Monday, August 10, 2009

Zer01 Mobile Coming Under Fire

zer01_logoZer01 Mobile has recently come under fire for major delays in the launch of their new unlimited voice & data mobile service. The company which was reportedly set to launch the new service back in July is still not up and running leaving speculation about the company, its investors and whether or not the service will ever be launched.

IDG News Service recently questioned whether or not the unlimited mobile voice and data service that Zer01 had advertised was actually too good to be true. The offer was so attractive and the hype over the company was such that it garnered loads of media coverage in top business and technology publications. We did two writes up about the new service and their recent award of "best in show" from Laptop magazine.

IDG News Service in their investigation of the company found that Zer01's service is being marketed through an MLM program run by a company called Global Verge. That company has has had to face some tough questions of its own with CEO Mark Petschel. Petschel is reportedly currently on probation after pleading guilty to securities fraud. According to a bankruptcy filing in the U.S. Bankruptcy Court for the Eastern District of Missouri, Petschel allegedly promised to invest $168,000 that he collected from several people, but instead spent some of the money on items like jewelry.

With the recent questions regarding their marketing and delays Laptop magazine rescinded the award it offered to Zer01 at the CTIA wireless conference.

"We're taking this extraordinary step because of serious ethical questions that have arisen about the company. We can no longer endorse its service and therefore are compelled to warn our readers to avoid it," the magazine wrote Laptop magazine's Mark Spoonauer in a blog post.

Spoonauer voices several concerns over the company stating:

"The company claimed that it would offer unlimited voice and data for $69.95 per month and use VoIP technology to let users make calls. We were informed at CTIA that Zer01 would launch its service by July 1. However, the company has since broken its promises both to consumers and to us.

Serious questions have also been raised about Zer01’s network and whether it can offer the coverage it promises. The company says it has interconnect arrangements with GSM providers yet refuses to tell us who they are. AT&T denied to us that they have any agreements with Zer01, and T-Mobile declined to comment. As we’ve reported, Zer01’s coverage map is identical to that of AT&T’s, which raises even more doubts.

We also take issue with the fact that Zer01 changed its business plan after CTIA Wireless 2009. Initially, the company claimed it would offer its service directly to consumers. Then in May, Zer01 said it would provide its unlimited voice and data service to Buzzirk Mobile subscribers, a chosen distributor whose parent is a multi-level marketing company called Global Verge. A report from Network World recently revealed that Global Verge’s CEO, Mark Petschel,has plead guilty to securities fraud. When we asked Zer01’s CEO Ben Piilani about it, he told us that Petschel had resigned, though we have no independent confirmation of that.

As of July 1, according to Network World, Zer01 changed the content of its Web site and began calling itself a mobile virtual network enabler. Even more unsettling is the fact that sales associates for Buzzirk Mobile, which is the public face of Zer01, have deceived the public by claiming that Zer01 owns 2100 MHz spectrum when it does not.

When we interviewed Zer01 CEO Ben Piilani on July 22nd and confronted him about our concerns, he promised to deliver a phone for us to test by the following week. However, to date we have yet to receive an evaluation unit. In addition, an e-mail message sent to Zer01’s public relations firm last week, which warned that we may rescind our Best of CTIA Award, was not answered.

At this time we can only urge extreme caution to those interested in using or selling Zer01’s service."

IDG News Service and Laptop magazine aren't alone in their suspicions of the company. In a follow up story posted to PC World today Gartner analyst Tole Hart, who was once big on Zer01's concept, is now suspicious about the company and its promises. Hart is quoted as question Zer01's claims to have partnerships that give it nationwide coverage using GSM (Global System for Mobile Communications) technology. To date it has not been confirmed by any of the nationwide GSM operators that they say they are working with Zer01.

Hart ask, "why would they let someone come on their network and undercut them?" A good question as Zer01's unlimited offering would cost far less than that of many of the operators, which also typically impose a cap on data usage. I highly doubt AT&T which already struggles keeping up with high data usage from iPhone customers would allow a third party service to suck up more bandwidth at a lower price!

For now it's really unclear as to what is going on at Zer01. I'll admit I for once was very interested in checking out the new service when I first heard about it. But now I think I'm glad I didn't get overly involved. I think I'll take a page from Laptop and warn readers to avoid it, at least until we get some solid answers.

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