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February 7, 2006

Fon Is Just Another For-Fee Hotspot Operator

After cogitating on it for a couple of days and talking to other reporters, it's pretty clear that Fon has a great smokescreen with its free "Linus" model: The fact is, Fon is just a paid hotspot operator that wants to eschew all venue signing, installation, and management costs. Fon has three kinds of hotspot users, but attention has focused on the Linuses, those who opt to let others who are also Linuses use their hotspots for free. This will always be a subset of all users. Let's say Fon reaches 1m installed hotspots by 2010, one of the stated goals of the founder. If even 750,000 are "Linus" hotspots, only 750,000 people will be able to use those hotspots at no cost. Six billion people--okay, the tens of millions of travelers with Wi-Fi laptops or handhelds or phones--will pay.

Let's not lose sight of the fact that there are now hundreds of aggressive hotspot builders cherrypicking the best remaining locations. If Fon only gets the dregs of locations (suburbs, apartment buildings, coffeeshops without service right now), then they're a niche-filling for-fee network. If they offer roaming across other networks and resell to aggregators, then they become a backfill network for missing locations, but only if people in those locations find it worthwhile to collect small fees in exchange for sharing bandwidth.

Primarily, Fon is for-fee. Primarily, it faces the same location, location, location issues as other for-fee operators. Locations that want to offer free Wi-Fi will not install Fon.

Update: Esme Vos has a quasi-rant, too, on this subject in which she wonders precisely how Fon fits in the current ecosystem. She suggests that sharing a connection (or having an ISP sell you a device that shares your bandwidth) produces uncertain amounts of bandwidth for your own users. (A FAQ at Fon does mention that bandwidth throttling is a future planned option for the software.) And, she asks, isn't municipal scale better than house to house?


I basically agree with you. The problem is that is that revenue strongly depends on how many people chose to be Linuses. Even if they are, Fon might have to share revenue with ISPs, and there's a definitive investment in getting new customers, be it Linuses or Bills. From the company POV, the only difference between them will be the time it takes to get a ROI on the investment you've made in getting them signed to the network (which might be quite a good amount of money if routers are sold at a loss, which seems to be the case right now). In any case, you'll end up with a few guys making a good amount of money, and most of them getting none (and thus, yielding none to Fon). Location, as you say, is key.


I�ve been watching all the hoopla surrounding FON over the last 36 hours and it is with a most serious countenance that I say the following: Google should stick to what it knows� search. They seem to miss the boat on everything else. As for the co-VC�s that have clamored aboard this bus, I�m stumped that they could be so swooned. But then maybe that�s why they got dumped so quickly the last time, after the dot com bust.

FON has a bright idea, technically, but, it stops there. You were right to criticize their business model and I for one, a fan of shared wi-fi, cannot see their model panning out. Receiving $22MM for their idea won�t miraculously make the model work and if anything, it causes me to wonder what the real motivation was behind these investors sinking a princely fortune. It certainly isn�t toward making a profit; at least not directly.

That isn�t to say a business model cannot be developed that makes shared wi-fi worthy of consideration and shhhh, don�t let anyone know, a profit. If you really want to dig deep into what would work, I recommend you check out a South African company: skyrove (

Before I continue, it is only appropriate that I reveal, in the spirit of disclosure, that I am a shareholder in skyrove, having made a small angel investment last year, after researching and evaluating various technologies and companies who I thought might provide a credible means for enabling a shared wi-fi business model. As a CEO of a small budding wireless broadband ISP in the U.S, part of my business plan called for offering shared wi-fi and IMHO skyrove has figured it out.

Though prototypic at the time, I felt this project, which was developed by two recently graduated Cape Town University students, was sublimely simple, technically astute and from a business model POV, consistent with the concept that making a profit would be a good thing. FYI, this project went on to win South Africa�s nationally prestigious Enablis Entrepreneur award late last year, so I venture to suggest that these gents are more on the ball with this concept than anyone else including FON.

Here�s the key, shared wi-fi isn�t about free wireless, it isn�t even about paid wireless and it certainly isn�t about controlling wi-fi access. It�s about flexibility and enabling wi-fi hotspots and those desirous to implement wi-fi hotspots, a simple and easy to use platform that enables them to deterministically establish their wi-fi strategy without having to be a techno-geek. This might be too subtle a point to get across, but stated another way, the internet thrives because no one controls the process and anyone can make a buck as they see fit; skyrove makes sure they don�t run afoul of this truism.

I must admit however, that I am ecstatic that Google and Skype chose to invest in FON for no other reason than it validates what we�ve known all along and attributes instant credibility to the �skyrovers.� Moreover, Skyrove�s technology, billing platform and business model is collectively superior and way ahead of FON and the other�s and it is already operating successfully (FON claims they�ll be ready to implement their platform within four months, their words � not mine, so skyrove is ahead in implementation if not $$). Now all that remains is for some truly smart venture capital companies who genuinely seek to make a profit from their investments to knock on skyrove�s door. To you, I suggest a dialogue with Henk Kleynhans, their CEO to validate or refute that to which I allude above. You can also read Henk�s thoughts re FON on his blog

Most Kindly,
Don Levy,
CEO, SkyWi, Inc.

Hi Glenn. This is Martin Varsavsky, FON's founder. I hope to meet you soon. I would first like to thank you for following us although I do disagree with some of the things you have said here. First concerning Speakeasy we did not announce that we were partners with Speakeasy. I think that Skype, Google, Index Ventures and Sequoia are strong enough partners for FON.

But the press wrongly said that we are partners with Speakeasy, this could be as a result of a poorly written sentence in my blog and both Speakeasy and us clarified that this is not true. What we do say is that the terms of agreement of Speakeasy allow for people to share wifi. Now regarding to how original or non original we are or if we are a hotspot provider or we aren;t my reply is that I think that we did not invent the wheel here with FON, we just put the right pieces together and got enourmous traction.

We do think that our idea of through software turning your wifi router into a global family of routers who share wifi is original and it has not been done before. But then for us what's key is not to be original but to be successful. I want to go around the world with my wifi gagdets and have predictable connectivity. I want to share wifi at home and in return get wifi everywhere. And Glenn, I do hope you to! My e mail is btw.

Hi Glenn, Ejovi Nuwere FON's US Country manager.

Our Linus users are the core of what we believe makes FON unique. Not the technology but the community. No one is talking about the FON community. FON is the Toyota Prius of WiFi, T-Mobile is the Porsche. Sometimes you want to drive really fast and enjoy the road. But most people, most of the time just need to get from point A to point B. And for that a Prius is perfect.

But more importantly when you buy a Prius you become a member of a club. Its a badge of honor it says you are altruistic. Its not about the car, its about what owning the car says about you. FON is about what joining a WiFi community means to its members. You can look at my personal website to see that for me, FON is more then just another hotspot operator.

the great business is.... buy one FON router linksys in 25 dollars (subsidy by FON and change the firmware to the original one!!!!


Hi Glenn, I agree that sharing Wi-Fi and flashing routers is not a unique idea. Its been around for a while. I agree there are many flavors of it around the globe. Heck, sharing these routers and flashing started at the Linksys labs, or its predecessor. What we at Wibiki want to see is free Wi-Fi and extend it to other platforms as well. We have been developing our flavor for quite some time, I could argue since the 1980's.But the business of putting up toll booths on top of these routers which are connected to unlicensed spectrum, boy thats not novel at all, ask T-Mobile or Cingular. Wibiki believes there is a model that works and will truly bring the power back to the ultimate user. Glenn, you are handicapping this pretty well so far. Best to all, Shant Hovnanian

For me, FON business plan is primarily a scheme for transferring the costliest part of the network construction to the 'foneros', the final users. That is, the interconnection between the access point and Internet. As this is also a recurring cost, getting rid of it is a touch of genius (or of evil). You get money from VC, spend it subsidizing routers and then wait to get money from the use of the network. It is not a surprise that FON plans to charge less that T-Mobile for WiFi access, they do not have to pay for any T1. You just have to maintain an authentication server (and make the bloggers that keep the viral publicity machine going on).

A few questions keep nagging me. What type of user info will be tracked? Is there a way to opt out of tracking for both node hosts and users? If info is tracked is it shared? With whom is it shared and under what conditions?

This idea appears to be based on GPL code. Will source code be fed back into the community soon?

For the "linus" crowd; How extensible will it be via an olsr, quagga/openvpn, WDS type of solution?

[Editor's Note: These are great questions, and I'm not sure they'll get answered here -- you may want to email Fon directly and ask them to give you a public reply you can post--gf]