FON, the iPhone and Mobile Operators

It took Fon almost four years to sell half a million WiFi routers known as Foneras. But in the last 2 months we have received orders for another half a million. This is because mobile operators have changed their view vis-à-vis WiFi. They see WiFi not as a threat anymore, but as a great add-on to 3G, to do the heavy duty work of downloading. Mobile operators know that WiFi cannot really compete with 3G in terms of mobility and that people will continue to want both 3G and WiFi, and will be willing to pay for both.

WiFi improves customer experience and saves CAPEX on a Smartphone when people are at home or in the office. Smartphones don’t need WiFi for email or Twitter, low bandwidth apps. But Smartphones do need WiFi when they become entertainment centers, when they are used to watch TV Series, stream video, stream music. And that is also when Smartphones become real burdens for 3G networks. Think of this, an N router nowadays has as much capacity as a cell tower, less range of course but at cost of $100 vs. $200,000. Here’s an article from the BBC that explains the problem that 02 is having with the iPhone.

With FON people autoconnect their Smartphone at home and also offer 20% of their bandwidth to others who may capture the same signal while at home visiting or nearby through walls and windows. So with FON, Smartphones get coverage at home and at other homes or offices with our Fonera routers. In certain countries, like the UK, FON has a venture together with BT, known as BT FON that has close to a million hotspots. That is great coverage and our network is becoming more and more valuable to mobile operators who want to complement 3G with WiFi.

But in order to preserve the ecosystem, and not go against fixed operators, FON is not free to those who don’t donate bandwidth. FON has a rule, “you share a little WiFi at home and you roam for free”, but if you don’t share you have to pay. In this way, FON has solved the leeching problem that free wifi networks have. As great as Free WiFi networks are, they never really took off because there are many more takers than people who offer WiFi. Also frankly, if they would take off, they would destroy most of the fixed telecom industry. With Fon there is a balance. To take you have to give. So people continue to buy fixed broadband services from companies like BT, ZON, Comstar, Neuf and other partners of ours. So in this telco/consumer ecosystem FON helps consumers, but also promotes fixed and mobile bandwidth. This is why FON has in its capital structure, telcos like BT and consumer internet companies like Google.

Here’s a video in which I try to make this point 🙂