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FreedomPop aims to gut US wireless oligopoly with free smartphone
Freemium VoIP model piggybacks on Sprint
By the end of the summer, FreedomPop aims to offer US users a smartphone for around $100 that gives unlimited texts, 200 voice minutes, and 500MB of data a month for free, with no contract.
"This is a long-term ploy," Steven Sesar, FreedomPop's COO told The Register. "This is a real threat to the major carriers. The price point and service offering we're talking about is so massively disruptive we think we can take a significant percentage of the total market."
Users will be able to buy a second-generation smartphone like the HTC Evo for $99 to get the service, or a higher-end device similar to the Samsung Galaxy S3 smartphone for $199, with all phones running Android 4.0 or above. This gives access to the free calls, text, and data service.
FreedomPop is betting enough people will sign up for extra services – unlimited voice calls costs $10 a month, for example, and an extra 2GB of data costs $18 – to make this a paying proposition and still undercut AT&T, Verizon, and T-Mobile by a large margin.
The key to this kind of price cutting comes from a custom VoIP app the company has developed. This will route traffic through IP rather than cellular networks, only relying on Sprint for the edge mobile connection. Even that still uses the mobile carrier's data network and so eliminates the need for a voice network altogether.
Sprint is lagging somewhat in network technology, thanks to backing the wrong 4G horse with WiMax, so initially connections will be 3G. But by the end of the year most users will have a 4G LTE connection for voice and data. Either is good enough for the job, Sesar said.
The current buyout battle for Sprint being staged by Softbank and Dish Networks won't be an issue, he said, because in either case the network will get investment for increased coverage. While not as large as Verizon or AT&T's offerings, Sprint's network still covers the majority of the US.
Looking ahead, the company wants to extend this mobile service to a home offering, as well. Sesar said that this would be aimed at the low end of the market, offering 10GB of data a month for $10. The service will be aimed at people who don’t stream content but just use the internet occasionally, he said.
The median level of data use in US households is 5.5GB a month, he told El Reg, and for those users FreedomPop can offer very low costs, with add-on packages for those that have heavier downloading requirements on an occasional basis.
"We've proved our business model on the data side," Sesar said, adding that the company makes a 50 per cent margin on traffic. "We think we can do the exact same thing on the voice side. It's the classic freemium model." ®