The U.S. wireless industry is dominated by a few big players. A startup is looking to break through with a proposition that should be tough for many Americans to pass up: Free service.
After testing the waters with free mobile data plans since last year, FreedomPop plans to offer full-blown wireless phone service at no cost. Customers will get 200 voice minutes, unlimited text messages and 500 megabytes of 4G data per month for free. After that, they’ll pay fees.
“The phone thing is going to be huge for us,” Stephen Stokols, the chief executive officer of FreedomPop, said in an interview. “That takes us to a whole other level in being able to disrupt.”
FreedomPop, backed by Skype co-founder Niklas Zennstrom and other investors, is one of a wave of new startups looking to disrupt the $185 billion wireless industry. Another called ItsOn allows subscribers to only pay for as much data and as many voice minutes as they use. The small companies are trying to woo customers away from the mobile giants by offering cheaper services that don’t require contracts.
After debuting last October, FreedomPop has gained several hundreds of thousands of users, and nearly half of them pay for extra data or services, Stokols said. An average FreedomPop user pays $10 a month, and that number is inching up, he said. An average American pays about $49 per month for their phone bill, according to wireless industry association CTIA.
FreedomPop, which is looking to raise about $15 million this year to ramp up marketing, was cash-flow positive in April, and likely burned little cash in May, Stokols said.
Turns out, free wireless services pay.