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Inphonic Navigates the Wireless Wilderness

Find an inefficient market and fix it: It's a time-honored formula for success in a business world where things don't run quite as smoothly as we'd like.

Five years ago, David Steinberg, with the help of former Apple CEO John Sculley, set up Inphonic (INPC), a Washington D.C.-based startup that spotted an inefficient market. Inphonic would do to opaque and unnecessarily costly wireless plans what Expedia did to air travel: help consumers navigate to the best and cheapest deals.

"We're saving consumers money three ways," says Steinberg. "We save them an average of $125 on the phone itself. We save them 20% to 40% by mapping their usage patterns to rate plans available in the market. And we save them by setting up accounts in under five minutes." It takes customers nearly an hour to do that in wireless retail stores.

Steinberg wasn't the first to come up with that idea. There were several other startups helping people sift through mercurial wireless plans -- Point.com, TelStreet, Simplexity, among others. But Inphonic had a board that included heavyweights such as Sculley, former senator Jack Kemp, Jay Hoag of Technology Crossover Ventures and others with deep ties to the wireless industry.

Those industry ties were crucial. And Inphonic won them by showing they could save the carriers money, too. The carriers spend an average of $380 for each new customer who signs up at a retail store, but only $295 on customers signed through a Web site. "We're disaggregating the cost of running thousands of retail stores," says Steinberg. "Carriers look at us as a low-cost distribution strategy."

By cultivating its connections and drawing on Sculley's marketing experience, Inphonic broke from the pack. Not only does its own Web site, Wirefly.com, help consumers compare plans on the basis of roaming, long-distance and anytime minutes, it maintains similar wireless-search functions for 6,000 sites operated by carriers such as Verizon (VZ) and Sprint (FON), phonemakers such as Motorola (MOT) and Samsung and portals such as Yahoo! (YHOO) and Microsoft's (MSFT) MSN.

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