Imagine if instead of buying groceries and paying only for what you need, you had to purchase a certain amount of groceries each month. Let’s also imagine that you have two teenagers who sometimes eat everything in the pantry and other times eat just a few bites at each meal. If you need more groceries, you’ll have to pay far more than you expected; if you need less you’ll have to pay the pre-determined amount anyway. Does that seem fair?
Probably not. That’s why a growing number of companies are trying to fight this system — or, at least, this system as it applies to wireless service. FreedomPop is doing so by offering customers a cheap smartphone with a certain amount of free service; Ting is offering new devices at off-contract prices with a customizable plan creator; and Zact is combining the two by offering older-model smartphones with customizable plans.
These companies have a few things in common. All of them are piggybacking off Sprint’s wireless network. They’re all relying on old hardware and offering it at off-contract prices. And they’re all trying to solve these problems through their websites, which might help technically-savvy shoppers but will likely preclude the average cellphone user from learning about their services. Zact is trying to change that by partnering with Best Buy Mobile Specialty Stores. (Those are the hole-in-the-wall stores focused on smartphones and their accessories you might have seen in shopping malls or busy markets.)
Zact’s products will be available in 400 of these stores around the US, and those who purchase a Zact-powered smartphone from one of the stores will get four months of service for free. Customizable plans that compete directly with the you’ll-pay-what-we-want-you-to-pay plans available from other carriers in the same retail space for perhaps the first time. This change could both help and hinder Zact’s efforts to change the wireless industry.
First, the good news: Getting its phones and service into the public eye is probably the best way for Zact to become a noteworthy wireless company instead of yet another wannabe company with lofty ideals but modest execution. Best Buy might not be the best of stores, but it’s a brand that many consumers trust — and its mobile stores are certainly better known than Zact’s website.
“Best Buy has all the other options in the market, so we’re very happy to be in there and be the only ones doing something truly different,” says Greg Raleigh, the founder and CEO of Zact parent company ItsOn. The partnership will also allow Zact to educate consumers about its offering by teaching Best Buy’s employees about the service and, in some stores, playing an educational video all day every day.
Now, the bad news: Zact will be competing with established carriers with old devices that seem to cost more than their newer counterparts. The math doesn’t work out that way — carriers only offer the latest-and-greatest smartphones for $200 because they make their money back in service fees — but many consumers don’t think beyond the price tag.
Raleigh dismisses such concerns. “The truth is, this is a big red herring, this whole phone selection thing. And it’s a red herring pushed by the dominant forces in the market,” he says. “If you’re buying an iPhone 5s, you’re either paying $800 for the phone or you’re paying $100 for your service in a two-year lockup. That’s not the deal we’re offering. And frankly, very few of our customers are interested in a $800 phone.”
Zact’s software and service plans are meant to take precedence over any concerns about having the latest-and-greatest hardware. Whether or not that proves to be the case will depend on how many people purchase Zact-powered devices from these specialty stores and how many skirt around the Zact table on their way towards the newest smartphones.
Despite those difficulties, today’s announcement signals a brighter future for all these companies trying to run their wireless services like a utility company instead of running ’em like money printers fueled by complicated contracts and anti-consumer policies.
“We want to be different. We need to be different, because people need better choices. Everywhere you look it’s all about a personalized service on your mobile phone — except when it comes to your mobile service,” Raleigh says. ItsOn and Zact are meant to show that this doesn’t have to be the case. “Five years from now, this will be the way the majority of the country will buy their service.”
[Illustration by Hallie Bateman for PandoDaily]