Wi-Fi Sharing Startup FON Faces Troubles With ISPs

Fon, a Spanish startup that plans to create a global network of shared Wi-Fi hot-spots, got attention last week for its new friends that gave it $21.7 million, investors including Google, Skype, and Sequoia Capital. But now it needs more friends of a different type: Internet service providers.

The idea behind Fon, founded three months ago by telecom entrepreneur Martin Varsavsky, is to create a global network of users called foneros--people who let others access the Internet through their broadband Wi-Fi connections. Members will fit into one of three categories. Linus members--the only kind that exist today--share home Wi-Fi hot-spots with the Fon network and use any Fon hot-spot free. Alien members will pay for the Fon network based on usage. And Bill members will share their Wi-Fi hot-spots with Alien members for a fee and have to pay to use the Fon network. The model hinges on Aliens, both to generate revenue to pay Bill members and to build hot-spots.

Fon fits the goals of Google and Skype because the more people who can get online, the more they can use those companies' services. Fon "is making it easy for people to access Wi-Fi anywhere. This is exactly what we had in mind as a logical next step as Skype began to proliferate across desktops worldwide," said Skype co-founder Janus Friis, in a statement.

But most major ISPs bar their customers from sharing or reselling their Internet connections. Fon contends it will spur broadband adoption, since people need it to be a member. It will be a hard sell, and Fon needs to persuade major ISPs that the model benefits them, or it will face a fight over the business model.

Ejovi Nuwere, Fon's U.S. manager, says the company doesn't want a fight and is working hard to make deals with large ISPs. So far, Fon has struck a deal with Glocalnet, Sweden's second largest ISP. Nuwere boasts that with Glocalnet alone, Fon could become the largest Wi-Fi provider in the world.