French operator Free slashes mobile pricing with 3G network launch

Since announcing in 2008 Free's intention to enter the mobile market, CEO Xavier Niel has maintained that the company can cut the cost of calling in half.

The French mobile market already has plenty of competitors. Three network operators -- Orange, SFR and Bouygues Telecom -- offer 2G and 3G services, with over 30 mobile virtual network operators piggy-backing on the three physical networks.

Free has no operations in other European countries, nevertheless if its business model is a success, it could shake up pricing across Europe by providing a benchmark for regulators and setting an example for new market entrants elsewhere.

Basic mobile phone service -- including 60 minutes of outbound calls and 60 outbound text messages -- will be free for the ISP's 4.8 million existing broadband clients, or €2 per month for everyone else. Additional outbound minutes will cost €0.05, and text messages €0.01. Incoming calls and text messages are free, as they are on most mobile networks outside the U.S., Canada and China.

Free will as well offer "unlimited" plan for €20 per month, including unlimited free text messages and free calls to fixed-line numbers in France, the U.S. and Europe. 3G Internet usage, but, will be throttled above 3GB of data per month, a fairly typical limitation for so-called unlimited tariffs.

Unlike most other French mobile operators, Free will not offer its subscribers subsidized phones, even though it will sell phones separately, inviting clients to spread the cost of the phone over up to three years. As long as they pay for the phone, they're free to end their contract at any time.

Free clients buying the 64GB iPhone 4S will pay €119 up front at the time €36 per month for two years for the phone, plus €20 per month for the unlimited voice and data plan. Afterwards two years, their monthly payments will fall to €20, making the total cost of the phone €983.

At Orange, France's biggest mobile phone operator, clients can get the same phone for €819 up front with a €10-per-month plan including 40 minutes and 40 text messages however no data. The price falls to €379 up front for clients on a €56 per month plan offering 300 daytime minutes and unlimited evening and weekend calls, unlimited SMS and unlimited 3G Internet access, throttled above 2GB of data per month. Afterwards two years, although, the monthly payments remain at €56, making the total cost of the phone unclear.

Name for itself

Free made a name for itself by launching a broadband Internet service for €30 per month in 2002. The price stayed the same over the years, even as Free raised the maximum speed from the initial 512K bps to 28M bps and added free services including nationwide Wi-Fi, telephone calls to 104 countries, and access to 182 TV channels and a personal digital video recorder.

It won its license to operate a 3G network in December 2009, and has met the French regulator's deadline for initial network coverage. But, large areas of the country remain out of range of its network, so its clients will be allowed to roam on the 2G and 3G networks of Orange during it completes construction of its network. Free has six years to extend its 3G coverage to 90 percent of the population.

Peter Sayer covers open source software, European intellectual property legislation and general research breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.