I have made the case of why FON is great for ISPs. We have signed our first agreement with Glocalnet, Sweden´s second largest ISP, an amazing competitor to Telia and we are in the process of negotiating with another 11 ISPs in the United States, Europe and Latin America. Now can we make a case that FON is great for mobile operators? This one is a harder case to make but let me try to make it.

First I would like to say that in Europe mobile rates and GSM ARPUs are much higher than in America. In Europe GSM operators are getting around 1000 euros per year per customer, in America around half of that. In America operators sell big buckets of minutes, in Europe operators charge customers very high per minute charges, incredibly high fixed to mobile rates that the mobile operators keep and extortionist roaming rates.

Still my prediction is that in the next 3 years there will be a huge price drop on mobile in Europe and ARPUs will fall to half of what they are now, say 500 euros per year.

Now when Europe goes to flat monthly pricing, a similar system to that of the States, FON will be a friend of GSM operators. Why? Very simple, once you collect a flat rate pricing rate what you want is less usage, so you have to invest less in the network. At that point Dual WiFi GSM phones go from being a curse to being a blessing as a lot of traffic would leave the network through WiFi simply cause phones would detect it and so users do not pass a theoretical high bucket limit set by the GSM operator. In this way GSM operators rely on WiFI to invest less. Moreover WiFi is great for many in building sections that are not reached by GSM operators.

ARPUs in different countries
ARPU O2 in Ireland

Rebecca Buckman from the Wall Street Journal wrote an article on today´s WSJ in which she questions the validity of FON´s advisory board members comments on their blogs about FON. I think Rebecca is right in one point and wrong in another one. Rebecca Buckman is right in saying that readers who go over comments written by a blogger who is also an advisory board member of FON should be warned that these comments are coming from people associated with the company. But Rebecca is wrong in saying that these warnings had not been made. I for example have been frequently blogging about each of the advisory board members and all of them individually had blogged about their involvement with Fon. There was no secret there and Rebecca should have researched this more thoroughly. And in any case having spoken with Rebecca quite a few times my take on this is that Rebecca, representing old media found it tough to accept that the announcement of the FON funding deal first came out on my blog and then in her paper the venerable WSJ. Sorry Rebecca but part of the appeal of FON, other than its service is that we are a blogged company and in any case I would not have announced the FON deal in a publication that requires its readers to pay to access its content on the internet. Other than that I would like to say that I love the new format of the WSJ in Europe. It´s so much easier to carry and to read than the old one!

There are many municipal Wi Fi projects around the world. These projects involve getting weather proof Wi Fi hotspots and installing them around the cities. At FON we believe that the best solution for a city is not a pure hotspot solution. Instead we believe that the best solution is citizens of a city with FON routers by a window combined with some hotspot investments on behalf of the city in key locations. We have been talking already to a number of cities whose names unfortunately we cannot yet disclosed and the reception has been great. The key here is that behind the municipal wifi movement there´s a war going on with the telecom operators on one side and the cities on the other. But with FON both cities and telecom operators win. Cities win because residents put their routers by their windows and provide free roaming to each other only after PAYING the telecom operators. And operators win because they get more customers and because they make more revenues as non residents pay to use the networks. FON then is either a free network for residents and a paid network for non residents. But the prices for non residents or aliens like we call them, coming at $2 a day, are very, very reasonable. $2 per day is a price that is not low enough to encourage you not to sign up with a telecom operator if you are a resident (as bandwidth costs less than $60 per month) but it is low enough for visitors into a city to feel that if they want wifi they can get it everywhere for a very reasonable amount.

I just read Forbes article on us. I understand Dan´s views but I am not sure he understands ours. When Dan contacted me I was on route from San Francisco to London where I recently landed only to see his article on line. I wish Dan Frommer was a more patient journalist and had given me 24 hours to reply.

Dear Dan, I am the founder of three ISPs, Viatel, Jazztel and Ya.com and believe me FON is not only not against the ISPs, FON is a boom for ISPs that will generate more broadband clients and more ARPU. FON invests in a wifi platform that is provided for free to ISPs so they can sell wifi roaming as a feature at no cost to them. And on top of that FON makes ISPs realize that they are seating on untapped potential extra revenue (payments from aliens) that we uncover and share with them. We know that some ISPs have terms of service that prevent users from becoming foneros. We do not want to encourage anybody not to respect these terms. We are instead working with ISPs so they endorse FON´s wifi roaming platform and then foneros sign up.

I am staying at the Clift Hotel in San Francisco. This hotel design is great except that the walls are very thin and both of my neighbors are watching TV. I can hear them well. I am annoyed. I realize I practically never watch TV. I don’t watch TV in America. I don’t watch TV in Spain. When I read statistics on the amount of hours that other people spend watching TV I see how uncommon my behavior is. Interestingly most of my friends also watch very little TV. And they do very well in life. Is there an inverse correlation between hours spent watching TV and success in life?

I have been reading articles on FON that call us the P2P of WiFi or the Napster of WiFi. What these writers fail to understand is that my whole career was built in the ISP world having started Viatel, Jazztel and Ya.com and that I created FON as a way to build a global wifi network and boost ISP revenue. FON is great for ISPs because FON pays for all the incremental costs of roaming to the ISP, because an ISP can sell an extra feature to a customer (pay for bandwidth at home have bandwidth all over the world) at no cost to them, and because when we make revenues from aliens (non foneros) we share it with the ISPs. ISPs are seating on potential extra revenue that FON untaps for them. Indeed if you are reading this and work for an ISP please contact us and we will explain to you all the advantages of making your ISP FON ready.

Got the initial figures. They are amazing. We made more foneros in one day, yesterday, than since we started the company. As of last night we had close to 9000 registered foneros. To give you a sense of what this is the largest wifi hotspot networks in the world have around 25,000 hotspots. We got 5000 registrations in one day and sold over 3000 fon routers. Our plan for 2006 is to be the largest hotspot network in the world. We are getting there. I take an opportunity here to thank the Spanish FON team, to thank Janus and Niklas from Skype, to thank the Google team, especially Megan and Christopher, to thank Mike from Cisco, Danny from Index Ventures, Mark and Mike from Sequoia, to thank our American advisory board for all the tough yet constructive criticism, to thank the blogosphere whose comments both positive and negative help us be a better company, and to thank all of those who became foneros and believe that a global, unified wifi signal can be of great benefit to all. THANK YOU!!!

I have been getting comments from people asking if we are moving to Silicon Valley as a result of our investment round. While we love the creativity and energy in the Bay Area and we have tremendous admiration for the global talent that has gathered over there, we are not moving away from Spain. We love being a Spanish technology company and we are staying in Spain. Something else. There was a misunderstanding vis a vis Speakeasy. Speakeasy allows FON but they are not our partners. Our partners are Google, Skype, Index Ventures and Sequoia quite a team as it stands!

As a result of yesterday´s announcement about FON there have been tens of thousands of new readers coming to my blog. I would like to take this opportunity to welcome these new readers and say a few things about myself and my blogs. First of all I am a blogaddict. I keep 6 blogs, three in English and three in Spanish. These blogs are Safe Democracy. Safe Democracy is one of my foundation in Europe. Safe Democracy and Club de Madrid organized a very large conference on Democracy and Terrorism attended by 1300 experts and over 20 heads of States as well as Kofi Annan. The result is that blog. Then I have the blog of the Varsavsky Foundation which as opposed to Safe Democracy is not a collaborative blog. I am the only writer in that blog and it is there where I speak about my (many times controversial political views), I keep those away from this blog as this blog is my blog as an entrepreneur. This blog tells the story of FON and also of many ideas that I have that never make it into companies. Now in my blogs I reserve the right to not accept commentaries. I also reserve the right to delete or change posts should circumstances arise that make me do so, for example if pressed by my lawyers or other people´s lawyers. I also reserve the right to ammend posts for the same reasons. Lastly this blog tells my views on FON, they reflect the spirit of the entrepreneur but FON also has its own blogs and fora and for official FON information you should go to the FON web site.

As you know, FON is a global community of people who share WiFi connections. We call these people “Foneros”, as a tribute to our heritage as a Spanish company. In order to become a Fonero, you go to FON, to download software that you install in your router, you place your antenna by a window and you share bandwidth with other Foneros from anywhere in the world. You can also buy the FON Ready router from our web site, plug and play. FON creates a free WiFi roaming environment for those who contribute WiFi signals, namely those who have already signed up with a local ISP and downloaded our software into their WiFi routers.

The success of FON, like the success of all online communities — such as eBay, Skype, ICQ, IM — depends on many people joining. At the very beginning, when there are no obvious advantages to joining FON, it is not so easy to get Foneros, even though the service is free. But as Foneros continue to join, and there are more and more Fonero hotspots, the dream of a unified global broadband wireless signal becomes a reality. The FON movement, as we call it, can achieve what 3G or EVDO has not — a truly broadband wireless Internet everywhere. 3G/EVDO are great for coverage, but their throughput is pitiful compared to WiFi and they are way too expensive.

FON was launched just 90 days ago and we already have over 3,000 registered Foneros. While that number may seem small, 3,000 registered Foneros puts us at 10% of our 2006 objective in only 3 months: to become the largest hotspot network in the world by the end of the year. Currently, the largest global hotspot networks have around 30,000 hotspots. But after having built the second largest Spanish Internet company, Ya.com and the second largest publicly traded telecom company in Spain, Jazztel both with significant backers, I realized that at FON was going to need very special alliances to succeed on its objective of having 1 million hotspots around the world in 4 years. I knew that our method of downloading firmware was a much faster way of building a unified global WiFi signal than the traditional method used by local hotspots companies. Their way — buying WiFi boxes and deploying them hotspot by hotspot — is costly and inefficient. Ours is simple: download and install. Ours is a people’s network. But for FON to succeed we need tremendous magnifying power for our message.

So I sought the ultimate alliances in the industry, and aimed high, very high. And today I have a great announcement to make: FON can now count Google , Skype, Sequoia Capital, and Index Ventures as investors and backers. They’ve joined us to help advance the FON movement, leading a group that has put 18 million Euros into FON and also committed to give us a strategic boost that should help us make this great idea into a great platform for everyone who wants a faster, cheaper and more secure wireless Internet. We’ll invest this money in R&D so we can make it quicker and easier to become a FONERO and so that we can expand the number of things you can do with your FON service. Our goal, after all, isn’t just to share bandwidth. It’s to use the power of people to people networks to create a global wireless network. What makes each of these firms great backers for us is that deep in their DNA is the idea of brand-new business models, tons of innovation and a commitment to making the digital world easier and cheaper. We feel the same way. So while we’re excited about (and responsible for!) their investment, we’re even more pleased to have their support. Also I am pleased to announced today that we have obtained the support of two significant ISPs for FON. In America Speakeasy has said that they welcome FON and in Europe, Glocalnet and FON have signed an agreement so Glocalnet sells its services FON ready and the Swedish foneros will soon be able move around Stockholm and other cities with their WiFi enabled gadgets. FON shares revenues with ISPs making it attractive for them to join the FON movement.
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