Monday, May 15, 2006

A Global FON for All ?

Here comes the FON movimiento - a serious threat to mobile telecoms

It's an international grassroots attempt -- started in Spain -- to patch the central weakness of Wi-Fi: spotty access. And it's spreading like wildfire.

Wireless connectivity hubs that use Wi-Fi technology are increasingly common: Many people are installing Wi-Fi at home to "extend" their broadband Internet access; antennas are replacing cables in office networks; and specific locations, such as airports, hotels, and coffee shops, offer access to the "cloud" of connectivity, often for a fee. But coverage remains limited. Even the presence of a public hub doesn't automatically mean that you can access it, due to too many different operators, high prices, no-roaming clauses, and so on.

LINUS OR BILL. Spanish serial entrepreneur Martin Varsavsky, who started FON last October, is out to change that. (See "From Hot Spots to Fon Zones"). Basically, FON is a bandwidth-sharing movement inspired by peer-to-peer principles. The idea is that if you're willing to share your bandwidth -- that is, share the Wi-Fi access point for which you pay a subscription to a broadband provider -- you can tap into the global network of "foneros" who are also willing to share theirs. Says Varsavsky: "You pay your bandwidth at home and can enjoy bandwidth wherever there are other foneros."

To become a fonero, you buy a FON-ready wireless router, or download a piece of Linux-based software that will rewrite the code of your existing router, adding access and billing layers and sharing a portion of your bandwidth with the FON network.

You can share your bandwidth as a "Linus" or a "Bill" -- obvious references to Linus Torvalds of Linux fame and Microsoft (MSFT) co-founder Bill Gates. As a Linus, you allow any other fonero to use your bandwidth, and in return can access that of anyone else in the network for free. As a Bill, you sell bandwidth from your hotspot for $2 or €2 a day to a third category of users -- the "Aliens," who aren't part of the network -- and you also must pay to use somebody else's hotspot. Revenues are shared with FON. The exact business model is still being fine-tuned. In this first phase, FON is limited to Linuses.

GLOBAL POOL. "The €2 rate is a bargain for 24 hours," says Varsavsky. "With this rate, we become the EasyJet [low-cost airline] of Wi-Fi."

Varsavsky, a multimillionaire telecom entrepreneur, personally invested €700,000 (roughly $834,000) in the venture, hiring about 20 people, before receiving $21.7 million in February from Skype, Google (GOOG), Swiss venture-capital firm Index, and Sequoia, a Silicon Valley VC.

Previous efforts to develop widespread Wi-Fi networks haven't exactly been overnight successes. During a recent discussion, Varsavsky said the bottom-up approach aims at creating a global pool of shared bandwidth, turning millions of private access points into a unified Wi-Fi network with a standard interface.

WI-FI HANDOVER. There are two parts to this plan: first, the unification of the network, through a free software-based roaming offering; and second, building an infrastructure through which it could become possible from almost anywhere (take that with a grain of salt) to place cheap or free phone calls using voice-over-Internet protocol software on a personal digital assistant (no wonder Skype is an investor). Beyond the PDA, Varsavsky has plans for another VoIP device, called WiFiFON.

Since "Wi-Fi handover" -- the technology that would enable a Wi-Fi-based conversation to be handed over from one access point to the next -- is getting closer to reality, the FON system could represent serious competition for mobile-telecom operators relatively soon. FON is also working on ways to share Wi-Fi bandwidth among laptops, in what's called a "mesh" network.

Numerous issues remain to be worked out. Right now, FON works on only a few models of routers. That will have to change if the service aims at mass acceptance. In order to implement the "Bill" option, FON needs a quite complex and secure billing system, which is no trivial task in this kind of distributed network. And questions of trust are not to be underestimated in access-sharing arrangements.

BLOGGERS ON BOARD. There are also legal implications. Some DSL providers have clauses prohibiting customers from sharing bandwidth. The coverage provided by foneros' hotspots is likely to be more indoor than outdoor. ("Nobody has all the solutions to the coverage problem," acknowledges the founder. "We will connect and collaborate with all the key players.") And FON isn't alone: Other companies, such as Wibiki, UnitedWiFi, and ShareMyWifi, are working on very similar approaches.

However, FON has already gained significant momentum -- virtually without spending a dime on marketing. It has been striking deals with Internet operators (who will sell "FON-ready" routers to their broadband customers in exchange for a portion of the revenues), and is counting on online word-of-mouth. To help that word-of-mouth along, Varsavsky made a shrewd move. He invited leading bloggers to join the company's advisory board, and gave them some equity -- plenty of incentive to spread the gospel of FON.

The move has paid off: After less than five months, FON is already breathing down the neck of global commercial Wi-Fi operators. The largest among them has slightly more than 20,000 hotspots, and that's approximately the number of people who have signed up as foneros so far -- nearly 5,000 of them in the U.S. (and growing very fast), 4,000 in the Spanish home base, and the rest in a couple dozen other countries. They haven't all activated their FON hotspots yet, but the trend is clear.

CITY TRAFFIC. Does a peer-to-peer design like FON's mean the end for commercial hotspot networks like those operated by T-Mobile and Swisscom Eurospot? Varsavsky enthusiastically believes it will, eventually. I'm a bit more cautious. I see FON's potential, assuming the scheme is correctly implemented, but then one could also ask: Is there a real need for FON (with all the weakness and uncertainties built into a grassroots volunteer network), when many cities and regions -- such as San Francisco, Philadelphia, Chicago, and Taiwan -- are starting to provide blanket Wi-Fi for free or for cheap?

Varsavsky's answer: "FON has been invited to make proposals to some major cities around the world. Cities like our offer because it doesn't turn them into telecom operators, relies on citizen participation, and is practically free to cities."

Local authorities, Varsavsky says, should just encourage citizens "to buy Wi-Fi routers and place them by their windows." That's one way to keep FON ringing.

By Bruno Giussani