Accusing broadband providers of ripping off their customers, startup FreedomPop is launching a home wireless Internet service aimed at price-sensitive cable and telco customers who don’t use much bandwidth.
The company -- whose investors include Skype co-founder Niklas Zennstrom -- is promising up to 1 Gigabyte of monthly data usage free, and up to 10 GB for less than $10 per month. Customers must purchase the $89 FreedomPop Hub Burst modem/router (pictured above), expected to begin shipping in January, to receive the service. Initially, the service will be delivered over Clearwire’s WiMax wireless network.
FreedomPop’s plans to compete with cable and telco providers were previously reported by Multichannel News.
“Major broadband providers, including Time Warner Cable, AT&T, Verizon and Comcast, are pillaging consumers, charging in excess of $500 per year for home Internet,” FreedomPop CEO Stephen Stokols said.
Los Angeles-based FreedomPop launched its “freemium” free broadband service for mobile users on Clearwire’s WiMax network in October, targeting 4G services from AT&T and Verizon Wireless. According to Stokols, FreedomPop has delivered more than 15 million Megabytes of free data.
With the home-based product, “we are going after the fat part of the market -- people who aren’t using [broadband] that much -- not the high end,” Stokols said.
FreedomPop has not settled on final pricing for the 10 GB option, but it will be either $8.99 or $9.99 per month, according to Stokols. Customers will be able to purchase additional data capacity, for $5 per Gigabyte, as well as earn usage credits by recruiting friends to the service and interacting with FreedomPop sponsors.
“It’s a no-brainer for a consumer to pay $8.99 per month for a service that’s better than DSL,” Stokols said.
FreedomPop originally intended to go after the home broadband market first, Stokols said. “Being able to prove the model and the economics on the wireless side gave us the ability to go ahead aggressively on the home early,” he said.
Clearwire’s network provides download speeds as high as 12 Megabits per second, with an average of 9 to 10 Mbps, with uploads of 1.5 to 3 Mbps, Stokols said.
Clearwire claims its network covers 130 million Americans, but FreedomPop will offer the home broadband service to areas covering 80 million to ensure quality of service, Stokols said. “They have coverage gaps,” he said.
To round out its market coverage, FreedomPop is scheduled to go live with Sprint’s LTE network in early 2013.
With broadband providers pricing their services at $45 to $60 per month, Stokols argued, “most consumers aren’t getting value out of it in terms of consumption.” Median average monthly data usage among North America wireline broadband subscribers was 16.8 GB in the second half of 2012, according to bandwidth-management equipment vendor Sandvine.
Low-usage subscribers are the most lucrative for broadband ISPs, Stokols pointed out: “We’re going after the most profitable users they have.”
FreedomPop will let users earn usage credits by recruiting friends to join the service (receiving 100 MB per month per friend) and by engaging in partner promotions. For example, a user can receive 2.5 GB of usage credits by signing up for a free one-month trial with Netflix and 500 Megabytes for using a Chili’s coupon.
As for FreedomPop’s challenges, Stokols said he expects big MSOs and telcos to begin introducing lower-end plans to compete. “As we get traction we expect some kind of response on the low end of the market,” he said.
The Burst device is manufactured by a Hong Kong-based company, which Stokols wouldn’t identify. FreedomPop’s initial supplies of the modem/router are limited to the “tens of thousands,” Stokols said. “We’re constrained by supply.”
The modem/router can connect up to 10 Internet-enabled devices, including desktop PCs, tablets, smartphones, connected TVs and streaming video players. The device supports 802.11n Wi-Fi with a signal range of 150 feet and includes an internal omnidirectional antenna.
Founded in 2011, FreedomPop is backed by Mangrove Capital, DCM and Zennstom's Atomico.
The company, which has about 50 employees, has announced a total $9.5 million in funding to date. FreedomPop is in the midst of raising another round of funding, expected to close in the first quarter, in the range of $15 million, according to Stokols.
Stokols joined FreedomPop in August 2012. Previously he was CEO of Woo Media, a video-chat startup backed by Zennstrom. He also was vice president of strategy and product development at British Telecom and as e-commerce director for Qwest Communications.