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Sunday, November 8, 
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Pocket Communications CEO: Raising $100M was 'damn hard'

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pocketwireless.jpgFlat-rate wireless service provider Pocket Communications Northeast has just raised $100 million for its ultra-low-cost wireless business that does away with the lengthy customer contracts, the added fees for text messaging and even the often hard to understand "customer service" staff located in a call center oceans away. It sounds like a compelling business model, but turned out to be a tough sell to the venture community.

"It was damn hard," the company's founder and CEO Paul Coster says. "It took us eight months. At first people were lining up, but then there was the meltdown on Wall Street."

"We're really thankful that Battery still believes in us," he says of lead backer Battery Ventures, which was ultimately joined by Charles River Ventures and Bank Street Group.

Pocket Communications' business model is similar to that of other flat-rate services such as Metro PCS and Cricket Wireless, which have turned the traditional model of providing cell-phone service on its head by eliminating the lengthy contracts that lock customers in. Pocket, which already has a wireless service up and running in Texas, will use the $100 million to launch a service in a swath of the northeastern U.S. comprising parts of Connecticut, Massachusetts and New York and says it can offer unlimited calling, texting and picture messaging for about $30 a month. It saves expenses in a multitude of ways, such as requiring up-front payment at the start of the month so that no invoices or late payment notices are required (customers receive copies of their bills via text message).

Coster argues that this is not a service that asks customers to compromise service for cost. Rather, it has a high quality of service, and its call center takes an average of just 12 seconds to answer customer calls, he says.

"We're cheap as hell, and we don't drop calls," he says.

One drawback is the company's relatively late arrival to the flat-rate wireless game, which could limit its nationwide expansion. Having built up a large base of customers in Texas, it decided to expand next into the Northeast because it identified enough unclaimed business there. But nationwide, many customers are already spoken for, thanks to more established services such as Metro PCS. Pocket says it will not enter a new market unless it identifies at least 1 million potential new customers.

Without a nationwide reach, the benefits of its service are limited. Customers may call anywhere in the world, but will be charged roaming fees outside of their own region.

"If someone travels a lot, we're not the right service for them," Coster acknowledges. "But if you don't travel, there's no reason to buy from anyone else." - Andrea Orr  


See Nov. 25 press release on Pocket Communications funding from Battery Ventures

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