FreedomPop Challenges Cable, DSL With 'Freemium' Wireless

Startup Starts Marketing Home Broadband Service
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Sick of paying $50 or more for monthly Internet service? Startup FreedomPop is targeting disgruntled cable and DSL customers who don't use much bandwidth with the launch of a wireless home broadband service -- with plans starting at zero dollars for up to 1 Gigabyte of data usage per month.

Users of FreedomPop's new home broadband service must first purchase the “Burst” wireless modem router for $89, which can connect up to 10 Wi-Fi devices. The router is manufactured by Taiwan-based Gemtek Technology. The service is provided over Clearwire’s 4G WiMax network through a wholesale agreement, and FreedomPop also plans to layer in access via Sprint’s LTE network in 2013.

FreedomPop’s Home Internet includes four service plans:

  • The free plan, which provides up to 1.5 Megabits per second capped at 1 GB per month (1 cent per additional Megabyte);
  • “Basic” at $9.99 per month for up to 1.5 Mbps and 10 GB of data usage (half cent per additional MB);
  • “Faster” at $14.99 per month for up to 3 Mbps and 10 GB of data usage (half cent per additional MB); and
  • “Fastest” at $18.99 per month for up to 8 Mbps and 10 GB of data usage (half cent per additional MB).

FreedomPop is aiming to appeal to lighter Internet users, given that its usage caps are far below what wireline ISPs impose. AT&T, for example, limits DSL Internet subscribers to 150 GB per month and U-verse Internet at 250 GB per month; Cox Communications' caps, meanwhile, range from 50 GB to 400 GB.

In addition, FreedomPop home users can earn data credits by adding friends to their network via email and social media networks -- receiving 50 MB extra for each user they refer -- and by clicking on ads and partner promotions.

FreedomPop originally launched its “freemium” broadband service for mobile users on Clearwire’s network last fall, targeting 4G services from AT&T and Verizon Wireless. The startup’s executives have described the model as similar to that of Internet storage providers such as Dropbox, which provides a limited amount of free data storage and charges for higher amounts of usage.

"Major broadband providers are charging in excess of $500 per year for home Internet, and continuing to raise their prices -- leaving consumers desperate for ways to cut down on their monthly bills for home Internet," FreedomPop CEO Stephen Stokols said. "FreedomPop's early success in the wireless market has put us in position to offer home broadband users significantly discounted alternatives."

Los Angeles-based FreedomPop has raised $11.2 million from investors including DCM, Mangrove Capital and Atomico, the investment fund run by Skype and Joost co-founder Niklas Zennström.