VP of marketing Tony Miller said that FreedomPop still plans to launch late this summer or in early fall with Clearwire-powered WiMAX modems and its even more anticipated WiMAX sleeve, which fits over the iPhone 4 and 4S. “We’re going to launch with Clearwire, but we’ll be live with Sprint by the end of the year,” Miller said.

At that point FreedomPop plans to offer tri-mode WiMAX-LTE-CDMA modems and sleeves, but as Sprint’s LTE network nears completion in 2013, it will begin phasing out WiMAX radios and rely solely on its Sprint network. Miller said FreedomPop may revisit the Clearwire deal in 2013 if the carrier can launch its own LTE network as planned, but even then Clearwire has only committed to the same limited LTE footprint it currently covers with WiMAX.

What’s astonishing is that Sprint is throwing the gates of its LTE network wide open to wholesale partners shortly after it launches next week. Typically, operators keep their latest and greatest technologies for themselves – it took years before most carriers started offering MVNOs access to their 3G networks. But according to Miller, Sprint isn’t just being liberal with its network, it’s also being flexible in its pricing policies.

To say FreedomPop’s business model is odd is an understatement. It plans to give away 500 MB to every customer each month, and then allow customers to trade those megabytes like digital currency. Social networking features and value-added services like VoIP will provide additional revenue streams (as well as a means for customers to earn more free megabytes), but only customers that subscribe to premium data plans or exceed their free monthly allotments will actually pay for the data they consume.

That kind of business model, however, doesn’t fit with the ways most carriers sell wholesale. Usually, carriers charge per-device connection fees as well as for data consumed. Sprint is making an exception for FreedomPop (as Clearwire did before it) to charge only for the gross data tonnage FreedomPop uses, Miller said, which allows the MVNO to easily move megabytes between customers.

As I wrote last month, we’re seeing a renaissance of MVNOs in the U.S. Sprint is becoming a big destination for MVNOs because of its flexible policies, and recently many other operators have begun following its lead. In the last year, both T-Mobile and AT&T have become much more welcoming of MVNOs.

Sprint, though, appears to be countering its competitors’ new openness to wholesale models with an even more aggressive stance. In addition to FreedomPop, Sprint is making LTE immediately available to Ting. It’s unlikely any of the remaining big 4 will be so willing to share their brand new 4G networks with partners so quickly.

“At Sprint we believe that our wholesale customers’ success is our success,” Sprint President of global wholesale and emerging solutions Matt Carter said in a statement. “We deliver a suite of innovative solutions that are customizable to the needs of each company and we are thrilled to enable new and innovative business models.”

FreedomPop isn’t just expanding its national reach, it may also be bulking up its bank account. Venture Beat is reporting that FreedomPop has raised $7.5 million in its first round of funding. We’re checking with the company on the details and will update this post when we learn more.

Update:  FreedomPop’s Miller confirmed to us that the MVNO has in fact raised $7.5 million in first round funding, led by ManGrove and DCM, who join FreedomPop’s initial investor Atomico. Skype co-founder and Atomico CEO Niklas Zennström  is spearheading FreedomPop, which is one of the reasons the MVNO has garnered so much attention even though it’s still months away from launch.

LTE image courtesy of Shutterstock user Inq

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Some of you may be crying foul right now, but in fairness to FreedomPop, it has never said every customer will get an automatic 1 GB bucket every month – at least not to us. In an interview with GigaOM in March, VP of marketing Tony Miller said FreedomPop aimed to give away a large block of free data each month, and while its target was 1 GB, it wasn’t set in stone. In addition, FreedomPop’s plan was to turn data into a digital currency, which customers could earn and trade. Customers could earn more megabytes by referring people to FreedomPop and by signing up for the carrier’s still unidentified value-added services. Also, customers who don’t use up their monthly data allotments can transfer their extra megabytes to friends.

The basic structure of its free data model is now starting to emerge. According to its Website, customers who order the iPhone sleeve will get 500 MB free each month, but it appears customers can increase the size of their free buckets to 1 GB a month, though FreedomPop isn’t saying how just yet. After customers use up their free buckets, they will be charged at a base rate of 1 cent per megabyte.

The Freedom Sleeve iPhone shell — which triples as a spare iPhone battery and a mobile hotspot — will tap into Clearwire’s WiMAX network so coverage will be limited to its 72-market footprint. While FreedomPop is taking pre-orders for the device online, it is also checking addresses to make sure you’re in a 4G market. That makes sense since FreedomPop doesn’t have a 3G — or any other — network to fall back on. You’re either in WiMAX coverage or you have no service.

The virtual operator is also scrapping the original deposit model it described. You buy the sleeve upfront for $99, though it seems that at any time you can return the sleeve in good condition for a refund, which amounts to the same thing. TechCrunch is reporting that FreedomPop is making the change for accounting reasons, allowing it to manage the device orders as revenue, not deposits.

When ordering the device, FreedomPop guarantees that you will receive your sleeve “before the rest of the world.” That’s not terribly helpful, and the wait could wind up being a few months. FreedomPop has said it would go live in the third quarter, which begins July 1, and in a press release issued Thursday it said would launch its beta service sometime this summer.

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According to the company, FreedomPop plans to discard every vestige of the traditional carrier business model and adopt the strategy of a Web startup. It’s not only giving away bandwidth but wants its customers to treat megabytes as a currency they can earn and trade. Instead of making its money through 4G access, FreedomPop is breaking one of the biggest carrier taboos: It plans to sell services over a free dumb pipe.

Turning 4G into a (nearly) free commodity

In an interview with GigaOM, VP of marketing Tony Miller laid out many of the pieces of FreedomPop’s intricate strategy that have so far gone unreported. The mobile virtual network operator (MVNO) is creating a social network as well as a 4G service; it wants to connect devices that have never seen mobile broadband connection; and it will sell value-added services on top of those connections, possibly even voice. Here are the details:

• FreedomPop plans to give a large block of data away for free. It’s targeting 1 GB at launch, though Miller said it may scale back or increase that allotment before it goes live in the third quarter. Miller said this wouldn’t be a onetime gimmick or promotion: The free bucket would kick in each month. As previously reported, FreedomPop will charge 1 cent for every megabyte over that free cap.

• The MVNO plans to make capacity a currency that customers can earn and trade. Customers will get bigger free data buckets for every customer they refer to the service. And in the future, Miller said, FreedomPop plans to make that capacity transferable. Say you’re running up against your 1 GB cap, but a friend who also happens to be a FreedomPop customer may be well short of hitting his cap. That customer can give you a portion of his free data allotment, allowing you to keep surfing gratis.

• FreedomPop plans to build a larger social network around those bandwidth-swapping capabilities. Customers will be able to form social communities tied to their device, sharing their location, status and other presence information with one another.

• The carrier plans to sell value-added services to its customers. Miller wouldn’t reveal the specific services, but he likened its strategy to the freemium model used by Internet companies: The core services — access and social networking features — will be free, but FreedomPop will layer on paid applications. Miller also said the company is considering launching its own VoIP service but had made no final decisions.

• While the WiMAX shell for the iPhone 4 and 4S has gotten the most attention, Miller said FreedomPop also hopes to launch this year with a mobile hotspot and USB dongle. The shell will act as a mobile hotspot distributing its mobile broadband connection to other devices through Wi-Fi, and it will run off its own battery, which can perform double duty as an iPhone charger. The company is also designing a shell for the iPod touch and in the future plans to connect other smart devices — and not necessarily just smartphones, Miller said.

How on earth will it make money?

Miller stressed that 4G access is only a minor part of the revenue equation. FreedomPop will get cheap WiMAX connectivity from its wholesale partner Clearwire, and it can afford to give most of that access away, he said. Customers who don’t use much data each month will cost FreedomPop little. Customers who consume a lot will quickly move into metered data, which allows the carrier to easily recover its costs.

The customer that poses a problem initially is the one that uses his entire cap each month without exceeding it, Miller said. Eventually those mysterious value-added services Miller referred to will turn those customers into profitable investments. Miller wouldn’t even give a hint as to what most of those services would be, though he did talk up the potential of VoIP.

“Speculatively this is something we would consider,” Miller said. “We’re not coming off the gate with a ‘cut the cord completely’ strategy. We’re launching first with mobile broadband. But down the road a VoIP service could be a possibility.”

Considering that Skype co-founder Niklas Zennstrom is spearheading the launch of FreedomPop through his venture capital firm Atomico, you would think VoIP has to be a strong consideration. Miller himself pointed to its planned launch of a WiMAX shell for the iPod touch, which FreedomPop or another over-the-top VoIP provider could easily turn into a softphone. “Some of these devices that were never meant to be phones can easily be transformed into them,” Miller said.

Miller also said FreedomPop will avoid the huge customer acquisition costs carriers face by taking the same viral marketing approaches as an Internet company. Its customers will beget more customers, drawing them in by the network’s social features and the promise of more free bandwidth. Miller said FreedomPop plans to grow the same way as Dropbox, which grew exponentially by rewarding referrers with more online storage.

“From an economics perspective, we need to look like a Web company,” Miller said. “That means customer acquisition costs can’t be $20 a pop.”

Will it work?

FreedomPop is turning the entire carrier business model on its head. In the data world, carriers have long tried to sell services, but for the most part they have become dumb bit pipes. By giving away access and focusing on services, FreedomPop may well succeed where the operators failed. But it’s also taking a big risk.

FreedomPop is betting its services will somehow be more appealing than any other over-the-top services available through an open broadband connection. It could block access to alternate VoIP providers or whatever the over-the-top equivalents are to its other unnamed services, but then it winds up playing the carriers’ game. But if it does provide unrestricted access to anything and everything out there on the Web and in the iPhone app store, its customers might just take the free data and run.

Sign image courtesy of Flickr user frankh; commodities image by stock.xchng user Lotus Head

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TechCrunch broke the story on Tuesday and FierceWireless confirmed it with FreedomPop VP of marketing Tony Miller, though some of the details are still fuzzy. It’s not clear, for instance, if the 1 GB is a one-off deal, which switches over to metered data plans once the initial bucket is used up, or if it’s a recurring month-to-month allotment of gratis data. Either way, FreedomPop plans to get paid. After customers use up the gig they’ll be charged a 1 cent for every additional megabyte consumed, Miller told Fierce, which falls in line with what the average $10 per gigabyte most of the major operators charge for overages.

The WiMAX shell is essentially a mobile hotspot, which connects to the iPhone and up to 8 other devices through Wi-Fi, according to TechCrunch, and Fierce reported the roughly $75 cost of the shell will be fully refundable once service is canceled, as long as it’s still in relatively good shape.

FreedomPop’s WiMAX deal with Clearwire has its limitations. Its 4G network covers 130 million people today, but Clearwire hasn’t announced any plans to continue its nationwide expansion. The bring your own iPhone model could present a problem as well, as AT&T, Verizon Wireless and Sprint, all require you to sign up for a data plan when activating the iPhone. Even at a bare minimum plan, customers will still be forking over $15 to $20 a month for data connectivity they may have no intention of using.

What would be interesting is to see if FreedomPop sparks a movement toward buying unlocked iPhones. Customers could theoretically get a micro-SIM from AT&T or T-Mobile for a voice-only plan, and then use FreedomPop’s WiMAX for data, falling back to Wi-Fi where 4G is unavailable. The price of entry is steep though. Apple started selling an unlocked version of the iPhone 4S in November for $849.

The other big question is how FreedomPop can sustain such a business model if it truly does give away 1 GB a month for free. According to a recent report from wireless analyst Chetan Sharma, only the top 30 percent of U.S. smartphone users consume more than 1 GB a month. FreedomPop will likely attract a lot of hard-core data users in the 30^th percentile, but there’s a good possibility many customers will never breech that 1 GB cap. NetZero is also trying its hand at a free 4G service – and is also using Clearwire’s network – but it’s drawing the line at 200 MB a month before it expects customers have to sign up for a paid plan.

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FreedomPop has been rather hush-hush since it revealed its plans in December. At the time, it announced it would purchase wholesale capacity from ailing LightSquared, raising questions as to whether the new service would get off the ground. On Tuesday the Federal Communications Commission said it planned to yank LightSquared’s LTE network waiver, effectively killing its plans to launch a wholesale nationwide mobile broadband network. One day later, FreedomPop had a new wholesale partner and said it would reveal more of its launch plans in a press conference this afternoon.

“FreedomPop’s ultimate goal of providing our customers with a free mobile broadband alternative will soon be realized thanks to Clearwire’s proven 4G network services,” Tony Miller, FreedomPop VP of Marketing, said in a statement. “This agreement enables FreedomPop to offer a disruptive retail service, providing free, flexible, high-speed internet access to millions of Americans.”

Last week Forbes got hold of Miller and wrote up many of the details of the company’s unique business model. In short, FreedomPop plans to offer a “free” basic service to most of its customers but charge fees to premium users, which Miller expected would account for 10 percent to 15 percent of the ISP’s subscriber base. FreedomPop won’t sell devices, but rather loan them to customers for free as long as they put down a deposit. Instead of smartphones and tablets, FreedomPop will distribute only modems, such as USB sticks and mobile hotspots, which customers can use to connect their laptops, tablets or any other device.

When Miller spoke to Forbes he didn’t reveal any details about how FreedomPop would price its premium plans or how exactly it would monetize all of the free broadband access it planned to give away, though he added that the virtual ISP planned to make use of mobile advertising to supplement its revenues.

If FreedomPop’s plans sound like innumerable Internet services business models out there, it’s no coincidence. One of the company’s biggest backers is Niklas Zennstrom, co-founder of both Skype and Kazaa. Companies ranging from Skype to Dropbox to Evernote have put freemium at the core of their services, offering the platform and most basic functions for free, while reserving key features for its paying customers.

How FreedomPop will transfer that freemium model to a wireless ISP is puzzling. It could implement strict data caps on its free subscribers or throttle back speeds to limit use of high-bandwidth applications like video – or a combination of both.

Image courtesy of Flickr user frankh.

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