There has been a lot of buzz around the net lately about Zer01, a new carrier that claims that it will offer unlimited data and VoIP calls at discounted rates. And the buzz hasn’t been good. We thought highly enough of the potential of this service back in April to give Zer01 a Best of CTIA award, but NetworkWorld just published an article claiming that the company’s promises might be too good to be true. Editor’s Note – 8/4/09: LAPTOP has rescinded the Best of CTIA Award given to Zer01. One of the primary issues is the company’s ties with Buzzirk, which many claim is nothing more than an shady pyramid scheme for peddling Zer01’s products. We reached out to Zer01 CEO Ben Piilani to get some answers about this relationship, Zer01’s ties to existing carriers, and when its phones will see the light of day. What do you say to those who claim that Zer01 isn’t legit? One of the companies that we signed on with, just as a distributor on a contractual basis was Mobile Verge. We didn’t meet them until after CTIA in May when they came to us. We weren’t even considering multi-level marketing until they came to us. They pitched us on the idea that—even though I’m not familiar with multi-level marketing verticals, and I’ve never been a fan myself—they pitched me on the idea that it’s a lucrative market that shouldn’t be overlooked. And they mentioned that they’ve worked with successful companies such as Amway where they’ve had successful models. We created that vertical specifically to work with Buzzirk in May. Again, it was only contractual as far as them becoming a distributor under that vertical. I guess in the past 10 or 11 days we discovered there was some murky past with Mark Petschel the CEO and he was convicted of securities fraud. So I contacted him and he explained to me the situation and he basically –long story short–he did get convicted of securities fraud. So we asked Mobile Verge to remove him as the CEO and so currently he just resigned as the CEO. Who is Buzzirk? Buzzirk was an MVNO of Amp’d. When Amp’d went under, Buzzirk left this big infrastructure. The founder of Buzzirk then founded this multi-level marketing company called Mobile Verge. We signed an agreement with Buzzirk that allowed them to sublicense to Mobile Verge. Basically, Buzzirk is just a brand and they are going to sell that brand to multi-level marketing. Again, it’s just a distribution agreement; we don’t own any part of them and they don’t own any part of us. They came and signed on as a distributor under one of our verticals and they aren’t the only one we’re working with. We were going to push the product through them as “Powered by Zer01.” They were originally going to launch in their agent network before on the public side. Then all of other stuff happened so we demanded they get it cleaned up before we start moving the product. Why partner with a company like Global Verge marketing? We listened to the marketing pitch, and to an everyday Joe Consumer, that sounds like a Pyramid Scheme through and through, with promises like “$29,000 a month,” “a WiMax phone,” phones from “science fiction movies.” That sounds like a scam to us. None of that came through our compliance. What happened was [[Buzzirk’s]] base grew too fast I guess and they didn’t have their compliance in place and so their agents… it’s one of those things you tell one person and by the time it gets down the chain it’s a totally different story. And they just started marketing that stuff. So according to our agreement they weren’t allowed to put out any public materials without passing it through us first. They didn’t have control over their associates at that time. They just signed in a new compliance officer. I can’t make a whole lot of comments about that company because they are completely separate from us. I’m just making comments on what I do know. Do you worry that Global Verge and Buzzirk are going to ruin your name before your product even hits the market? Absolutely. At the time we didn’t realize there was going to be a compliance issue and that it was going to get out of hand. In 2 weeks it went completely out of hand on their side. We’re pretty much completely helpless from our standpoint. The only thing there is to do now is tell them to clean up and get their compliance together. When we first started with them it wasn’t that we were intending on doing anything like this. For now we’ll deal with the aftermath and try to clean it up. Obviously, this was a new thing for us too, multilevel marketing. It was unconventional. It made sense at the time. Can you cut your ties with Global Verge? We could completely sever our relationship with them but I don’t see how that would do any good. It would cause even more bad to come out. The best thing we can do with them is get their compliance in place and get it all cleaned up. And then get phones in their hands and have them out on the market. Do you have any rules in place requiring them to get rid of these bogus claims? Yes we do. They have an ultimatum to shut down these sites and only post approved, messages. If not they’ll be removed as an associate. At this point I don’t know how quickly they are going to be able to clean it up. Obviously, there are individual sites out there. A compliance e-mail has to go out to all of their associates. Does Zer01 have a patent for its technology? We are patent pending right now issued through the Patent Trademark Office. [[Note: Zer01 spokesperson Ron Dresner says the pending patent number is US 61/149,871 under the Unified Technologies Group name.]] Do you have a response to those who argue that AT&T and T-Mobile have said they don’t have a partnership with you? How could a nationwide footprint be possible without a partnership with one of them? T-Mobile didn’t deny it, they said they can’t make a comment. If you were to contact the carriers I’m sure they would give you the “we can’t make a comment,” [[answer]]. I’m not saying we don’t have a partnership. I’m just saying we aren’t going to comment on who our partners are and what relationships they have. We’re limited by the network, yes. If there isn’t a 3G connection we’re going to be on EDGE or GPRS. But there’s still an unlimited Internet connection; it’s just at slower speeds. We’re providing unlimited Internet access. There are rumors that you bought some of the 2100-MHz band, but there’s no proof. Can you address this? We never made any comments. We are piggybacking on GSM networks. We never made comments that we bought any, or acquired any, specific frequencies. The funny thing is, everyone is making a big deal about frequencies when you and I know just as well it doesn’t matter what frequency you’re on. It’s just a radio frequency inside a spectrum. We never made the comment that we ever bought spectrum. We are partnered and interconnected with GSM networks. What can we expect from Zer01 in the near future? We just said we’re partnering with NetMovies, and they are owned 34 percent by Blockbuster. The CEO of that company is the founder and CEO of Napster. They came to us because they are a content company. They do IP television, gaming, movies, and music. They came to us because we have unlimited Internet access. Originally that’s why they came to us but then they came to us in a different way. They said, well John Fanning has existing relationships through his past Napster deal and he wants to work with us in the big box. They offer the more conventional distribution through big box retailers like you would normally see. We are also working with independent retailers. We have one with 20,000 locations and another with 6,000 locations with real store fronts. So we’re going that way as well. How long until we can check out a phone? We’re sending phones out to a few journalists next week sometime. If we put working phones in journalist’s hands they can make comments about it. Everybody says we can’t do this. It’s not that hard of a concept to think about it. I was using it last week at the Mobile Beat 2009 conference and I demonstrated it there.