NetZero reinvents itself as America’s first free 4G service provider

NetZero burst onto the scene in 1998 as the first in a crop of Internet service providers that gave subscribers free access to the Web using an advertising-supported model. NetZero’s patented ad technology displayed highly targeted ads to users as they browsed the Internet at dial-up speeds, but it was forced into a freemium model when a number of other ISPs began offering free Web access as well. NetZero continues to offer basic paid dial-up and broadband services, but now the company is going back to its roots in an effort to disrupt the wireless industry as it did to the dial-up industry nearly 14 years ago.

With Clearwire as its network partner, NetZero on Monday unveiled a new contract-free 4G wireless broadband service. At launch, NetZero has two affordable hardware devices available for purchase: a $49.99 NetZero 4G Stick and a $99.99 NetZero 4G Hotspot. Neither device requires a commitment of any kind on the part of the user.

Affordable 4G modems are just the beginning. NetZero will also offer five no-contract service plans at launch that start at free — yes, free — and top out at $49.99 per month.

The free plan obviously comes with some big caveats. First, it only affords 200MB of data each month. On a WiMAX network that afforded average download speeds of between 8Mbps and 9Mbps during my tests, this seems like an incredibly small amount of data. For light travelers who need access to email on the go a few times each month with minimal Web browsing, however, this plan will certainly get the job done. Any use case beyond that will likely require a larger plan.

The other big draw-back is a restriction stipulating that the free plan can only be used for 12 consecutive months. This means two things: if a user activates the free plan and then upgrades to a paid plan after a month or two, he or she cannot switch back to the free plan. Secondly, the light travelers looking for a free high-speed connection described above will only have a year to enjoy free service. The cheapest monthly plan after a year is just $9.95 though, and since there are no contracts to worry about, users can deactivate and reactivate service at any time.

Here’s what we get when we line up NetZero’s plans against 4G broadband plans from the four major U.S. carriers:

Sprint is clearly the best value for heavier users, but there’s an obvious catch. Each plan listed above for Verizon Wireless, AT&T, Sprint and T-Mobile requires the customer to sign a two-year contract. This means at Sprint, the subscriber will spend a minimum of $839.76 for service over the life of a contract on top of the hardware purchase price, even if service is only used for a handful of months over the course of two years. T-Mobile subscribers will pay a minimum of $959.76 over two years, and AT&T and Verizon customers will pay a minimum of $1,200. The only way out, of course, is to pay a lump-sum early termination fee, the cost of which varies between carriers.

There is another consideration, however, and that is coverage. NetZero’s 4G service utilizes Clearwire’s WiMAX network, which covers 82 cities across the United States and their surrounding areas. That’s it. NetZero’s current hardware only supports WiMAX, so neither currently available device will operate on Clearwire’s upcoming LTE network. The company may release LTE-compatible devices in the future, but for now, coverage will not be expanding.

NetZero’s 4G Hotspot performed extremely well during my tests in and around New York City, with no service interruptions to speak of. Download speeds averaged about 8.3Mbps, which is more than enough to accommodate most users, and upload speeds hovered above 1Mbps.

The device itself is very easy to use, and the big, clear LCD display provides key information like signal strength, remaining battery charge and a WEP key. Battery life seemed above average compared to other portable hotspots I’ve used, and I still had two bars left after a few hours of usage in an area with solid WiMAX coverage.

NetZero’s success as a wireless service provider is anything but guaranteed. It offers clear benefits compared to the nation’s top carriers — no contracts, free and inexpensive plan options, low-cost hardware — but coverage will be a big barrier for many potential customers. If a potential subscriber doen’t spend all or at least most of his or her time in and around the 82 cities listed above, NetZero’s service is simply not an option.

NetZero’s 4G devices and service becomes available to consumers at 9:00 a.m. EDT on Monday, and additional details are available on the company’s website.