FreedomPop launches free smartphone talk and data service (and a $100 HTC Evo)

Have you heard of FreedomPop? About a year ago, it became the first free cellular service provider, offering 500MB of data to anyone who buys its 3G and 4G Wi-Fi hotspots. To celebrate its anniversary, the *carrier will start selling its first smartphone, the HTC Evo Design 4G, and free service with it.

The HTC Evo Design 4G is a two-year-old Android phone, but not terrible when you consider its $100 price (without a contract). It has a single-core processor, 768MB of RAM, 4GB of internal storage, and a 4-inch 960 x 540 pixel LCD screen. Most new smartphones retail for $600 and up.

So what’s the catch, you may wonder? Well, there isn’t one, exactly, but there are limits to what you get for free. FreedomPop offers 200 minutes, 500 texts, and 500MB of data for free each month. If you exceed this limit, you’ll have to pay $11 to upgrade to unlimited service. We covered FreedomPop’s service and pricing here.

We spoke with FreedomPop CEO Stephen Stokols who told us that he’s been waiting to launch a phone since FreedomPop first opened its doors. He believes that his company is proving that free and incredibly cheap wireless prices are possible.

“We needed a disruptive business model,” he told us. “The prospect had to be too good to be true. … we are giving away 200 free minutes, 500MB of free data, 500 free texts, and we can deliver unlimited everything for $10.99. That’s 92 percent cheaper than AT&T.”

And he is right about one thing: Carriers like Verizon and AT&T are overcharging users. U.S. phone owners pay more for service than almost anyone else in the world.

Since launching, FreedomPop’s user base has grown consistently by about 25 percent a month, according to Stokol. He wouldn’t share precise user numbers, but says that the carrier’s business model is working. To operate, it needed 30-40 percent of users to pay it something, and right now about 45 percent of those on the service are opting to pay a small premium to exceed the strict limits of the free service.

Still, “more than half of our user base doesn’t pay us a penny” said Stokol, and that’s how he wants it, telling us more than once that the “Internet is a right, not a privilege,” a saying that is echoed on FreedomPop’s website. He said that even as FreedomPop offers more expensive phones, it will always have a $100 option.

*FreedomPop, like many other small cellular providers, runs off of Sprint’s 3G and 4G LTE network. Soon, other Sprint phones will work on FreedomPop’s network.