FON Banks Millions

By Eric Griffith

February 07, 2006

The Spanish startup has received investments from Google, Skype and venture capitalists for its controversial “grass-roots” Wi-Fi access movement.

How much will it take to get FON’s business off the ground in the United States? No matter what, $21.7 million is a probably a good start.

The money has come from Google, eBay’s Skype, Sequoia Capital and Index Ventures.  Some big names from Index, Skype and Cisco have also joined the FON advisory board.

Spain-based FON announced earlier this year its plans to bring service to the U.S. It’s a controversial business model that relies on customers to install software running on their Wi-Fi routers, currently limited to the Linksys WRT54GS with Linux and soon VxWorks, though more will be available in March.

To get there, they need the help of not just end user customers — who are notorious for not even turning on security, let alone upgrading firmware — but also ISPs. FON claims to have gone from 0 to 3,000 registered “Foneros” (their name for end users) in its first 90 days of business, which CEO Martin Varsavsky said in his blog, “puts us at 10 percent of our 2006 objective in only three months.”

Google, of course, has been making waves in wireless networking circles for months now, having made bids to unwire the city of San Francisco, landed the contract to provide wireless in its home city of Mountain View, California, sponsored networks in New York City, and released beta software for securing hotspot connections, among other things.

FON’s Foneros come in two types, Linuses that provide free access and thus  roam for free from AP to AP, and Bills who charge for access and in return are charged when they roam. If you’re neither, you’re an Alien and you pay at the AP of either a Linus or a Bill.

Those without technical skills are pointed at getting a FON-ready router direct from their ISP. Right now, only Spain’s Jazztel (also founded by Varsavsky) and Glocalnet, a Swedish provider, have signed on.

There’s been a bit of controversy because of reports  that U.S.-based ISP Speakeasy was mentioned by Varsavsky as having an “agreement” with FON. However, Speakeasy told Glenn Fleishman, the guru of Wi-Fi Networking News, that “No relationship, financial or otherwise, exists between Speakeasy and FON.” Speakeasy is one of the few ISPs that has always supported sharing of wireless connections, a strategy FON is duplicating. Not all ISPs do support sharing via routers (wired or wireless) and there’s a chance, probably slim, that FON could face legal challenges.

Fleishman is quoted at Om Malik’s Blog as saying, “FON as a grassroots effort seemed to me to be headed to the same dustbin that led other companies to abandon trying to get individuals and small businesses to install hardware that would turn them into hotspots... But if FON is going to use the money and connections it now appears to have to seed its network, there’s more of a likelihood of it working, especially given what seems to be a very high commitment to signing up ISPs instead of signing up users and having them worry about whether their ISP finds FON appropriate or not.”

Fleishman said today after pondering the company that “FON is just a paid hotspot operator that wants to eschew all venue signing, installation, and management costs,” and that “Locations that want to offer free Wi-Fi will not install FON.”

FON is not alone in this business model of getting customers to upgrade existing hardware, as Speedus Corp.’s Wibiki is similar, though it promises 100 percent free Wi-Fi for users. LinSpot provides software for Macintosh users to create C2C (consumer-to-consumer) connections, with prices set to “less than half that of the cheapest big commercial provider,” according to its FAQ. Less Networks, which runs free access in parts of Austin, Texas, is available to anyone with broadband and the money to pay for it — or users can download the software to build their own hotspot.

Another new member of FON’s U.S. advisory board is “prosultant” David Isenberg. He says in his blog that, while proud to be part of it, he is “more than a bit nervous about how ready the FON implementation is for the general public. The idea, though, is wonderful. And the implementation will benefit from a culture of openness, transparency and receptiveness to suggestions from all quarters.”



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