Technology Review: Catalyst Managing Partner Brian Rich Comments on FreedomPop
Free Wireless Broadband for the Masses
A startup backed by a Skype cofounder plans to offer “freemium” broadband—supported by ads and social features.
By Rachel Metz
When you think of basic human rights, access to wireless broadband Internet probably isn’t at the top of the list. But a new company backed by a Skype cofounder disagrees, and plans to bring free mobile broadband to the U.S. later this year under the slogan “The Internet is a right, not a privilege.”
Called FreedomPop, the service will give users roughly a gigabyte of free high-speed mobile Internet access per month on Clearwire’s WiMAX network and forthcoming LTE network. It will offer other low-cost prepaid plans that provide access to more data.
FreedomPop vice president of marketing Tony Miller gave few specific details about the company’s offerings and how it plans to make money—and won’t yet name executives or founders—but says he expects the service to roll out in the U.S. sometime between July and September and to eventually branch out to other countries as well.
FreedomPop’s arrival coincides with the rapid rise in smart-phone users and rollout of 4G networks as wireless carriers try to keep up with the growing demand for mobile data. The company is not the only one that sees an opportunity to launch a free 4G service: NetZero recently rolled out its own free and low-cost plans. But while NetZero offers 200 megabytes of free wireless data per month, FreedomPop will offer about five times that amount—more than most data users currently consume in a month.
“In our minds, the access piece is already a commodity we’re looking to further commoditize, in the same way Skype did with voice,” Miller says.
Miller says the company’s founders are friends with Skype cofounder Niklas Zennstrom, who has long wanted to work on a startup related to free Internet access. Zennstrom is a backer and an advisor, Miller says, but he is not an active manager at the company.
Miller says that, similar to Skype, FreedomPop will follow a “freemium” model where users receive some aspects of the service for free and must pay for more. After users surpass their monthly allotment, they will be charged a fee for going over that allotment (Miller says the overage charges will be “cheap”—probably about a penny per megabyte, though maybe a bit lower for prepaid customers—since FreedomPop wants to encourage use).
Without getting specific, Miller adds that users will be able to earn more data usage through some social features built into the service, and share some of their allotted data with other users.
Miller says FreedomPop will offer three mobile broadband devices at first. There will be a USB dongle for laptops, a Wi-Fi hotspot device that can connect up to 20 devices to the Web, and an iPhone case that will allow the smart phone to circumvent the user’s wireless carrier and can also charge the phone and act as a hotspot for up to eight additional devices.
Users won’t pay for the devices, but they will have to fork over a refundable deposit fee. Miller says this is meant to discourage abuse, such as people reselling a hotspot or iPhone case on eBay. While the devices will be sold primarily online, Miller says, they may be available at some brick-and-mortar stores as well.
FreedomPop will also sell prepaid wireless data plans that Miller says will be priced “significantly lower” than existing prepaid and contract plans on the market. Prices vary, but AT&T charges $50 per month for a two-year contract that gives users five gigabytes of data for use with a USB modem or mobile hotspot, while smart phone plans include a three-gigabyte option that costs $30 per month. On the prepaid side, the company’s GoPhone service offers 500 megabytes of phone data for $25.
Miller says FreedomPop expects most of its revenue will actually come from services it will offer on top of the Internet access. He won’t say what these will be, exactly, but says that a security offering such as virtual private networking won’t be one of them—it didn’t do well in an early test. He says the company is also looking into some sort of advertising opportunities, which could be another revenue source.
Brian Rich, a partner at venture capital firm Catalyst Investors, which has invested in Clearwire, says FreedomPop is a clever idea, as it’s taking advantage of the capacity offered by Clearwire’s network, which is less constrained that the networks of AT&T and Verizon Wireless. He wonders if FreedomPop will be able to make enough money off reselling Clearwire’s service to make its efforts worthwhile.
Neil Shah, an analyst with Strategy Analytics, feels similarly, saying FreedomPop will also need to forge deals with other mobile broadband partners because Clearwire’s range is still limited. The service currently reaches more than 130 million people in over 70 U.S. cities. FreedomPop also has a deal with LightSquared, which has been planning a nationwide wholesale LTE network, but the U.S. Federal Communications Commission recently revoked LightSquared’s permit. Miller says FreedomPop is working on another U.S.-based deal, though.
Shah also cautions that as people get more used to using data on their cell phones, FreedomPop will have to give away even more to lure users to its service. “Eventually, one gigabyte won’t be enough,” he says.