Even as giant cellphone carriers like T-Mobile US Inc. and AT&T Inc. unveil aggressive new pricing plans to steal each other’s customers, a tiny Cambridge startup called Scratch Wireless has begun offering a monthly price that can’t be beat: zero.
The catch is that customers will have to do much of their phone work — whether making calls, sending texts, or browsing the Internet — over free Wi-Fi Internet connections. If there is no Wi-Fi nearby — say, while driving along the highway — then a caller would need to connect to a cellular network, and pay for it.
Scratch offers optional packages for users to connect to the Sprint Nextel Corp. cellular network that range from $1.99 for one-day use to $14.99 for a monthly pass.
Though not quite ubiquitous, free Wi-Fi is not hard to find. Many homes and offices have wireless Internet access, as do thousands of retail locations, such as Starbucks and McDonald’s restaurants. And the leading cable TV companies operate hundreds of thousands of Wi-Fi hotspots tht can be used free of charge by subscribers. With Wi-Fi so commonplace, some Scratch users may be able to avoid paying a penny for wireless calls.
“Scratch Wireless is all about free mobile phone service,” said chief executive Alan Berrey. “Seventy percent of our customers right now live completely free of a monthly cost. They’re consuming hundreds of voice minutes, thousands of text messages, and they’re not paying a penny.”
Scratch enters a cellphone industry already roiling with price wars. T-Mobile recently announced it would pay the early termination fees of users who switch to T-Mobile from other carriers; AT&T offered to pay customers who switch to its service from T-Mobile. And Sprint Nextel Corp. has announced major price cuts on its family calling plans.
Of the four biggest US companies, only Verizon Wireless has so far refrained from a major change in strategy.
“I think there’s a seismic shift happening in the market,” said Carrie MacGillivray, a wireless telecom analyst for IDC Corp. in Framingham, because companies must find new ways to sell phone service in a saturated market.
MacGillivray predicted that Scratch Wireless would not have much chance of winning existing cellular customers,
“They’re not offering to pay them, like T-Mobile or AT&T is right now,” she said. But Scratch might gain traction with first-time users who are on a budget.
The company sells the Photon Q, a Motorola smartphone running Google Inc.’s Android operating system, for $269 full price; there’s no monthly contract. The user can then use a Wi-Fi Internet connection to place voice calls, check e-mail, or visit Internet sites at no cost.
For when Wi-Fi is not available, Scratch will sell “passes” to Sprint Nextel Corp. For instance, $1.99 buys a 24-hour pass good for either 30 minutes of voice calls or 25 megabytes of 4G LTE data downloads.
The 30-day plan, for $14.99, provides 200 megabytes of data or 250 minutes of talk.
And text messages over Sprint’s network are always free, even when there is no Wi-Fi available.
‘Seventy percent of our customers right now live completely free of a monthly cost . . . They’re not paying a penny.’
The company began offering its service to preregistered users just before Christmas and launched the service publicly last week.
“We’ve targeted this primarily at a younger 14 to 24 age group,” Berrey said.
Such users have easy access to wireless Internet at home or at school and can usually get by without a phone when they’re out of Wi-Fi range.
Scratch Wireless is looking for traction in a market that is saturated with cellphones.
According to CTIA-The Wireless Association, there are now more wireless phones than people in the United States, with many Americans owning more than one. With few new customers to tap, companies must target young people getting their first phones and the handful of adults who have never bought a wireless phone.
Or they must steal customers from rivals.
Moreover, a growing number of consumers have stopped buying phones under the traditional two-year service contract. Instead, they pay upfront for a phone, then pay in advance for the amount of voice or data service they need, a practice known as prepaid phone service.
MacGillivray said that 24 percent of Americans had no-contract prepaid phones as of 2012, and predicted the number will rise to 28 percent by 2017.
“The prepaid market has been a growth engine for the past several years, but the large carriers like AT&T haven’t paid a lot of heed,” MacGillivray said.
But that is changing fast. Last year, even before it abolished contracts, T-Mobile acquired the prepaid carrier MetroPCS, while AT&T Inc. bought the prepaid phone company Leap Wireless.
Scratch is not the first mobile phone company to bet big on Wi-Fi calling. Republic Wireless in Raleigh, N.C., launched a similar service in 2012. But it charges a minimum of $5 per month, even if a user sticks to Wi-Fi only.Hiawatha Bray can be reached at email@example.com.