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In 1998, NetZero(s untd) became the first ISP to offer free dial-up Internet access; 14 years later it’s doing the same thing except with a different access technology: Mobile broadband. On Monday, NetZero revealed its plans to become a virtual 4G service provider, reselling – or in many cases, giving away – Clearwire’s WiMAX bandwidth.

For the cost of a $50 USB dongle or a $100 mobile hotspot, customers can get 200 MB a month for 1 year with no strings attached. There are no contracts, so at the end of that year customers either sign up for one of NetZero’s paid plans, which start at $9.95 a month, or they simply wave goodbye to the service.

NetZero’s free ad-supported and low-cost plans garnered the company millions of dial-up subscribers in the previous decade and a half, but as residential broadband got cheaper, faster and more readily available, the ISP saw its customers depart, leaving it today focused on two niches: People who can’t afford home broadband and rural customers who don’t have access to it, said Mark Goldston, CEO of United Online, NetZero’s parent company. But with the launch of NetZero4G, the company sees a big opportunity to reclaim its metropolitan roots, by taking a mobile broadband service normally unaffordable to most Americans and selling it on the cheap.

“[Mobile broadband] is a very expensive, elite service today,” Goldston said. “Some people can afford it, but Joe and Jane go to the coffee shop, and they use free public Wi-Fi. … We’re not going after home Internet replacement. We’re not going after the business user. We’re going after those 100 million public Wi-Fi users.”

Unlike with its old free dial-up plan, NetZero isn’t overlaying a big ad window onto your screen. Instead, the ISP is treating the free 4G plan as a loss leader. Generally the barriers to entry for 4G are high, requiring the purchase of a device and committing to data plan and contract. By removing all of those barriers except for the device purchase, Goldston said Net Zero hopes to sign customers up to the free plans by the boatload. After that, the utility of the service will be so readily apparent NetZero will be able to convert many of those free customers into paid customers before their gratis year is up, Goldston said. Once they upgrade though, there’s no going back to the free offer.

The paid plans start at $9.95 a month for 500 MB and scale up to $49.95 for 4 GB. Customers who exceed their caps aren’t charged overage fees, but their service stops working. NetZero gives them the option to top off their plans with additional megabyte buckets or upgrade to the next plan tier. Since there are now contracts, though, customers can switch back and forth to different plans each month.

Probably the biggest limitation to the service is Clearwire’s WiMAX coverage. Clearwire stopped expanding its 4G network once it reached its footprint reached 130 million people in 70 cities, and it hasn’t announced any plans to continue its expansion.

As for speeds, Clearwire’s network was once the fastest in the U.S., but new LTE networks and even T-Mobile’s hopped-up HSPA+ service started getting the best of WiMAX last year. Still, I tested a review hotspot NetZero sent me, and it delivered 2-3 Mbps consistently while my wife drove through Chicago’s surface streets. While stationary the connection often spiked to 10 Mbps.

For most NetZero customers, though, speed won’t be the prime motivator – unless they plan to tear through their plan allotments in a matter of hours. In fact, in an interesting twist on the throttling controversy plaguing other mobile operators, NetZero is giving customers the ability to slow down their own broadband speeds to help manage monthly usage. On users’ account pages, there is a throttling bar, which can be scaled down to what NetZero calls “Light Speed,” ensuring that connection speeds never surpass 1 Mbps on the downlink and 384 kbps on the uplink.

Image courtesy of Flickr user frankh.