Google, Skype Fund Global Wi-Fi Network

by Ed Sutherland

ISPs invest $21.7M in Spanish plan for a million Wi-Fi hotspots worldwide.

Spanish Wi-Fi startup FON, a day after gaining more than $21 million in funding from heavyweights Google and Skype, today is backpedaling from claims that every ISP supports its idea of shared wireless connections.

Taking a page from peer-to-peer networking, FON hopes to expand its current 3,000 members (or "foneros") and build 1 million shared Wi-Fi hotspots worldwide by 2010. Borrowing a lesson from investor Skype, FON will gain revenue through multi-leveled subscriptions with names "Bill," "Linus" and "Alien."

Linus members will share home Wi-Fi hotspots with the FON network in exchange for free access to the FON network. Bill members receive a fee for allowing Alien members to share their Wi-Fi connection and have to pay a fee for using the FON network. Alien members pay for using the FON network.

Alien roaming fees are split 50-50 with Bill's members.

"Aliens are at the heart of our business model," according to FON CEO Martin Varsavsky in a statement. The plan is an opportunity allowing "the 'average Joe or Jane' with a Wi-Fi connection to make money by letting other foneros connect to the Net safely and simply," Varsavsky said.

FON, along with funding from Skype, gained support from the Voice over IP player. "FON has a great idea to help people share Wi-Fi with one another," said Niklas Zennstrom, Skype's CEO.

While Skype lauded FON's plans, one stumbling block could be that ISPs' terms of agreements usually forbid subscribers from sharing wireless connections.

Although FON announced an agreement with Sweden's Glocalnet, U.S. ISPs mostly have turned thumbs-down on Wi-Fi sharing.

"Most ISPs frown on that kind of thing," Lynn Brackpool, spokesperson for Seattle's Speakeasy. Since 2003, Speakeasy has allowed subscribers to share their Wi-Fi connection.

In some interviews, FON initially gave the impression Speakeasy had partnered with the Italian firm. "Words were used that shouldn't have been," said Brackpool. Following a threat of lawsuit, words in the FON announcement were changed, and Speakeasy said the issue is now resolved.

But as for the shared Wi-Fi concept, "it's a bit of a question mark," Brackpool tells internetnews.com. Some type of revenue sharing with ISPs might be needed.

"FON is entirely dependent on the goodwill of ISPs," said Joe Laszlo, broadband analyst with JupiterResearch. Even if FON shares a large portion of its revenue with service providers, "most ISPs probably not interested in a revenue play," according to Laszlo. (JupiterResearch and internetnews.com are owned by Jupitermedia.)

"Within the U.S., it's a pretty iffy model," said Laszlo. "FON faces some real problems."

Sharing Internet resources -– from Flickr to Wi-Fi -– is a very trendy idea with Internet elite, but sharing content is not the same as designing broadband networks, according to Laszlo.

Random FON networks will likely create Wi-Fi islands with wireless users sharing connections at popular locales swamped while leaving other hotspots unused.

Even with the obstacles, FON's concept "is worth a bit of a bet," said Laszlo. It becomes so much easier to build Wi-Fi networks using shared connections. "The payoff could be really high."

Along with expanding its reach into Wi-Fi, Google today also announced it will integrate e-mail and IM by combining the Internet giant's Google Talk and Gmail applications.

Gmail users will be able to send and receive instant messages along with e-mail. The move goes against the trend by Yahoo and others to include e-mail features into their IM services.

Article courtesy of internetnews.com

This article was originally published on Wednesday Feb 8th 2006