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By Tim McElgunn
May 19— Scratch Wireless customers will no longer have the option of buying an unlimited cellular data plan in conjunction with the Sprint MVNO's Wi-Fi First mobile wireless offering. But they will have the choice of a new handset.
Scratch made the change last week, telling users that it has ended its one-day and 30-day unlimited cellular data offers that gave users access to Sprint's 3G data network for $2 and $25, respectively.
Scratch and other Wi-Fi First MVNOs use proprietary software to enable free Wi-Fi calling and texting along with standard Wi-Fi data connectivity. The services automatically enable cellular connectivity when a device is out of range of a hotspot. Customers must pay for cellular connectivity.
In a statement, the company says that it was forced to make the changes due to a small number of users who were using enough 3G data to threaten the company's business model.
“Scratch updated its passes so it no longer includes unlimited cellular data. Unlike many carriers, we chose to be transparent about these updates and notify users instead of simply throttling data speeds to lower usage when a user hit a certain threshold. With regard to the unlimited data passes, unfortunately, a few people really took advantage of the unlimited data passes to the point where they had to enforce limits to ensure our unique business model continued to be profitable. Unlimited voice passes remain intact.”
But Scratch has now positioned the change in its cellular plans as part of a new handset announcement.
In a release issued this morning to announce a “new value-driven smartphone” the company states, “As part of its expanded offerings, Scratch also introduced new data and voice passes for the times Scratch users aren't on Wi-Fi and need to make phone calls or access data services over the nationwide Sprint 3G network. These new passes, which start at just $1.99 for 24-hour unlimited voice, were developed in direct response to customer feedback and present a more affordable and flexible option for Scratch users.”
With the unlimited plans gone, Scratch users wanting access to cellular data will now be limited to 50 MB of data usage on the new 24-hour pass, with plans topping out at 1 GB per month.
Scratch has retained its existing 500 MB/30-day pass for $15. The $25 offer now provides access to 1 GB of cellular data over 30 days.
Emergency cellular calling is available to all customers, but anyone wanting to make or receive non-emergency voice calls outside of Wi-Fi range must pay for 3G voice connectivity, which Scratch wholesales from Sprint.
Following the change, Scratch users will still have the option of buying unlimited cellular voice add-ons and the company does not charge users for texting over Sprint's network. A 24-hour unlimited cellular voice pass is $2, and unlimited cellular voice for 30 days costs $15, both unchanged.
In a statement explaining the change, Scratch Wireless noted, “The cellular options are there if and when you need them and a third of users each month opt to buy voice or data passes. We realize this isn't for everyone but it works incredibly well for a lot of consumers. At the end of the day, if a user is looking to be on cellular for a majority of the time, Scratch is likely not a good solution for them. We'll continue to evaluate new passes and cellular offerings based on user data and consumer feedback.”
Scratch's business model depends largely on customers' chargeable cellular usage coming in significantly below the fees they pay Scratch to have that access available. Those cellular charges, along with the upfront cost of a Scratch Wireless handset enable Scratch's “freemium” service model.
The company to date has offered only the Motorola Photon Q at a list price of $269, but frequently discounted to for $99.
As Broadband Daily was in production this morning, the company announced the availability of a new Scratch-enabled Android smartphone, the Coolpad Arise, available for pre-order via ScratchWireless.com for $99.
The handset, from China's third-largest smartphone manufacturer, is a relatively basic Android device sold elsewhere in the U.S. for $1 to $15 with prepaid plans that range from $30 to $80 per month. Early reviews on Amazon.com, CNET, and other outlets are mixed.
The Arise appears to have replaced the Photon as Scratch's only phone, despite Jon Finegold, vice president of marketing for Scratch telling Bloomberg BNA in March that it was preparing to announce “four or five 5 handsets on the market in 2015 at various price points” from $100 to $400 or $500. Coolpad does make a range of more expensive models, which are likely among those Scratch says it will introduce later this year.
Scratch has phased out the Photon, with a Scratch spokeswoman tyelling Bloomberg BNA on May 19, “The Motorola Photon Q was an older device (introduced to the market in 2012) that was naturally phased out of the Scratch lineup. Scratch had a working relationship with Motorola since its launch, and found them to be a supportive partner while part of the Google family, who is traditionally very supportive of start-ups. Following Lenovo's acquisition of Motorola, however, Scratch decided to pursue other partners.”
In time, Scratch users should have the choice of an almost unlimited selection of Sprint-compatible handsets. The company is working on a cloud-based Wi-Fi First voice and data calling solution that will work in conjunction with an app loaded onto essentially any Android device. That will help Scratch exit the handset business altogether.
In our March interview, Scratch's Finegold told Bloomberg BNA, “we'd love to do it as an app, because we'd love to get out of the whole certification, handset inventory ... all that stuff.”
He said that preparing and certifying handsets, “was probably the thing that was most surprising in terms of what we thought were going to be some of the challenges when we started the business.”
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