Startup Dials Into Free Cell Market

Why pay for mobile Internet access, when you can get the service for free? Valley tech startup FreedomPop is rolling out new devices that promise to break consumers from the shackles of cell service providers such as Verizon and AT&T, which sell mobile Internet access for a premium. But despite the excitement by tech lovers and gadget geeks, FreedomPop’s success is far from guaranteed as the company still must convince consumers to pay for hardware and extra services. With a beta test underway in limited areas, including the San Fernando Valley, users will have a chance to test the FreedomPop service. “The response has been tremendous,” said COO Steven Sesar. “We had forecasted product for two months, but we’re closing in on selling out of the hotspot.” The company, headquartered in Tarzana, is backed by Skype co-founder Niklas Zennstrom. It raised $7.5 million in Series A funding in July, giving it the capital necessary to manufacture its pre-orders and get through beta testing. FreedomPop is launching its service through two primary devices: the Freedom Spot Photon hotspot that can provide access for up to eight devices, and its Freedom Bolt Stick, a USB connection that services one device. Both are free, but require a deposit: $89 for the hotspot and $49 for the stick. By the end of the month, FreedomPop expects to launch the FreedomPop WiMax Sleeves. The device sheaths a mobile phone and allows users to make calls using technology similar to Internet voice services Google Voice and Skype. The devices are available for pre-order for $99 and will work for iPod Touch and iPod mobile phones. Hard sell Since its 2011 debut, the company has announced several upcoming projects, but the beta test is the first public debut of its product. Critics already have pointed out concerns such as service reliability, a major factor for consumers and one that may threaten the sustainability of interest in the devices. “New technology creates a kind of stress,” said Shan Barkataki, a professor of computer science at Cal State University, Northridge and a technology expert. “They’re going to have to provide some kind of usefulness while minimizing the frustration.” “They really have to sell it,” he added. “Generally, in the past, there was a seven-year cycle with technology devices. Now that is much shorter in the market, but it’s still near the same with users…It will really have to be incentivized.” Sesar rattles off the benefits of FreedomPop including no primary service contract and significant cost savings. He says consumers can save as much as $30 a month for mobile access, compared with some plans by Verizon. FreedomPop’s primary method of revenue stems from getting consumers to opt for extras, or premium plans. For example, the company offers a security plan, dubbed the Protection Plus upgrade. It also offers two pre-pay plans that allow subscribers to exceed the 500 MB that comes free. The revenue also will rely on ads embedded into its software, akin to those built into Facebook games and other apps. Sesar says they won’t be intrusive. “Today’s cost conscious, frequent mobile users are familiar with this sort of ad. They can look past it if they want, although we’ll certainly push them.” Next steps In the short term, FreedomPop is aiming to generate revenue at some level and take its product to market. The company also is working to overcome a barrier to non-iPhone mobile consumers. Officials say they’re developing devices to serve Android customers. “We are in development on other devices, and we want this to be able to be used across multiple platforms,” Sesar said. Clearwire, a smaller broadband provider, agreed to participate in FreedomPop’s beta test and will continue to be a partner when the initial launch concludes. “Disruptive market entrants like FreedomPop drive growth, introduce new ideas, and help expand consumers’ access to 4G products and services,” Dan Stroberg, Clearwire’s senior vice president of wholesale, said in a statement. Stroberg said Clearwire is well positioned to enable startup providers such as FreedomPop by offering “a large 4G network footprint, deep spectrum resources, and years of experience operating in the wireless broadband industry.” As it looks to enter the mass market, FreedomPop also plans to align itself with a larger network in the early part of next year, Sesar said. By partnering with Sprint and its 4G LTE network, FreedomPop will offer increased speed and more reliable nationwide coverage. “Then we’ll be able to get more people access,” Sesar said. According to Barkataki, if they do it right, it could change things. “They stand a chance,” he said. “Wireless tech is going to be the future.”