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FreedomPop Says Buy the Phone, Everything Else Is Free
FreedomPop Says Buy the Phone, Everything Else Is Free

By Jennifer LeClaire
June 5, 2013 11:23AM

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"They are offering limited voice, text and data for free, and unlimited for a low price. That's the good news," said telecom analyst Jeff Kagan of FreedomPop's plan. "The bad news is this is using a technology that many don't understand or trust yet. They use the data network for everything. That means even voice calls travel over the data network, using VoIP."

FreedomPop is making an offer smartphone users may not be able to refuse: free voice, free text and free data. The mobile service is offering users 500 MBs of 4G data for free, along with unlimited texting, and 200 free anytime voice minutes. That's on top of free calls to other FreedomPop users.

The FreedomPop service will be available on refurbished HTC EVO 4G Android phones, as well as a few others, available for $99 to $199 with no contract, and will be the first-ever all-data devices running 100 percent VoIP (Voice over Internet Protocol) using cellular networks. FreedomPop plans to launch the service and phones later this summer using Sprint's data network.

FreedomPop also plans to sell two or more gigabytes of data starting at $18 a month, as well as an upgrade to unlimited calling for $10 a month, still far less than plans offered through the four biggest U.S. carriers.

"This is not only disruptive, but game-changing," said Jonathan Chaplin of New Street Research, an investment firm focused on the telecom industry. "This move completely marginalizes the voice network by leveraging VoIP over cellular and is extremely threatening to already declining voice margins."

Like Early Skype?

Jeff Kagan, a telecom industry analyst in Atlanta, said FreedomPop is a company with an idea that you would think should be highly successful. But there is good news and bad news here.

"They are offering limited voice, text and data for free, and unlimited for a low price. That's the good news," he told us. "The bad news is this is using a technology that many don't understand or trust yet. They use the data network for everything. That means even voice calls travel over the data network, using VoIP."

Kagan compared the FreedomPop offering to the early days of VoIP on a wireline network. Put another way, FreedomPop is like Skype or Vonage, but it's wireless. And if you remember the early days of Skype, you remember spotty quality.

Kagan said the quality and reliability of calls will improve just as traditional VoIP did over time. Case in point: Today, big players like Comcast, Time Warner, Cox and other cable television companies sell VoIP because the technology has reached prime time.

No Big Dent

"While I love these kinds of stories, of little companies who buck the system, they don't usually make a big dent in the industry," Kagan said. "Real winners are those who have the big, familiar brand names through advertising, marketing and public relations. That's why companies like AT&T and Verizon lead."

And that, Kagan said, is the challenge that many smaller companies have run into over the years. Could it be different with FreedomPop and its competitors? Other companies like Republic Wireless are playing in a similar space.

"Typically these companies with great ideas to cut costs are received well, but they just don't grow. So bottom line, FreedomPop is a great idea for a free or lower cost service. They resell a real wireless service from Sprint," Kagan said. "It all depends how well they do with marketing, advertising and public relations. If they do well, they may be able to crack the code and be successful longer term. We'll have to watch them and see what happens next."

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