Google and Skype Technologies have taken part in a first round of funding for community WiFi developer FON, while Cisco Systems and both Skype’s founding members have joined the board of the Spanish company.
Madrid-based FON has announced the completion of a $21.7 million Series A round, with Google and Skype taking part alongside Index Ventures and Sequoia Capital. It also said both Skype’s founders, Niklas Zennstrom and Janus Friis, have become board members, along with Danny Rimer from Index, and Mike Volpi, VP of business development at Cisco.
FON’s software is downloaded to a WiFi router (provided by Cisco subsidiary Linksys) enabling free or paid for access to the internet to third parties who are, like the owner, a member of the FON community, or foneros. Alongside the Linus members (who allow free access) and Bills (who charge), there are also Alien foneros, who only pay to access the network without owning infrastructure, with 50% of the revenue from them shared with the Bills.
The presence of both Google and Skype among the VCs is not surprising. Google has demonstrated its interest in WiFi via its proposal to supply a free network in San Francisco to derive valuable insights on how to develop location-based advertising and information services. It has also been recruiting for WiFi business development personnel in Europe.
Skype has partnerships in place with hotspot aggregators such as Boingo and The Cloud, and already offers WiFi-enabled Skype handsets made by, among others, Linksys. A visit to any internet cafe in a big city will reveal countless individuals calling home over the P2P VoIP service, so if those connections can be wireless-enabled, it should only stand to gain more users.
FON also signs up ISPs to resell its services. It has Speakeasy in the US and Glocalnet in Sweden, which presumably argue that, provided it’s driving more traffic over their networks, it’s all to the greater good, even if it means their individual users are sharing and, in some cases, selling on the connectivity they’re getting from the ISP.
Inevitably, the association of both companies with FON leads to mentions of the word disruptive, while the presence of that stalwart of corporate data networking on the board, Cisco, serves to put the disruption into perspective. This is Cisco seeking to turbo-charge its drive into the digital home market by pushing FON-enabled Linksys routers.
In an article in the Financial Times, FON said that it is growing faster than T-Mobile, which in turn claims to own the largest hotspot network with 24,000 active sites, a number FON expects to surpass in the not-too-distant future. In operation since November, it has some 3,000 active users in 53 countries and, one suspects, will shortly start advertising how many people it has on its network when you go to its home page, just like Skype does.
It’s true that building a network by inviting individuals to take part and fund their own entry by buying the infrastructure for a node is a cheaper way of doing it than spending on installing your own hotspots. So will FON kill the proprietary hotspot network or undermine the municipal WiFi initiatives underway in towns and cities across America?
Probably not, because the corporate market, at least, will still want to guarantee the security of its remote connectivity and quality of service levels, not to mention the centralized billing used by companies such as iPass, Sprint, with its Extended Workplace service, and BT Infonet with MobileXpress.
Martin Marsavsky, who founded FON, is a serial entrepreneur with a string of businesses, if not success stories, to his name, including US alternative carrier Viatel, which ultimately went bust; Spanish alternative carrier Jazztel, which is hanging on by the skin of its teeth but laboring under a severe debt burden; and Ya.com, a portal he eventually sold to Deutsche Telekom, which continues to eke out a living as an ISP.
Whether FON will enjoy greater success remains to be seen. Neither Speakeasy nor Glocalnet are heavy hitters, and it is unlikely that big ISPs like AOL and France Telecom’s Wanadoo, or the ISP divisions of the RBOCs, will be as happy to underwrite its business model with their connectivity. Indeed, many of the US ISPs have rules banning their customers from sharing their bandwidth.