The name Fon means more than a trademarkable version of a common household and handheld appliance: In an interview this morning, founder Martin Varsavsky explained that Fon's focus isn't on laptops and plain handhelds. Rather, Fon's focus is on cellphones, game consoles, and cameras that have Wi-Fi built in--or that soon will.
Fon is a grassroots hotspot network in which downloading firmware and installing it--and no cost--onto an appropriate Wi-Fi gateway device turns the gateway into a Fon hotspot. I spent a chunk of last week writing and being interviewed about Fon's potential to build a network of what they call Foneros. I spoke to Varsavsky about issues I saw as red flags and others raised by readers of this site and bloggers worldwide.
The executive summary is that Varsavsky has focused Fon on mobile devices, not laptops, and that the company will try to increase the number of Internet connections that ISPs sell while simultaneously increasing the revenue they derive from each connection. Mesh and community-spanning networks are part of future thought, but not announced plans. And Varsavsky acknowledges that his attempt to be informal in announcing the investment may have backfired: too much was read into everything he wrote (and has written for months) and that his US advisory board wrote. He was just trying to bypass the usual press release and stiff statements that accompany funding announcements.
I'm still convinced that Fon faces high hurdles in achieving the kind of market they're longing to create, but I'm no longer confused as to the kind of network they're building. There are many aspects to the nuances of what Fon could involve that may give it a foothold. Many parts of Fon are similar to ideas held by community wireless networking groups today--they differ on who owns the physical part of the network, but in terms of local services that run over a local network independent of the Internet, Varsavsky's on the same page. Now on to the detail.
Varsavsky said that Fon isn't per se unique, although it's sometimes represented in that fashion. He was aware of previous efforts, such as Sputnik's original business plan--he's a friend and colleague of my friend and colleague David Sifry, a founder of Sputnik and the founder of Technorati. "I don't really know how original we are, but I know we are timely," Varsavsky said, noting that of seven companies he founded and six he sold he had just one he considered a financial failure--a German ISP--but only by selling it a couple of years before the market was ripe.
He believes that Fon is different than previous efforts because of the focus on a simple hardware device rather than (as with Sputnik, Joltage, and SOHOWireless) a PC with an appropriate network card. "The way I define Fon is a software download that turns your router into a global family of routers that shares Wi-Fi," he said. "We centered on the router and we concluded that people wouldn't want to leave their PCs on all the time."
Some free and fee competitors also use authentication (via the 802.1X protocol or a gateway page), but those solutions don't extend into the hardware gateway to provide bandwidth throttling and other tools. The open-source packages that Fon uses are available in various forms for standalone gateways, including something close to what they provide today. But these open-source projecdts don't have unified account authentication behind them as that requires services. Systems like Radiuz, in other words, don't reach into the network layer of the router while open-source packages don't reach up into the application and access layers.
Varsavsky knows that some of the early criticism has been directed at the idea of average users flashing--or changing the firmware--of Wi-Fi gateways. He points to the iPod to refute this, interestingly. iPods are frequently flashed with new firmware via installers provided by Apple. "When people said how is this? We said, do you have an iPod, it's just like that. The iPod trend as worked for us," he said.
Where Varsavsky says Fon will make its impact is via the tens of millions (or more) people who will be carrying around Wi-Fi equipped cell phones, game-playing systems, and cameras in the coming years. There are already at least eight million Nintendo DS units and Sony PlayStation Portables (PSP) sold in the US with Wi-Fi included. Many millions more have been sold internationally.
Varsavsky also points to Kodak EasyShare-One camera, which uses Wi-Fi to transfer photos (although I find the camera needs additional features to make it a true Internet camera rather than a Kodak service camera), and cell phones with Wi-Fi. At the 3GSM conference in Barcelona, Spain, today, Nokia introduced the Nokia 6136, which allows true seamless roaming between GSM and Wi-Fi connections. Phones announced before this required calls to be placed or received on either form of network and remain on that network for the duration of the call. "That's a fantastic trend, and a trend of all the Wi-Fi enabled phones and PDAs," he said.
This focus on mobile devices rather than computing devices makes the investment by Google, Skype, Sequoia, and Index more explicable. Laptop hotspot venues largely already have Wi-Fi access, are in the process of being signed, or are disinterested. It's hard to find locations that simply aren't locked up or unavailable. But mobile devices can benefit from a different kind of geographic availability of Wi-Fi, and typically require less actual throughput ot be useful. (Cameras are a particular category: upstream bandwidth will be a high-demand item for cameras, especially as they add megapixels. And Wi-Fi hotspots with higher-speed upstream links than home asymmetrical service might be in greater demand for that segment.)
Follow the link for the rest of this interview...
That's the story on devices, but what about Internet service providers (ISPs), which need to sign off on Fon's plans to allow their users to share a connection via Wi-Fi? That kind of sharing is typically prohibited by ISPs worldwide. At the moment, Verizon, AT&T, and other US phone companies have arrayed themselves against Skype and Google, among others, over the issue of net neutrality--allowing arbitrary legal of use of an Internet connection for any device, service, or application--which makes the investment in Fon potentially a stumbling block for participation by those giant incumbents.
But Varsavsky founded and sold several ISPs, and has conceived of Fon from the ISP perspective. "I am extremely sensitive to the economics of ISPs. We believe ISPs are sleeping on a goldmine that we are uncovering," he said. ISPs think about two factors, Varsavsky said: churn and ARPU (average revenue per unit).
"Now we go to ISPs and we say look, you help us promote these among your clientele, and we will share the revenue" from Aliens (paying roamers), he said, and "the opportunity to make more revenue from the millions of connections you have. We especially get along well with ISPs that do not have a mobile side or a cellular side, but who have been looking at WiMax or other alternatives to develop."
This is partly, he said, because the roaming rates for making phone calls from fixed lines to mobile users "are horrendous in Europe." (I spent 22 euro cents per minute calling Varsavsky's Spanish cell number via SkypeOut; a SkypeOut call to a Spanish land line is about 2 euro cents per minute.) These high costs make a dual GSM/Wi-Fi phone very interesting to ISPs, some of whom are already mobile virtual network operators (MVNOs) who resell cell service to customers. "A large ISP can become an MVNO and combine that with a phone offering. We're seeing tremendous creativity on the part of ISPs we speak to," Varsavsky said.
Varsavsky said that they have had tremendous interest from ISPs worldwide, including in the U.S., after news of their investment round hit the press. While having signed just Glocalnet in Sweden prior to launch, they expect to make announcements about other ISPs coming on to their global roaming platform in the next 90 days. (The Speakeasy kerfuffle, in which Varsavsky mentioned them as a company that supported Fon, seems clearly over: Speakeasy supports all shared uses of connections they sell, but hasn't signed a deal. Because they're the only major ISP in the US with such a policy, Fon used them a little too freely as an example without clarifying no agreement was in place.)
The real heart of Fon's model, of course, is getting large numbers of people to install their software and spread their Wi-Fi access--not to neighbors, but to people who either also share their access at home (and thus get free access on similar nodes) or those willing to pay the cost of a subway ticket for 24 hours access across all Fon hotspots.
Varsavsky agrees that density has a point in the discussion. "In Montana, or some places like that, Fon is irrelevant," he said. "I would agree with you that Fon is absolutely irrelevant in places where there is one person per square mile." But most resident live close together. In that environment, Varsavsky pictures some of the millions of kids with portable game players toting them around and finding access. They hope to sign companies like Sony--no deal is implied in that hope--to pre-authenticate a PSP to log into a Fon location. (This isn't at all unreasonable: Nintendo has cut deals for 10,000s of hotspots worldwide to offer free, no-login usage for its DS game system.)
Users will roam more widely as more Wi-Fi is available alongside more devices with Wi-Fi, Varsavsky said. "You're not spending $2,000 in gadgets to keep them in your bedroom when you have Wi-Fi." He notes, "We're thinking of the tremendous opportunity in new devices other than laptops."
In that world, he said, it's not about a single Fon hotspot, but rather a network of them that for the cost of a subway ticket--maybe $2 for a day in the U.S. when pricing is set--a user could have access across any Fon gateway in a city. This implies that universal density or ubiquity across a city, a region, or a company isn't necessary as long as there is enough availability in parts of a city with frequent users carrying mobile devices. Fon will sign roaming agreements with great abandon as the network develops.
Mesh is obviously a key aspect to the future of wireless networks, and it's the basis of all the municipal networks being deployed for reasons of cost and efficiency. Varsavsky said that because of Fon's ISP focus, they wouldn't use mesh to extend one network connection to many people, but rather to connect Foneros together creating a local high-speed network that would allow community resources to be shared. "You could communicate at the speed of Wi-Fi and not at the asynchronous speed of ADSL," he noted.
This mesh capability is part of what Varsavsky wants to build into Nicholas Negroponte's $100 laptop's wireless software. There's no commitment, just an interest at this point. Varsavky established a foundation in Argentina to spread Internet access for educational use that may purchase one million of these laptops using a variety of funds. "This brings tremendous opportunities to the developed world," he noted.
Varsavsky said that his plans for Fon have been so transparent that people have thought he was hiding something; many ideas have been floated and killed because of feedback via his blog. But the posts remain (or persist in a Google cache) making some think that the ideas are in play. He noted, for instance, that the idea of patenting Fon technology has been killed. He wanted pre-emptive patents to avoid a situation in which he had to use prior art to defend against a patent lawsuit, but community feedback has convinced him that it's better to avoid any patents.
I came away from this conversation with Varsavsky better understanding the focus on voice and mobility which makes much more sense than a conventional hotspot model. Handheld or mobile devices don't require working space, electrical outlets, or the highest-speed Wi-Fi connections: distant Fon hotspot could have the right latency and speed for a voice conversation where a laptop user would be entirely stymied trying to surf the Net. (Laptop users won't be excluded, but Fon won't be designed for them.)
I remain concerned that density of locations will be critical to making Fon work and that major US ISPs will reject Fon entirely, despite the ISP-centric model. However, Varsavsky is convinced that there are enough independent ISPs worldwide and enough in the developing world that will fully appreciate revenue sharing that they will break through the ISP wall.
Time and about $22 million in capital from Skype, Google, Sequoia, and Index will tell. Fon today seems much more about telephony to me than it did yesterday.