FreedomPop founder cagey about revenue model for 'free' mobile broadband service
FreedomPop, the furtive startup backed by Skype co-founder Niklas Zennstrom, will not use advertising support to enable its offer of free voice and broadband data over LightSquared's planned LTE network, nor will all of its services be provided free of charge.
FreedomPop's website, mainly a placeholder, proclaims "Free mobile services for ALL!"
Aside from those points, there is still considerable mystery about what exactly FreedomPop intends to offer and what its ultimate revenue model will be. "We will not serve ads, can't get into too much detail here since the revenue model is part of the innovation we are delivering," wrote Tony Miller, FreedomPop's head of marketing and communications, in an email to FierceBroadbandWireless.
He noted the revenue model will be "similar to those proved on Web, whereby the heavy users subsidize the less active," and confirmed FreedomPop is actually pursuing a "freemium" model, where basic services are offered for free but premium services cost money.
The company, spearheaded by Skype co-founder Niklas Zennstrom and his venture capital firm Atomico, garnered considerable attention last month by announcing it will "offer free broadband and voice services to all Americans" via a wholesale agreement to use LightSquared's planned LTE network.
Excitement often follows announcements of free or inexpensive unlimited mobile calling and data plans, though such schemes are rarely as simple or cost-free as presented. "There's all this interest because it's a different business model, it's seemingly very innovative," said William Ho, Consumer Group vice president at Current Analysis. "But will it get major adoption? We don't know," he added.
"It's a different business model, but for the most part, is it something new and exciting in terms of technology? We would have known it by now. In this industry, you don't really operate in a vacuum and stealth for long," Ho said.
Other attempts at free and unlimited
Ho noted other promised offers of free or low-cost unlimited voice and data plans either never came to fruition or were altered significantly after launch. For example, Zer01 was touted in 2009 as a nationwide, GSM-based, unlimited calling and data service that would cost $70 a month. But Zer01 was marketed through a complicated multilevel marketing scheme and attracted loads of attention, and the service never launched.
And Leap Wireless' much-heralded $40-per-month unlimited broadband plan ultimately created issues with network traffic and financial metrics, prompting the operator to throttle users' speeds after they reached a monthly data allotment. The company's basic broadband plan now offers up to 2.5 GB of "Best Speed" data for $45 monthly before speeds are restricted.
In a development that could portend future problems for FreedomPop if it fails to deliver the "free" services that customers expect, Sprint Nextel MVNO Republic Wireless recently reversed course and eliminated its cellular fair-use policy. The company had pledged "unlimited" voice and data service for $19 per month, but only for traffic routed to Wi-Fi. However, harsh customer criticism during its beta trial led Republic to promise truly unlimited service for both Wi-Fi and cellular traffic.
And M2Z Networks, fronted by former FCC official John Muleta, for years worked on a plan to get the FCC to devote spectrum to the company's plan to offer free mobile broadband to all Americans. The effort finally fell apart in 2010.
LightSquared, or some other partner
FreedomPop may also face issues due to its choice of network partner. The company aims to introduce service later this year, once "LightSquared's 4G-LTE network comes online starting in the second half of 2012."
But LightSquared is wrestling with thorny funding issues and high-profile battles over whether its network interferes with GPS signals. Miller said FreedomPop's launch timeline "depends on which wholesale network we partner with as contingency to LightSquared." FreedomPop is currently in discussions with what Miller described as three of the four major 4G network providers "but will select just one (soon) to launch with."
Current Analysis' Ho said FreedomPop might be able to score a satisfactory wholesale deal with a major mobile operator "because everybody's looking for wholesale for additional revenue." LightSquared has said it will charge its wholesale customers about $7 a gigabyte.
But Ho cautioned that partnering with an existing mobile operator will impact device configurations and time to market because FreedomPop will need to ensure customer equipment is compatible with its partner's wireless network.
Segmenting the market
FreedomPop is targeting three primary customer groups: Underserved markets, younger more mobile users and prosumers who want mobility in addition to their fixed DSL or cable broadband services. "We're technically mobile, but with the evolution/investment in 4G networks over the next few years, we will also go after lower consuming households currently on terrestrial networks," said Miller.
He added FreedomPop also plans a small- to medium-size business package and "may be announcing a notable partnership on that front in next couple months."
Regarding devices that will be used with FreedomPop's service, Miller confirmed that USB dongles and mobile hotspot products will be available at launch.
Miller declined to address FreedomPop's specific rollout plans and would not discuss whether FreedomPop service would be sold primarily online or would be made available, along with compatible devices, via big-box stores or other retailers. According to a Dec. 15, 2011, article in Bloomberg Business Week, FreedomPop intends to market its wares through retailers, who could require a refundable device deposit of about $49.
If FreedomPop's business model succeeds in the U.S., Miller said the company plans to expand internationally and is already in discussions with wholesale partners in two major international markets.
Article updated Jan. 17 to correct information about M2Z.