Republic Wireless and FreedomPop are two surging companies in the cellular carrier industry, who aspire to compete with Verizon Wireless, AT&T, Sprint, and T-Mobile USA, through the strategic placement of Wi-Fi routers to significantly reduce cellphone costs. Unlike traditional wireless carriers, who mainly focus on cell tower connections, and rarely resort to Wi-Fi, the duo rely on locations with pre-established Wi-Fi spots, and minimal cellular network usage. For the past five years, the alternative method has been steadily gaining subscribers and recognition from companies such as Google and Cablevision. Republic Wireless experiences a 13% growth in its customer base each month, and every four to six months, FreedomPop’s customer base doubles. Both Google and Cablevision plan to model the Wi-Fi powered service, producing a greatly reduced price in comparison to those of its competitors. Cablevision recently announced its $30 a month plan, whereas traditional cellular services costs approximately $100 a month. Republic Wireless customers currently offer its services for a very affordable $10 a month. While Republic Wireless and FreedomPop trump its competition price-wise, there is much debate over whether Wi-Fi connection is superior to cellular. When stationary, Wi-Fi is clearly the logical choice to consumers. However, if the consumer is active, and constantly moving around, then cellular is ideal, as your device is able to switch from one cell tower to another. Independent telecom analyst, Jan Dawson, states that “people would inevitably lose connections when they are on the go — riding a train or even just taking a walk.” Dawson also mentions that there are “many places where Wi-Fi doesn’t reach, and the quality of Wi-Fi that you can find is often subpar.” Despite what Dawson claims, FreedomPop has access to 10 million Wi-Fi hotspots, and Republic Wireless recruited bandwidth.com, who developed a handover method, “a technique to move calls seamlessly between different Wi-Fi networks and cell towers.”
Republic Wireless and FreedomPop “demonstrate just how disruptive [to the carrier industry] a Wi-Fi-first operator can be, and just how much cost they can take out,” says Craig Moffett, a telecom analyst for MoffettNathanson. By creating an extremely affordable service, the duo can potentially gain market share from the traditional carriers. People who normally couldn’t afford cellular coverage are now able to with either a free or significantly reduced monthly fee. With increased accessibility to cellular coverage, comes an increase in demand for cellphones and tablets. As these devices are purchased, complimentary goods, such as cases, headphones, screen protectors and cleaners, and camera attachments, are bought as well. Major companies such as Apple, Samsung, and Microsoft, would all be profiting from the popularity and success of the increased Wi-Fi base.
In addition, a cheaper cellular data plan reduces the annual cost of the basket of goods and services that the typical household purchases each month, and therefore decreases the cost of living. The money saved from the plan, can be put towards other necessities and wants, stimulating businesses throughout America.
My Thoughts: The introduction of two startup companies, in an industry where capital and networking dominate, is extremely appealing from both a student’s, and investor’s standpoint. Both Republic Wireless and FreedomPop have discovered a ground-breaking technological advancement, which could potentially revolutionize how Wi-Fi and cellular data provide service are leveraged to provide an affordable service for a larger consumer segment. However, with the introduction of new players in a highly competitive space, it will be interesting to monitor the duo’s growth rate, and to see if they fall prey to their rivals.