It’s All in the Application

Is FreedomPop the Ultimate Over-the-Top Service?

FreedomPop_lGSMA Intelligence stats show that the global average monthly revenue per wireless subscriber is currently about $12. For most users and operators in developed markets, that seems a low figure, but it’s infinitely higher than that of several new wireless companies.

A growing number of service providers are offering “freemium”-model voice, messaging and data services. They funnel bits through smartphone apps and — whenever possible — over Wi-Fi connections, offloading to cellular connectivity only when needed. It’s an upside-down wireless world.

US company FreedomPop is launching services in the UK next month. It will offer a free package of 200 voice minutes, 200 texts and 200 megabytes of data, all run through FreedomPop’s Android app. The company will buy wholesale connectivity from the UK’s Three network, and offload to Wi-Fi connections whenever possible.

FreedomPop’s founder, Stephen Stokols, compares the business model with that of Ryanair: customers can pay for upgrades. Premium services will include the ability to buy additional megabytes and minutes. Users will also be able to pay £2 per month for a second phone number from any of 60 countries — a subscriber in London could also have a New York City phone number connected to the same device, for example.

FreedomPop says it now has about 1 million subscribers in the US, up from a few hundred thousand at the beginning of the year. Mr Stokols stated that half of the service’s subscribers pay for upgrades, making the company profitable. FreedomPop also sells low-cost smartphones, some of which are refurbished models purchased in bulk.

A combination of free wireless services running on top of used devices sounds like the making of a market disturbance, if not a quite a true disruption. But FreedomPop isn’t alone in pushing app-based, Wi-Fi-centric services like this — other companies are also introducing change to the market.

Republic Wireless, based in North Carolina, offers Wi-Fi voice and data packages as low as $5 per month, or $10 per month with access via Sprint’s cellular network. US firm Cablevision is offering a $10-per-month Wi-Fi phone service that gives subscribers unlimited access at more than one million hot spots (though coverage is said to be spotty, perhaps like cellular connections were 20 years ago).

When Google introduced its Project Fi in April, alternative cellular services attracted more attention. This highlighted the concept of wireless neutrality and the growing potential of Wi-Fi and smartphone apps. Some stats suggest that consumers in developed markets are in range of Wi-Fi about 80 percent of the time — whether at home, in the office, at a hotel or local cafe, people are well-covered.

It’s too early to tell whether Wi-Fi-centric, freemium business models are truly sustainable, and smaller providers like FreedomPop and Republic Wireless are a greater threat to niche MVNOs than to major operators. But younger generations of subscribers are very comfortable with over-the-top services, and the VoIP-like approach used by these start-ups is a natural extension of this behaviour. Data is data.

As FreedomPop rolls out in the UK and other countries, it will be an interesting test of subscribers’ willingness to try something new. The service requires a SIM card slot, so users will have to dedicate some hardware to an otherwise free trial. But if services like this catch on, it’s bound to cause pricing pressures on wireless operators. FreedomPop’s CEO has compared his company to disruptive budget airlines. Other airlines are still around, but they have had to learn to keep their fares competitive with alternative business models.

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