Saturday, January 14, 2012

Can "Freemium" Model Work for "Access"

Freemium, where no-cost versions of a product are offered, with a revenue model built on incremental services or more-robust features, is a well-established model in the content, application and gaming businesses. So the issue is whether freemium can work in the retail telecom business or mobile business.

To be sure, entrepreneurs have thought about, and some have tried, to create sustainable "free calling" services that are supported by advertising. It really has never worked, but the notion continues to appeal. 

Over the last decade or two, lots of entrepreneurs have tried to create "free" broadband access services that are funded by advertising or sales of additional products. Municipal Wi-Fi networks are recent examples.

In some ways, the model has been tweaked by some firms that use free Wi-Fi as an amenity to boost sales of other products, ranging from coffee and food to hotel stays.

FreedomPop, for example, hopes to use the LightSquared network, which has not yet received permission to operate, as a way of offering "free broadband and voice services to all Americans."

FreedomPop is lead by Niklas Zennstrom, co-founder of Skype, and his venture capital firm Atomico. The company hopes to launch in 2012, in what it calls "under-served markets."  FreedomPop

In the communications service provider space, it arguably has been the case that there have been more experiments with advertising-supported approaches, but we will probably continue to see some variants of the freemium model in telecommunications.

Over the past decade and a half, for example, lots of U.S. firms have contemplated, and a few have attempted, to create “free” broadband access services, with the intention to make revenue by advertising or selling premium tiers of service. There are no examples of outstanding success one easily can point to, though.

But that is not going to keep firms from trying. FreedomPop, a start-up backed bySkype and Joost co-founder Niklas  Zennström, hopes to create a freemium service for broadband access in the U.S. market.  

FreedomPop says it will launch in 2012, with a revenue model similar toDropbox, the cloud-based storage service that also uses a freemium model. Dropbox offers up to 2 Gigabytes for free, and sells access to additional storage for a monthly fee in different tiers. Netblazr, a Boston-based access provider, uses a co-op model, giving small businesses free best effort digital subscriber line in exchange for the right to to put a microwave radio at that location, helping Netblazr create its network. Netblazr

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