If you want to change phone companies or you’re paying for a lot of unused data, good luck getting out of your two-year contract. Prepaid plans, meanwhile, are inflexible, and most don’t offer parental controls, which are in high demand. Engineer Greg Raleigh thinks he has the answer: He’s created a cloud-based company that offers users 36,000 no-contract smartphone plan options they can switch between at any time on its app.
Raleigh’s mobile-phone service, Zact, launched on May 13 without its own wireless infrastructure, instead leasing network capacity from Sprint Nextel (S). Zact lets users customize their plan with a few clicks, spreading phone minutes, texts, and Web data over any number of devices. Parents can limit or ban kids from calling certain numbers or texting or playing games at certain hours. A typical package totals $27.09 a month—$9.43 for 500 minutes, $4.43 for 500 texts, and $13.23 for 500 megabytes of data—and customers get a credit if they haven’t used that much by the end of the month. “We call it the un-plan,” says Raleigh, the chief executive officer of Zact parent company ItsOn. “We’ll be the least expensive service in the country.” Datacomm Research analyst Ira Brodsky says, “These kinds of services will let you buy wireless the same way you buy gas and food—you buy what you want and need.” Zact sells two basic Android smartphones for use with its service.
The son of a Bay Area engineer, Raleigh, 52, has sold two other startups: Clarity Wireless to Cisco Systems (CSCO) in 1998 and wireless chipmaker Airgo Networks to Qualcomm (QCOM) in 2006. Earlier in his career, he developed manufacturing equipment for Varian Medical Systems (VAR), then became a chief scientist at Watkins-Johnson. He started Clarity while finishing his electrical engineering doctorate at Stanford University, spurred by papers on new antennas. His wireless signal research was incorporated into today’s LTE networks. “That’s one of my proudest achievements,” he says. “As a technologist, your goal is to have your technology used by as many people as possible.”
In 2008, Raleigh left Qualcomm and founded startup incubator Headwater Partners but itched to launch another project himself. The same year he and longtime friend Charlie Giancarlo founded ItsOn, which now has roughly 40 employees. Raleigh hopes to sell Zact’s software to other carriers. “Greg and his team have brought a Silicon Valley-based point of view to wireless services that has not been tried before,” says Sprint Senior Vice President Fared Adib.
Raleigh’s company has raised $28 million from investors including Vodafone Ventures, Verizon Investment Management, Best Buy (BBY), and Andreessen Horowitz. Zact will be competing with much larger phone companies, and Datacomm’s Brodsky says “it’s not going to be an overnight thing.” But, he adds, “There are a lot of people who’d appreciate the power to buy what they use.”