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"When we looked at the consumer electronics industry, we looked at tablets and notebook computers and gaming consoles, you name it. You go buy a consumer electronic device, you're connected to Wi-Fi, you use it every day for free, but our cell phone was different," said Alan Berrey, CEO and president of Scratch Wireless. "For some reason a cell had to be connected to a $100 a month cell phone bill. So we thought, 'Well, why can't you just connect a cellphone to Wi-Fi?'"
According to Berrey, here is how Wi-Fi First works: Customers purchase the phones that Scratch provides -- the Motorola Photon Q -- from the Scratch website. They can then choose to use services via Wi-Fi for free, or they can purchase passes to use the cellular network when there is no Wi-Fi available. Berrey said Scratch's first customer was actually in Hong Kong, noting that that is the beauty of a "Wi-Fi First" approach because the phones can be used anywhere for free as long as there's Wi-Fi.
So how free is free? Scratch Wireless' Vice President of Marketing Jon Finegold, said, "About two-thirds of our users live completely free of any wireless bill, they pay zero dollars and zero cents, and they make hundreds of minutes of calls, send thousands of texts and use gigabytes of data -- but they do most of it on Wi-Fi."
Not everyone is ready to jump on the "Wi-Fi First" bandwagon
"People want to be able to talk when they want. They don't want to necessarily have to worry about finding that next hotspot or how to get access to it," said Brian Blau, research director of consumer technologies and markets at Gartner, who has been briefed on Scratch. He said this poses a problem not only for individuals but also for CIOs and enterprises because, for example, an employee could be unreachable by phone because they are not in or near a Wi-Fi hotspot.
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He sees the market as limited, at least for now.
"From our perspective, it's considered a niche service. It's going to be one that you know only appeals to a certain number of people. They're probably not going to have a big impact in the near term on the overall wireless market in the US and neither are their competitors," he said.
Berrey begs to differ. He believes that Scratch can provide real real value for CIOs and enterprises.
"A CIO is clearly always interested in controlling the cost of the organization and making their employees efficient at what they do," Berrey said. "So any enterprise right now that has a large cellphone bill cost for providing cellphone communications to their employees -- or who wants to add cellphones to more of their employees, but they're cost-confined from doing that -- would be interested in what Scratch Wireless is doing."
Although he has his doubts, even Blau is keeping his eye on Scratch. "Scratch is someone who has to be watched because if they do catch on at all -- if they do start to get a good subscriber base -- I wouldn't be surprised to see them offer different types of devices or expand their service either with Sprint or within the Sprint family or even to other carriers," Blau said. "And, yeah, that may make it interesting over time."
Despite these challenges, Berrey and his team are optimistic about Scratch Wireless. Berrey said, "We really hope to change the model for the cell phone services throughout the world."