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)

There had to be an explanation for the sudden string of new hybrid (GSM/WiFi) cellphones from the major manufacturers, and here it is: Telefonica Móviles, the world’s second largest mobile operator, will operate the world’s largest WiFi network within three months, as soon as it completes the conversion of all its GSM and UMTS towers in Spain into high-capacity WiFi access points. Wireless users will then be able to log into the Internet from anywhere under Movistar coverage.

(Some background information for non-Spanish readers, here and here)

(An additional explanation here)

The huge technology project, that the company is undertaking extremely quickly and in full secrecy, will provide fast, wireless Internet access from any place where there is Movistar cellphone coverage. Here we are talking about tens of thousands of cellphone towers that, while still providing their current service to regular mobile phones, will also be enabled for access via laptops, PDAs and hybrid cellphones, such as the ones recently introduced by Nokia and Sony-Ericsson, among others. The only technical requirement will be compatibility with the 802.11b/g standard, allowing data rates up to 54 Mbps (megabits per second).

Given the size and geographical extent of the Telefónica Móviles deployment, most other initiatives previously considered as far-reaching pale by comparison, such as Google Secure Access in San Francisco or Philadelphia’s city-wide coverage. The Spanish carrier plans to unveil the still-unnamed service during the 3GSM World Congress to be held in Barcelona from February 13 to 16 de febrero, 2006. However, the deployment and the commercial launch will not reach the whole of Spain until the end of March. The company will use its 23-million customers in the Spanish market as a pilot project for the complete rollout to all its subsidiaries, based in Latin America and Europe, with a global 89 million customers.

Company sources concede privately that such an extreme drive for nationwide WiFi is due to the tepid market response to 3G/UMTS services. By offering WiFi everywhere, we are going to push broadband on mobile devices, removing any doubt about its actual applications, says one of the project leaders to CanalPDA. When asked about the risk of obsolescence of WiFi technology when fastest systems such as WiMax are widely available, the executive says that it is still too soon for taking WiMax for granted; on the other hand, the market penetration of WiFi-enabled devices provides more than enough critical mass. However, the technology platform we are deploying will allow an easy migration to WiMax in the future.

Rates not yet ready

The price of the service for users is still unknown. The company is considering several price plans, with a monthly flat fee for Movistar contract subscribers including some volume of data transfer, in order to increase the ARPU (Average Revenue Per User) of high-end phone users, who are already the carrier’s main revenue source. Also, there will probably be several per-megabyte plans, mainly addressed to prepayment cellphone users. The industry will take notice of the effect of Telefónica Móviles’ new nationwide service on Movistar’s overall billing to subscribers, because anyone with a WiFi-enabled device and a VoIP software such as Skype will now be able to make all kinds of voice calls, even internationally, for a flat rate.

(picture of the UMTS cell tower, courtesy of Telefónica Móviles)