May 1 (Bloomberg) -- Charles Giancarlo, Cisco Systems Inc.’s former chief of product development, will unveil this month a wireless service that will seek to compete with bigger carriers by offering customized plans.
ItsOn Inc., a mobile-technology venture based in Redwood City, California, plans to offer mobile plans with options that can be tailored to user needs, Giancarlo said. Using a smartphone application, consumers will be able to change services at any time and share minutes, text and data allowances with others. Customers will have to buy a mobile device from ItsOn and pay full price, rather than a reduced, subsidized amount.
The program, which will be marketed under a different brand, will challenge established no-contract service providers such as Leap Wireless International Inc., MetroPCS Communications Inc., and Sprint Nextel Corp.’s Virgin Mobile and Boost brands. Prepaid plans make up about a quarter of the U.S. wireless market, according to Washington-based New Millennium Research. Subscribers spent $178.4 billion on mobile services last year, estimates CTIA-The Wireless Association.
“It just provides a huge amount of flexibility,” said Giancarlo, an individual investor and co-founder of ItsOn. “It allows for cheaper plans as well as integrated, richer plans for families. The whole idea of prepaid and postpaid goes away, and it becomes pay-as-you-go.”
While ItsOn already offers its plan-customization software to carriers and handset makers worldwide, the new initiative is the company’s first foray into selling services directly to mobile customers. The name of the service will be announced this month, Giancarlo said.
ItsOn holds more than 50 patents and pending applications. By offering its own wireless service, ItsOn could push other carriers to adopt more customizable plans, according to Ira Brodsky, an analyst at Datacomm Research Co. in Chesterfield, Montana.
“The industry is changing very dramatically,” Brodsky said in an interview. “With the shift to smartphones and more devices, these kind of services let you buy wireless the way you buy gas and food. You buy just what you need.”
Including $15.5 million in funding from Andreessen Horowitz, SV Angel and other investors, ItsOn has raised about $30 million to date, according to Chief Executive Officer Greg Raleigh.
“This is a multibillion-dollar market,” John O’Farrell, a general partner at venture-capital firm Andreessen Horowitz, said in an interview. “The market over time is every carrier and every consumer that has a smartphone. It’s a truly different, exciting company.”
The startup, which has more than 30 employees, is hoping to benefit from consumers seeking affordable plans for a growing array of wireless gadgets. More than 30 percent of U.S. users own a tablet, 26 percent have an e-reader and 45 percent own a smartphone, according to Pew Internet & American Life Project.
Signing up for ItsOn’s services will only take a few minutes after it’s introduced, Raleigh said. New devices can be easily added and allocated voice minutes, texts and data. Parents can decide how many messages their child can send out, and put a curfew on use of phone applications or calls during certain hours -- such as during school or at night, he said.
“We call it the un-plan,” Raleigh said in an interview. “We’ll be the least-expensive service in the country.” A family of three will pay less than 50 percent of what they spend on wireless service today, he estimated.
Giancarlo said he and Raleigh began discussing the project four years ago. The two met when Giancarlo was at Cisco, which bought Raleigh’s wireless-networking startup, Clarity Wireless Corp., in 1998.
Before leaving Cisco six years ago, Giancarlo was the networking-equipment maker’s executive vice president and chief development officer. Giancarlo is also a managing director at private-equity firm Silver Lake Management LLC, which isn’t an investor in ItsOn.
Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.
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