Think back a decade ago. If you wanted broadband, DSL was all that was available in many areas. And it was available only as an add-on to your landline telephone service. Then cable systems began offering broadband service and the telephone companies reluctantly began offering DSL on a standalone basis.
That, says Stephen Stokols, CEO of a small company called FreedomPop, is what's about to happen to wireless service, with a big psychological boost from Google, which last week announced its Project Fi, a wireless phone and data service that automatically switches between traditonal cellular and wi-fi networks, offering low-cost, no-contract service to customers.
It's something FreedomPop has been doing for quite awhile but Stokols told ConsumerAffairs Google's announcement is "sort of an endorsement from the most geeky company in the world on what telco may look like in the future."
FreedomPop and other small companies, like Republic Wireless, aren't threatened by Google's move, Stokols says, describing it instead as a shot across the bow of the embedded wireless carriers like AT&T and Verizon.
A new paradigm
The model the new entrants are pursuing basically pits network against network in realtime on every single call -- switching the call from Sprint to T-Mobile to wi-fi on the basis of who has the stongest signal at that moment. Google does this with software built into the phone; FreedomPop does it with an app.
At $20 a month, Google's plan is actually more expensive than FreedomPop's -- which, like Republic's, starts at $5 a month -- and is comparable to some prepaid wireless plans. And since it initially works only on Google Nexus 6 phones -- making up less than 1% of the wireless universe -- it's not an immediate threat to anyone at the retail level.
What it is, says Stokols, is the first step in a strategy aimed at disaggregating, blowing up, in other words, the stranglehold that the big carriers currently enjoy. Initially, it's aimed at demonstrating to other equipment manufacturers -- Samsung, Apple, HTC, etc. -- that consumers will vote with their checkbooks.
If that happens, the manufacturers will be more likely to build network-switching intelligence into their phones, setting the stage for the new carriers to begin scaling up quickly.
"If Samsung and all the OEMs (phone manufacturers) adopted the same technology that lets devices switch between networks, that switches power from the carriers to the consumer," Stokols said. "Then a wholesaler like us, we can push more traffic to better carriers, play the carriers off each other and get the best deal for consumers."
No more roaming
The new services also promise to send the roaming concept straight into the history books, somewhere in the chapter that explains what "long distance" charges were.
Those old enough to remember long distance will tell you that it was what you paid to place a phone call from, say, New York to Chicago. Sure, if you lived in New York City, you could call Westchester County for free (depending on a zillion inexplicable ifs, ands and buts). But if you wanted to call Chicago, it would cost you 20 or 30 cents a minute, depending on yet another set of completely mysterious rules called tariffs.
In truth, there was no actual physical cost to the telephone companies to complete so-called "trunk" calls, except for the half-cent or so that they charged each other -- charges based on calculations of their "embedded costs," outlined in accounting reports similar to the hieroglyphics found in ancient cave dwellings.
Likewise, when the Googles and FreedomPops of the world have negotiated deals with wireless carriers and lined up open wi-fi networks worldwide, there will be no easy rationalization for international roaming charges.
Although Sokols would not confirm it, industry sources say that FreedomPop will be announcing free international roaming to one or more countries later this week.
Leaving Sprint and T-Mobile by the wayside may also become more commonplace. Sokols said his company currently has 8.5 million wi-fi hotspots at the moment and is adding new locations daily.
In 18 to 24 months, he said, he hopes to enough wi-fi hotspots to offer a wi-fi-only plan that would be extremely inexpensive, possibly even free, for the first half gigabyte or so.
That, he estimates, would appeal to the 80 million or so consumers who are sporadic prepaid users or do not have wireless service at all.
Back in the day, the U.S. government subsidized phone companies by allowing them to tack on a "Universal Service" fee, something that survives to this day. Its stated intention was to bring telephone service to every wide spot in the road. It took decades to get into the 90% neighborhood.
If Sokols' plan works, universal wireless service may become a reality without fees in just a few years. Stay tuned.