FreedomPop Freedom Sleeve

Despite all evidence to the contrary, FreedomPop CEO Stephen Stokols isn’t allergic to money. He simply believes that offering consumers free Internet access on low-cost devices will eventually become a viable business model.

That continues today with the first FreedomPop smartphone, an HTC Evo Design 4G that offers free access to 500 megabytes of wireless data, 500 text messages, and 200 voice minutes each month. Customers can also purchase an unlimited plan for $10.99 per month, and Stokols says that FreedomPop will introduce complementary features, such as visual voicemail, meant to help FreedomPop nickel-and-dime its way to a sustainable business.

FreedomPop has been purchasing HTC Evo Design 4G units from resellers, refurbishers, and recyclers for the last six months in an initiative referred to as “Operation American Gangster” inside the company. One employee found a supplier willing to part with a large number of devices at Long Beach, Stokols says, and FreedomPop had to find a way to transfer $400,000 in cash because the supplier wouldn’t accept a check. (This, along with other acquisitions, storage, and hiring, is where some of the $5 million FreedomPop raised in July has gone.)

Besides providing free Internet access, FreedomPop has changed little about the HTC Evo Design 4G. Stokols says that the company’s goal is for the device to look like every other phone on the market — it’s better for consumers to think that the device is a steal at $99 than for them to see it as a chintzy smartphone whose only redeeming factor is its cheap service plan.

Stokols says that introducing a smartphone will allow FreedomPop to monetize its services better than those data-only products. (The visual voicemail feature, which will ship alongside the phone service, is one example.) He adds that 35 to 40 percent of FreedomPop customers have to pay the company something — whether it’s for these add-on services or for extra data — in order for the business to become sustainable. The smartphone service is meant to attract many of those paying customers.

Introducing a smartphone was part of FreedomPop’s plans from the beginning, Stokols says. Everything else — the sleeves, the hotspots, the Home Internet product — was developed to prove that releasing a cheap smartphone with a free or low-cost service plan could provide a platform upon which a real business could be built. He believes that FreedomPop has done just that — now it’s time for the smartphone to make its debut.

Plenty of things could go wrong with Stokols’ plan. Consumers could decide that they’d rather pay carriers’ ridiculous fees in exchange for broader coverage or, until FreedomPop introduces new devices, the latest-and-greatest smartphones. The company could offer too much wireless data for free and fail to entice paying customers with its add-on services. Supplies of a two-year-old smartphone could dry up. The list goes on.

Stokols isn’t allergic to money. He’s just trying to prove that consumers can be persuaded to ditch larger carriers in favor of a free service — and then pay something, anything, to make sure the company offering those services will stay afloat.

[Image via Freedompop]