FON Funding

5 Feb ’06

Om notes that FON, the wifi sharing service I blogged a few months ago, has been funded to the tune of US$22M, and the blogosphere is burning with the news. For now, FON is Europe and US only, but will it come to Canada? I think it’s a marvellous idea, but as I said when I originally blogged it, bandwidth sharing “is expressly prohibited by the TOS of the Canadian consumer broadband ISP’s. The reaction of ISPs to this phenom will be … interesting.”

Alec Saunders notes that:

Sharing broadband is already widespread, though, and the agreements are typically not enforced. More importantly, though, FON wants to share the revenue they earn with the ISP. They’ve already signed up Speakeasy and Glocalnet. And, to my mind, there doesn’t seem to be any reason for the ISP not to like this. If they can boost revenues from my broadband connection by 10% in a month by working with FON, this goes straight to the bottom line.

Note that at present users can share their wireless through FON only for free – although eventually the plan is to allow people to also choose to charge for access to their bandwidth (who knows how many will …). From the ISP’s perspective, passively accepting some bandwidth sharing is one thing, but doing a deal with FON is another. Alec may be right, but given that there are generally only two broadband retail ISP’s per market in Canada, wider sharing would seem to inevitably lead to cannibalization of the ISP’s existing market (some people will use it to passport, but others will use it to easily share their bandwidth with neighbours on a more permanent basis) and softening of the market for wide area wireless when it comes out. And given that the WRT54G’s firmware can be easily hacked to remove the power governor built in to the default firmware, will FON’s firmware allow the same? That power boost, together with hi-gain antennae and a high location, and the box has dramatically increased range, making it a powerful tool for local sharing (Q: will Linksys release a MIMO box with open source firmware? I’ve heard rumours that Cisco is taking heat from telcoms to keep their MIMO boxes closed).

So ultimately I suspect that Canadian ISPs will see this as unlikely to generate new revenue, and quite likely to cannibalize their existing customer base and soften growth. But perhaps the practical answer is the technical issue – how do the ISPs implement a ban, or at least distinguish between permanent sharing and mere passporting (note: Glenn Fleishman says the former is trivial, and raises other issues)?. If they can’t, FON may at a practical level be home free, no pun intended.

I hope I’m wrong about the ISP reaction – plans like FON and groups like Wireless Toronto are to my mind fantastic tools for quickly and efficiently deploying the ubiquitous wireless broadband we ought to be enjoying right now.

Update: FON’s founder, Martin Varsavsky, is quoted by the AP on the ISP issue to the effect that someone who wants to share their bandwidth using FON needs Internet service to be a member. “So in fact, FON is an incentive to become a customer of an ISP,” he’s quoted as saying. Well, having access to bandwidth is an incentive to having an ISP account. Since one can share with many, FON is an incentive for at least (and at most?) one member of a group to have an ISP account. How that works out in numbers is the issue.

Update: Mathew Ingram notes the security concerns that some observers have and FON’s answer. I’m willing to bet that Steve Gibson will take a close look in an upcoming episode of the Security Now! podcast (even though he’s just finished a multi-episode series on wireless security) – stay tuned.

Update (2006-02-06): The NYT covers the story and notes the connection with Skype, both as one of the funders and as a potential killer app for wi-fi sharing:

[Varsavsky] said that a variety of new Internet services such as voice-over-Internet telephone service and Internet-enabled cameras had changed the business climate for Wi-Fi networks. “The message will be, if you like Skype, Fon will enable it to be everywhere,” he said.

Fantastic, and something I’ve been pining for, for a long time. But since the broadband ISP duopolies in Canada are generally also the celphone oligopolies in every market, ubiquitous free wireless calling is another reason to suppose that they will not be enthusiastic about FON.

{ 3 comments… read them below or add one }

Rob Hyndman February 6, 2006 at 07:46

It’s a very good point, Mark. I really don’t know how you could design a FON Bill pricing schedule that would allow you to deal with tiered ISP pricing … perhaps flat-rate your FON at the ISP’s highest marginal rate?

Reply

Mark Evans February 6, 2006 at 07:37

rob,
one of the flaws i see in FON’s model is they are relying on people to share their broadband access. what happens when ISPs start putting caps on these plans rather than all you can eat?

Reply

Glenn Fleishman February 5, 2006 at 23:19

“But perhaps the practical answer is the technical issue – how do the ISPs implement a ban, or at least distinguish between permanent sharing and mere passporting”: In the US, at least, ISPs can act entirely arbitrarily towards their customers. Thus, they could institute ridiculous policies. If Fon traffic to their authentication centers are identified, an ISP could sent a threatening letter, and many users would back down rather than engage in the legal process.

Fon could use peer-to-peer methods to obscure traffic to their centralized authentication passing packets to nodes on the ISP networks that are partners. On the other hand, if Fon really stresses that they will only allow their nodes to appear on ISP networks that allow this, my concerns are irrelevant.

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