FreedomPop's Plan to Become the Anti-Carrier

A lot of attention has been focused on FreedomPop's intention to give away gobs of data and connect the iPhone to 4G, nevertheless it turns out the operator's plans to launch a "freemium" mobile broadband service this year are much more radical than we thought.

The company

According to the company, FreedomPop plans to discard every vestige of the traditional-carrier business model and adopt the strategy of a Web startup. It's not only giving away bandwidth nevertheless wants its clients to treat megabytes as a currency they can earn and trade. Instead of making its money through 4G access, FreedomPop is breaking one of the biggest carrier taboos: It plans to sell services over a free dumb pipe.

In an interview with GigaOM, FreedomPop's vice president for marketing, Tony Miller, laid out many pieces of the company's intricate strategy that have so far gone unreported. The mobile virtual network operator is creating a social network as so then as a 4G service; it wants to connect devices that have never seen mobile broadband connection; and it will sell value-added services on top of those connections, possibly even voice. Here are the details:

- FreedomPop plans to build a larger social network around those bandwidth-swapping capabilities. Clients will be able to form social communities tied to their device, sharing their location, status, and other presence information with one another.

- The carrier plans to sell value-added services to its clients. Miller wouldn't reveal specifics, however he likened FreedomPop's strategy to the freemium model used by Internet companies: The core services-access and social networking features-will be free, yet FreedomPop will layer on paid applications. Miller as well said the company is considering launching its own VoIP (Voice over Internet Protocol) service however had made no final decisions.

The WiMAX shell for the iPhone 4

- During the WiMAX shell for the iPhone 4 and iPhone 4S has gotten the most attention, Miller said FreedomPop as well hopes to launch its service this year with a mobile hotspot and USB dongle. The shell will act as a hotspot distributing its mobile broadband connection to other devices through Wi-Fi, and it will run off its own battery, which can perform double duty as an iPhone charger. The company is as well designing a shell for the iPod touch and henceforth plans to connect other smart devices-and not necessarily just smartphones, Miller said.

Miller stressed that 4G access is only a minor part of the revenue equation. FreedomPop will get cheap WiMAX connectivity from its wholesale partner, Clearwire, and it can afford to give most of that access away, he said. Clients who don't use much data each month will cost FreedomPop little. Those who consume a lot will quickly move into metered data, which allows the carrier to easily recover its costs.

The customer who poses an initial problem is the one who uses his entire cap each month without exceeding it, Miller said. In the end those mysterious value-added services Miller referred to will turn those clients into profitable investments. Miller wouldn't give even a hint as to what most of those services would be, even though he did talk up the potential of VoIP.

"Speculatively, this is something we would consider," Miller said. "We're not coming off the gate with a 'cut the cord completely' strategy. We're launching first with mobile broadband. However down the road a VoIP service could be a opportunity."

The launch of FreedomPop through Atomico

Considering Skype co-founder Niklas Zennstrom is spearheading the launch of FreedomPop through Atomico, his venture capital firm, one would think VoIP has to be a strong consideration. Miller himself pointed to its planned launch of a WiMAX shell for the iPod touch, which FreedomPop or another over-the-top VoIP provider could easily turn into a softphone. "Some of these devices that were never meant to be phones can easily be transformed into them," he said.

Miller as well said FreedomPop will avoid the huge customer-acquisition costs carriers face by taking the same viral marketing approaches as an Internet company. Its clients will beget more clients, drawing them in by the network's social features and the promise of more free bandwidth. Miller said FreedomPop plans to expand the same way as Dropbox, which grew exponentially by rewarding referrers with more online storage.

The entire carrier business model on its head

FreedomPop is turning the entire carrier business model on its head. In the data world, carriers have long tried to sell services, however for the most part they have become dumb bit pipes. By giving away access and focusing on services, FreedomPop may so then succeed where other operators failed. Yet it's as well taking a big risk.

FreedomPop is betting its services will somehow be more appealing than any other over-the-top services available through an open broadband connection. It could block access to alternate VoIP providers or whatever the over-the-top equivalents are to its other unnamed services, but at the time it winds up playing the carriers' game. Nevertheless if FreedomPop does provide unrestricted access to anything and everything on the Web and in the iPhone App Store, its clients might just take the free data and run.