CanalPDA

The project is less than four months old, but it already has the backing of several industry heavyweights. Google, Skype (acquired last year by Ebay) and the venture-capital funds Index Ventures and Sequoia Capital have covered Fon‘s first investment round. Martin Varsavsky, the former ya.com and jazztel founder and president, has raised 18 million Euros for jump-starting this Spanish company around the world.

(este artículo también está disponible en español)

by Ignacio Escolar

The news was released yesterday by Varsavsky himself on his personal blog, a page where he has been reporting, almost live, the details of the launch of this new product. His idea is to create a huge WiFi network for accessing the Internet, based on the connections of individual Internet users who share or resell their broadband connections.

Varsavsky says they plan to have more than 10 million access points worldwide by the year 2010. The service has been in testing for a few months, and currently has 3,000 registered users.

The main obstacle in Fon’s strategy are the ISPs (Internet Service Providers). Most of them include specific clauses in their contracts preventing their customers to resell their cable- or ADSL-connections to third parties. Moreover, according to the confusing Section 286 of the Spanish Criminal Code, doing so may be taken as a crime.

Internet users wanting to resell their ADSL or cable connection need permission from the company that provides the service to them. Most ADSL contracts include provisions forbidding the resale of the connection to third parties.

In order to circumvent these legal problems, Fon’s service remains at the testing stages, and the network is only available to users who share their connections, but not to paying customers.

In order to solve this issue, Fon is negotiating with several service providers. The company would share some of its revenue with them, in exchange for allowing their customers to resell their connections. Martín Varsavsky says that they have already inked deals with the American ISP Speakeasy and the Swedish Glocalnet. There’s no pact in Spain yet, but negotiations are open with Jazztel and ya.com.

Company sources say that, after the project investors were announced, they have been contacted by four ISPs interested in the project. “Now everything is going to be much easier”, they say.

Linus, Bills and Aliens

There are three types of Fon users: “linus”, “bills” and “aliens”. The first ones, named after Linus Torvalds –the creator of the Linux operating system–, share their connections in exchange for free access to all the other network nodes. Meanwhile, the “bills” will sell their connections through Fon and they will have to pay for using other network nodes.

The third kind, the “aliens”, will be able to log into all access points of Fon’s network, both from “linus” and from “bills”, as long as they pay for doing so. The rates for this kind of users will be 5 € per 24 hours or 40 € per month. Sharing or reselling your connection requires buying a specific model of WiFi router and installing a specific software. Fon is subsidizing heavily the purchase of these preinstalled units: it is selling them at 25 € or $25, almost a third of their actual price.

(translated from Informativos Telecinco)

More on CanalPDA:

• Martín Varsavsky: “el WiFi es una bañera y yo quiero montar un mar” (17 oct 2005)

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