Free iPhone Data Will Scare AT&T, Verizon and Sprint

Something wonderful is coming to an iPhone near you. According to TechCrunch, the unusual project FreedomPop (which comes from Skype co-founder Niklas Zennstrom) is in the process of developing a case for the iPhone 4 and iPhone 4S that will provide Apple AAPL fans with 1GB of free data. The free data will come through FreedomPop's “freemium” WiMax service, hence the need for an external case that delivers data to your iPhone. But FreedomPop didn't stop at the iPhone. With this new unnamed device, users will basically have a mobile hotspot in the palm of their hands – all for free. Those who go over the 1GB limit will be charged one penny per gigabyte. That's not a great deal by any means. And it's not yet clear if the 1GB limit will reset every month or if that's merely a freebie to get consumers started. But if FreedomPop – a company that insists it provides “100% Free Wireless Internet Provider and 4G Mobile Broadband ISP” (see the official site for more) – can offer 1GB of free data per month for, AT&T T, Verizon VZ and Sprint S could be facing a tough road ahead. Granted, there are a few drawbacks involved with FreedomPop's service. For one thing, if TechCrunch's source is accurate, the company has already broken its promise to provide 100% free wireless Internet access. Second, there will reportedly be a deposit for the iPhone case, which may be less than $100 and may or may not be refundable if and when the case is returned. But even with the drawbacks, consumers are bound to go crazy for FreedomPop's offering. At the very least, it will provide existing iPhone users with an additional amount of data, which could prevent them from incurring unnecessary overage charges from Verizon and AT&T. Obviously this isn't an issue for Sprint subscribers, who have been given the gift of unlimited data. But it creates an incentive for consumers to jailbreak their iPhones and avoid getting locked into a monthly data plan. It might also inspire some consumers to buy an iPod Touch instead of an iPhone. If FreedomPop finds a way to monetize its free Internet access (by throwing ads onto the screen, for example), it might be compelled to offer additional gigabytes for nothing. And if that happens, consumers are going to be less attracted to AT&T and Verizon's overpriced data packages. In the short-term, this isn't likely to impact the cellular carriers in any way. But the long-term impact could be enormous. Just as some users have attempted to “cut the cord” and replace Comcast CMCSA cable with Netflix NFLX, users may be tempted to “cut the cellular provider” out of the data equation.
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