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'Snowden Phone' Sold Out in 12 Hours, Company Says

By Steven Nelson, U.S. News on March 7, 2014
 
Los Angeles start-up FreedomPop says it sold 10,000 encrypted phones and now has a 100,000-person wait list.
 
 
 
 
Americans can get free, encrypted monthly phone service through FreedomPop, the company whose "Snowden phone" entered the marketplace with a bang this week.

 

 A Los Angeles company sold its entire inventory of so-called "Snowden phones" 12 hours after it began offering the device Wednesday. 

 

Amid a flurry of media reports and general curiosity, FreedomPop sold more than 10,000 of its encrypted smartphone - officially called the Privacy Phone - and added 100,000 people to a wait list.

 

“We thought it would be a little more niche, at least out of the gate,” Stephen Stokols, CEO of FreedomPop, tells U.S. News. “It took us less than 12 hours to run out of the initial lot, which was supposed to take us all the way through March.”

 

Stokols attributes the sales stampede to news coverage and the fact that the phones are not only encrypted, but come with inexpensive plans compared to mainstream carriers. 

 

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FreedomPop currently offers just one Privacy Phone model - retrofitted Samsung Galaxy S II smartphones - for $189 each, with free voice and text service for three months. After three months users can either pay $10 a month for unlimited service or default to a free monthly plan that offers 200 minutes, 500 texts and .5 GB of data.

 

How is service so cheap?

 

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“We use Sprint’s data network, but we don’t touch the voice network,” Stokols says, “So our free plan would cost $18 if we bought it wholesale from Sprint, but it costs us one-tenth of that, where we can afford to give away $1.80.”

 

The privacy-geared phone treats voice calls as data using Voice Over IP technology, similar to the popular online service Skype. The company initially started the VOIP phone service in October and claims nearly 500,000 subscribers, but most of them do not have the enhanced privacy features.

 

FreedomPop buys phones from manufacturers and contracts to another company that retrofits them, a process that takes 3-4 days. The Privacy Phone is loaded with 128-bit Android encryption software and VPN for private web browsing.

 

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After the unexpectedly strong sales, the company quickly moved up the delivery date for another batch.

 

About half of the Privacy Phones already sold were bought for secondary use, Stokols says. He expects more people will use them as their primary phone as newer models become available - initially to include other Galaxy models and eventually iPhones.

 

Stokols predicts the company will be able to sustain between 30,000 and 40,000 new phone plans a month when inventory catches up to demand.

 

“There is a ton of demand" coming from the Washington, D.C., and northern Virginia area, he says, "[and] we’re trying to track down why a disproportionate share is coming from there.”

 

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FreedomPop’s website prompts would-be customers for their ZIP code and street address to first ensure there is strong enough local network service.

 

Other companies are beginning to offer encrypted phone service, but prices are high. The company Geeksphone, for example, announced last week it would be begin offering its $629 Blackphone this summer. Boeing introduced its Boeing Black phone this week, geared toward defense workers. It pings communications off satellites and “discrete radio channels” and its encrypted hard drive self-destructs if it's tampered with. 

 

“We’re the only ones that are making a consumer, mainstream play," Stokols says. "Based on the traction we’re getting, we expect some competition. I’d be shocked if in six months we’re the only ones in the space.”