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There’s no shortage of new virtual operators emerging onto the U.S. mobile scene, but there are very few that are giving voice and SMS services away for free. Scratch Wireless is positioning itself as mobile carrier that only sells cellular connectivity as a last resort. Instead it’s building its core communications services on the back of Wi-Fi, and it’s charging nothing for that service beyond the $269 up front cost for its initial phone, the Motorola(s goog) Photon Q.
Scratch Wireless believes that the prevalence of Wi-Fi networks has reached a point where consumers can use the technology as their sole means of wireless connectivity, CEO and founder Alan Berrey said in recent interview. Consequently, it’s designed its service to use Wi-Fi as the primary access technology and the cellular network as a backup.
Customers can call or text for free over Wi-Fi networks, and if they choose, they can buy cellular minute and data passes that allow them to connect to Sprint’s network. A one-day 30-minute voice pass cost $2, as does a 25 MB one-day data plan. Customers can buy 200 MB or 250 minute monthly passes for $15. Meanwhile, texting on both the cellular and Wi-Fi networks is always free.
But if customers stick solely to the Wi-Fi network for voice and data, then they’ll never pay a dime, Berrey said. Scratch uses both VoIP and IP SMS for its services, which helps it save costs, but it still provides a phone number to each subscriber that can be dialed or messaged like any other number.
Mobile virtual network operator (MVNO) Republic Wireless has also been experimenting with this kind of Wi-Fi-first model, but instead of discriminating between cellular and Wi-Fi uses, it bundles both access technologies into its service, charging a cheap rate of $19 a month for unlimited service. Berrey, however, believes that many consumers, particularly younger ones, are network-aware enough to limit their use to Wi-Fi. While many customers will buy occasional cellular passes, Berrey expects a large segment of them will never use its paid services.
How will it make money off those customers? While Scratch said it wouldn’t push advertising on its phones, it can share revenue from media and app store partners. There are definitely ways of monetizing mobile beyond subscription fees — other MVNOs like FreedomPop are exploring similar models — though Scratch executives were still a bit vague about the specifics.
Scratch is going after a young demographic accustomed to rationing their mobile use. Whether it can turn such a freemium model into a profitable business remains to be seen, but it’s interesting to see the experimentation going on the MVNO market. It’s also is tapping into a growing trend in mobility to emphasize Wi-Fi over cellular networking.