Cellular Startups Using WiFi Hot Spots to Provide Service Instead of Cell Towers

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Americans spend about two hours a day on their mobile devices, and based on data from Statista, they’re consuming about 6.85 million gigabytes of data when they do. Considering how much major cell carriers charge per month for data packages — U.S. News reported that Verizon Wireless, the largest mobile carrier, charged about $148 per month on average in the fourth quarter of 2013 — such an exorbitant amount of mobile device usage is costing Americans a lot of money.

Fortunately for the wired-in masses, two companies are on the forefront of an ambitious undertaking. Both Republic Wireless and FreedomPop are trying to reduce cellular costs by relying on strategically placed WiFi routers, and when none are available, smartphone users would fall back on the traditional cellular networks.

FreedomPop, an L.A. company that was founded in 2012, works with companies who already offer WiFi hot spots, like the ones users might find in Starbucks, to create a massive Internet-driven phone network. For just $5 a month, FreedomPop gives its subscribers access to a network of 10 million WiFi hot spots a month, many of which aren’t normally open to the public. Some of its other plans use a combination of WiFi hot spots and Sprint’s cellular network.

Republic Wireless, which is based in Raleigh, N.C., is similar. For only $5, subscribers can call and get online via WiFi, and for just $10 a month, they can use both WiFi and Sprint’s cellular network. Bandwidth.com, Republic Wireless’s parent company, developed a method of seamlessly moving calls between different cell towers and WiFi networks.

The two companies are already profitable and adding subscribers every day. FreedomPop claims to be doubling its customer base every four to six months, and Republic Wireless says that its subscriber base is growing a whopping 13% each month. That being said, they’re still diminutive in comparison with the major carriers. Each company has hundreds of thousands of subscribers, while Verizon has more than 100 million.

However, the idea is gaining traction with consumers — and catching the attention of other cellular carriers. Cablevision announced a new phone service that would be powered by WiFi last month, and would cost just $30 per month — a third of what the traditional wireless contract would cost.

“WiFi first is a massive disrupter to the current cost structure of the industry,” FreedomPop’s chief executive Stephen Stokols told the New York Times. “That’s going to be a big shock to the carriers.”

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