FreedomPop, a cellular hotspot company that lures customers with free, entry-level data packages, is getting into the smartphone business.

The company announced today that it's launching a mobile phone service in which the entry-level package costs nothing and includes 500MB of data, 500 text messages, and 200 anytime voice minutes. Anything beyond that requires payment of usage fees. The company is calling this first offering a "beta" and will take signups at FreedomPop.com/phone.

At first, the free plans will only be available for the HTC Evo Design, a two-year-old phone running Android 2.3. FreedomPop is selling refurbished versions of the device for $99. That might entice some people who still use non-smartphones, but to really compete in the smartphone market, FreedomPop will need a broader lineup.

"A year from now I'd expect us to have at least six or seven of the most popular handsets in the market available but with a free plan," FreedomPop CEO Stephen Stokols told Ars. "We're not tied to one handset because you can't disrupt with one handset. Our objective is basically to look like any carrier, the difference being our plan is free; you can get a free plan."

He also said FreedomPop plans to upgrade the Evo to Android 4.0 sometime after launch. (UPDATE: The upgrade happened sooner than expected. FreedomPop now says, "All of our phones are shipping with Android 4.0.3.")

FreedomPop's service rides on the Sprint network—which is rather slow, according to several Ars commenters.

Besides selling phones itself, FreedomPop will eventually allow customers to bring their own phones and get a free plan. "Any phone attached to the Sprint network" will work, a company spokesperson told Ars. While the Evo Design uses CDMA and WiMAX, FreedomPop plans to support LTE devices as well. No timelines for those upgrades have been announced.

FreedomPop will make money by selling fee-based plans to those who want more than what the free usage tier offers. $10.99 per month will provide unlimited voice and texting with the same 500MB data cap. $7.99 per month will provide 500 minutes, unlimited texts, unlimited FreedomPop to FreedomPop calling, and 500MB of data.

Customers will be charged one cent for each megabyte of data they use past 500. That works out to $10 per gigabyte.

FreedomPop voice calling will happen entirely with Voice over IP (VoIP) to save the company money, Stokols said. The company's version of the Evo Design has been optimized so that the native dialer can be used for FreedomPop voice calls, even though they're being routed through the Sprint data network instead of the voice network, he said.

Stokols hopes to make some extra revenue on voice calling and future updates that add conference calling or video calls for a fee.

The phone launch comes one year after the company started its hotspot business. It's been rocky at times, Stokols acknowledged. He pointed to early complaints about devices not dropping back to 3G when 4G wasn't available and device orders being delayed.

"There were a shitload of operational issues that we just had to learn the hard way," he said. The phone launch is more difficult than a hotspot, obviously, but he said FreedomPop is being far more methodical in its rollout this time around. Customer support has been tripled in the past two months to make sure FreedomPop can respond to customer complaints the day they come in, he said.

"We know the phone is going to have 10 times the complexity of a hotspot," Stokols said.