Friday, April 21, 2006

Fon Hopes Its Hotspots Will Rival Cellular

The Spanish company's rapidly growing network of shared hotspots might be the key to widespread Wi-Fi phone service.

By Dylan Tweney

Fon founder Martin Varsavsky. (Courtesy of Fon)

Sure, you can browse the Web from your local coffee shop, thanks to its Wi-Fi connection. But what about leaving your cell phone at home and using cafes and other Wi-Fi "hotspots" to place free or cheap Internet-based phone calls using a laptop or Wi-Fi phone? Not yet.

The problem isn't bandwidth -- Wi-Fi has enough capacity to support voice calling with software like Skype. And it's not hardware -- several cell-phone manufacturers have recently released handsets with the ability to place calls via Wi-Fi. Rather, it's the patchy distribution of today's Wi-Fi networks, which makes cellular-type roaming impossible.

"If making calls from hotspots were really a successful model, then where are all the pay phones?" says David Chamberlain, principal wireless analyst at In-Stat, a high-tech consultancy in Scottsdale, AZ. "The value of mobility far outweighs any cost factors," he says, leading people to use more expensive cellular service, even if cheap, fixed options are available.

Spanish startup Fon wants to change that predilection for cellular, with a rapidly growing Wi-Fi network owned by its users, rather than a big telecommunications company, and based on shared access. In order to create a large network of hotspots, the company is encouraging network members -- mostly, average consumers -- to give away Wi-Fi access in exchange for getting free access at other Fon hotspots. Members can use that access, in turn, for Web browsing, e-mail, instant messaging -- or Skype-like Internet phone calling.

Since its launch in late February, the startup has amassed a network of 31,000 registered users ("Foneros"), and is currently adding 200 new users each day. If each of those users were to set up special Fon Wi-Fi routers, Fon would instantly become one of the world's largest networks of Wi-Fi hotspots. To date, though, only a minority of them have acquired Fon routers -- the company won't say exactly how many, but it expects that a large number of them will do so, given that there's no benefit to registering without also creating a Fon hotspot.

Fon founder Martin Varsavsky has set his sights well beyond, though. "If you really want to create a ubiquitous Wi-Fi signal, being the largest network in the world is not enough," he says. "We need maybe a million hotspots -- that would be a number where you would find Fon very frequently everywhere you go." As many as 300,000 of those hotspots would be in the United States, he projects, with the rest in Europe and China, Japan, and Korea -- areas where Fon is concentrating its marketing efforts. By contrast, the largest current network of hotspots, iPass, has around 43,500 hotspots worldwide, with some 13,400 in the United States, according to JiWire, a South San Francisco, CA-based company that tracks hotspot locations worldwide.

Fon's service provides Wi-Fi access for any application, including Web surfing, downloading music, or playing games. But the company's ambitious plans for coverage make it especially attractive for telephoning services -- that's one reason eBay's Skype division has invested in the company.