One of the co-founders of Skype, Niklas Zennstrom, has launched a new company that looks to turn the US telecom sector on its head. FreedomPop is a MVNO on the Clearwire Wimax network which is set to start services soon. The company originally partnered with LightSquared for wholesale access to its planned LTE network (see our commentary 'Open LTE network in US reaches next phase - now find a tenant'), but LightSquared has since seen its network plans blocked by the FCC due to interference with GPS devices. FreedomPop has now turned to Clearwire, which is 54 percent owned by Sprint.
Zennstrom's earlier ventures included Kazaa (file-sharing, now part of Sharman Networks), Skype (VoIP, first sold to eBay and then to Microsoft) and Joost (a video site). FreedomPop is a completely different kind of company, but does include an important element from the internet world: ‘freemium’. The basic service is free, and the business model is built on selling additional bundled services. The model is comparable to companies such as Dropbox and Spotify, but also like media websites, such as the New York Times.
FreeedomPop (launch date still unknown) will be positioned as a replacement for fixed broadband services such as DSL or cable. It can also incorporate mobility features in its marketing, making it attractive to laptop users who don't want to be tied to home. This makes it a competitor to Wi-Fi, which is often provided free by American ISPs as part of a cable or DSL subscriptions.
The service will offer 1GB per month free, and any further use costs USD 0.01 per MB or USD 10 per GB. Additional revenues are expected to come from extra services, possibly VoIP. The company is also trying to include a 'social' element, giving customers extra data if they recommend friends for the service. FreedomPop is not the only MVNO with a freemium model on the Clearwire network. NetZero (part of United Internet) has already launched its service, although the amount of free data is less (200MB per month) and only offered for the first year.
The question is whether FreedomPop or NetZero with their freemium models can breakeven, and also if they will put pressure on prices at other providers. Their offerings highlight the positive effect of having a player like Clearwire in the market, even if its Wimax network has a limited reach. Once it moves to LTE and gains access to more spectrum, it can compete fully with the fixed networks.
Conclusion: FreedomPop offers an interesting case, built on a good wholesale offer over Wimax and later LTE and a freemium model. The question is whether this is a sustainable fixed-line replacement, when free Wi-Fi somewhat undermines the business case.
