FON Gets Funding From Skype and Google

by Bruce Stewart

fon.jpg Probably the most interesting story in VoIP coming out of this weekend is the over $21 million in funding that FON just secured from the likes of Google, Skype, Sequoia Capital (original investor in Google), and Index Ventures (original investor in Skype). FON is based in Spain and announced their U.S. launch at ETel just a few weeks ago, and has only existed as a company for 3 short months. Their plan is to create a global shared network of WiFi hotspots, with two levels of users: "Linuses", who share their own WiFi connection with other FON users for free and can in turn use any other FON node also for free; and "Bills", who allow others to use their FON nodes for a fee and take a cut for themselves (but don't get free access to other FON nodes).

It's an ambitious and probably idealistic business model to say the least (but hey, at least they seem to have one), and many observers have already questioned the viability of FON's plans to create a large peer-to-peer WiFi network. The two most obvious issues are that, in the U.S. at least, turning your WiFi access point into a for-pay shared service almost certainly goes against most users' ISP Terms of Service, and the short range of today's access points makes the idea of stringing these FON nodes together into any kind of meaningful coverage scenario pretty unlikely. There's also the fact that many users won't be comfortable or adept at flashing the ROM on their wireless routers to enable them for FON's system. (I expect FON will quickly start flooding the market with their own inexpensive, already-enabled APs to get around that though). But I do think the first two concerns are major ones, and unless FON is successful at negotiating the deals they are supposedly working on with the major ISPs to allow the FON service to operate on their networks, it's hard to envision this going anywhere.

As Telopocalypse pointed out, FON definitely has some enthusiasm on their side though (the FON announcement at ETel was a rousing and infectuous pitch), and getting financial support from players like Google and Skype has got people standing up and taking notice. They also have some intriguing and impressive board members, including Ester Dyson and Dan Gillmore (who were joined this weekend by representatives from Skype, Index Ventures, and Cisco.) The idea of creating a ubiquitous global shared WiFi network by encouraging broadband subscribers to share their connections certainly has some rebel appeal, and FON is trying hard to capitalize on that as their communications and branding all have a very revolutionary feel. And let's not forget you don't have to look back very far to see other examples of P2P that have taken off far beyond anyone's initial expectations. Also with Google's rumored intentions of building out their own network, this play could potentially catapult what seemed like a pretty crazy idea at first into a serious WiFi deployment. As FON's Martin Varsavsky points out, the 3G guys aren't going to like this idea one bit.

There are several excellent analyses of FON popping up online now, and for more reading I'd reccomend Om Malik (who interviewed Varsavsky and also has input from wireless guru Glenn Fleishman who has been decidely negative on FON since their inception), Mark Evans, and IP Democracy.

UPDATE: Glenn Fleishman has just posted a statement from Speakeasy, the one U.S. ISP that FON has been trumpeting is on board with their plans, saying they have no relationship or agreement with FON at this point. The plot thickens.