The battle for the last-mile heats up as GOOG, Skype and VCs fund startup FON
By Tom Foremski - February 6, 2006
Google, Skype and VCs working on creating planet-wide ubiquitous Wi-Fi with a $21.7m investment in startup FON.
It is a strategy that I predicted back in August:
What's Google up to? It's going to become a wireless Telco with its own fat backbone...
I think it is very clear what Google's strategy is, or rather has to be. I think it is getting ready to do a wireless Telco buy. Because everything is rapidly being walled up into gated communities, and the gatekeepers are the cable companies and the wireless mobile phone companies (the land-liners are toast).Those walled gardens can shut Google out, or put Google a click or two away....and on a mobile phone that might as well be Siberia, you are going to use the first search box you see and it doesn't have to be Google.
This is the battle for the last-mile--whoever controls the entry into the digital home controls a very lucrative content market.
Interestingly, FON has co-opted leading bloggers such as Dan Gillmor onto an advisory board, and who have also given their official blessing through allowing their quotes to be used in the press release.
Gartner and IDC and Forrester analysts usually provide such quotes and they are always paid by the company issuing the press release(!)
From the release:
The well regarded blogger/former newspaper columnist Dan Gillmor and telecom expert David Isenberg have already signed on to serve on the company's board of advisors, as has Esther Dyson, the well-known blogger Joi Ito and many others. For a complete list of the board of advisors visit http://en.fon.com/info/who-is-behind-fon.php
Here is the statement from GOOG and CSCO:
FON SECURES $21.7M TO CREATE WIFI PLANET
Niklas Zennström, Janus Friis, Danny Rimer and Mike Volpi Join Board
MADRID, Spain 6, February 2006 FON, (www.fon.com) a company focused on creating a global network of shared WiFi connections, today announced that it has secured 18 million (USD$21.7M) in Series A funding from Index Ventures, Google, Sequoia Capital and Skype. Index Ventures led the round. The company also announced that Danny Rimer (Index Ventures), Mike Volpi (Cisco) Niklas Zennström and Janus Friis (Skype) joined the board. Existing board members include Martin Varsavsky, FON CEO, and Antonio Fuentes, FON CFO. This announcement illustrates the willingness of leading technology companies and venture capital firms to jointly invest in the development of a global WiFi infrastructure.
Founded just three months ago by serial entrepreneur Martin Varsavsky, FON's objective is to build a global WiFi network bottom up, with one million hot spots by 2010. To do this, FON users, or "foneros," are able to connect to the Internet via Fon WiFi hotspots provided by other foneros. For foneros, the development of the FON global network means they will be able to connect to the Internet safely and securely all around the globe. For service and application providers such as Skype and Google, the FON network makes their services more ubiquitously available. For ISPs, FON provides a way to expand their reach globally. For developers, the FON network is a new platform for creating and delivering services on a global scale.
With a simple download-and-install approach, similar to Skype's, FON is a secure "by-the-people, for-the-people" network. FON has registered 3,000 members since it went live with a beta of its service in November, 2005. The company plans to use its funding to grow the network of foneros and support the growth of WiFi worldwide, particularly in countries where broadband is currently unaffordable to most people.
FON will drive its revenue from a multi-tiered subscription model. Members sign up in one of three foneros categories: Linus, Bill or Alien.
Linus members share their home WiFi hotspot with the FON network and can use any FON hotspot for free.
Bill members share their WiFi hotspots with Alien members for a fee. Bills cannot roam the FON network for free.
Alien members pay to use the FON network on an as-needed basis. Fifty-percent of revenue generated from Aliens will be shared with Bills. Alien memberships are currently available on a free-trial basis.
"Aliens are at the heart of our business model," said Varsavsky. "As we continue to grow, we will attract consumers for all three foneros categories and achieve our goal of creating a global WiFi nation. This is a great opportunity for ISP's, bloggers, developers, early adopters, consumer electronics manufacturers and the 'average Joe or Jane' with a WiFi connection to make money by letting other foneros connect to the Net safely and simply."
ISPs are already signing up to partner with FON. "As a leading ISP in Sweden, Glocalnet is happy to partner with FON as the concept will enable us to bring even more value to our offering. Being able to offer internet access when out of home at no extra cost is a strong selling point," said Martin Tiveus, marketing director of Glocalnet. FON expects to announce other ISP relationships soon.
"There is perhaps no more important goal for the industry than helping to make broadband Internet access available around the world," said Skype CEO Niklas Zennström. "FON has a great idea to help people share WiFi with one another to build a global unified broadband network, and we're happy to lend support. Enabling more communities to tap into the power of the Web benefits us all."
Power Foneros
FON has attracted the likes of some of the technology communities' leading advocates. The well regarded blogger/former newspaper columnist Dan Gillmor and telecom expert David Isenberg have already signed on to serve on the company's board of advisors, as has Esther Dyson, the well-known blogger Joi Ito and many others. For a complete list of the board of advisors visit http://en.fon.com/info/who-is-behind-fon.php
Prior to launching FON, Varsavsky, founded the second-largest Spanish Internet company, www.ya.com, and the second-largest, publicly-traded telecom company in Spain, www.jazztel.com.
About FON
Founded in 2005, FON is a community-empowered company dedicated to building the world's largest global WiFi network bottom up, spreading the power of WiFi around the world. Headquartered in Madrid, FON is backed by Google (NASDAQ: GOOG), Skype (NASDAQ: EBAY), Index Ventures and Sequoia Capital. For more information on how to join or partner with FON, visit www.fon.com.
Editor's Note: Quote sheet below
Executive comment on the FON funding announcement
"We're very excited to be the lead investor in FON," said Danny Rimer, general partner at Index Ventures. "In the same way that Skype filled a communications need, we believe that FON fills the need that people have of people getting connected to the Internet anywhere they go. Martin has created an elegant technology solution coupled with a highly viral community that could have the business impact on the broadband market that Skype has had on Internet communications."
"What Martin and the people at FON are doing 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, so we're delighted to be a part of the FON revolution," said Janus Friis, Skype co-founder.
Mike Volpi, Cisco: "Ubiquitous broadband is providing people access to information and entertainment in an unprecedented way. Consumers can have access to the power of broadband untethered to their devices and FON is paving the way."
Dan Gillmor: "The Web fuels communities, and so does FON. When like-minded folks get together, they can accomplish amazing things."
February 6, 2006 | Permalink | Comment | Category: Disruptive | Subscribe to SVW
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Comments (9)
I've never paid an analyst to provide a quote for a press release - perhaps it's a North American thing?
Posted: February 6, 2006 11:07 AM
Yes David, I guess it must be a North American thing. Do you think that the Gartner, and Forrester analysts that turn in their quotes in press releases do it for free? No, they will not issue a comment unless you are a CLIENT!!!!
Does this sway the analysts objectivity? You decide. Which is why I thought it strange that in the place in the press release where you would normally see an analyst quote we had some of our best and brightest bloggers offering their PR support--that's all. I feel they were being used by FON's publicity people very deliberatly.
Posted: February 7, 2006 12:38 PM
Tom, I find this really interesting.
If you provide a quote for a press release then you are providing an endorsement. It doesn't matter whether the quote praises the company or is a general comment on the market. It's the act rather than the words that count.
And if analyst companies will only provide quotes to clients, then I find that ethically dubious. After all, what about the non-clients who are doing equally great stuff? Sometimes, it's what isn't said as much as what is.
Posted: February 8, 2006 10:53 AM
David, you've hit the nail on the head. The analysts are paid by clients to voice their opinions. And also, they won't include companis in a report unless they are clients. It is doubtful that you will appear in any of Gartner's magic quadrants unless you are a client. And the client fees are very substantial.
Companies sometimes would call me up and say "why didn't you quote the IDC, or Gartner, or Forrester analysts that we provided in the press release?" I tell them it is because they are paid to be in the press release.
I'm not saying that those analysts are voicing a tainted "sponsored" opinion--but it certainly doesn't add to their credibility. And that is one of the problems inherent in that analyst community and the analyst "tax" is a heavy burden for many startups trying to get above the noise level.
Posted: February 8, 2006 3:15 PM
This is a very interesting discussion. There's no doubt the analyst credibility and "tax" issue is something that's getting more and more attention (have you seen this week's InformationWeek: http://blog.bitepr.com/2006/02/who_needs_credi.html)
I will say this. Tom, your assumption that ALL analyst quotes in press releases are paid for is incorrect. I've worked with several start-ups and have, on more than one occasion, obtained quotes from analysts for press releases when my client was NOT paying the "tax" in any way, shape or form.
Posted: February 9, 2006 5:37 PM
Madrid based...hmmm...Telefonica (or as 'we prefer to say Timochronica = (loose translation chronic scam artist) provides the backbone for everyone else's 'service.' This is the company that knows how to lie shamelssly and put the phone down on customers with boring regularity. It will be fun to see how much headway FON makes in its native land. Especially in those parts of the campo where ADSL is a lottery.
Why anyone is getting excited about FON paying for coverage is beyond me. Spain is the land of blatant bribery and corruption. So I guess it's a case of exporting a workable business model.
Posted: February 12, 2006 3:46 AM
Very interesting, and interesting debate that followed. I've provided quotes for press releases, and I've worked for comppanies that say they don't for ethical reasons, but I don't think I've never (in my recollection) provided a quote for a client because they were a client. I am based in Europe, perhaps this is an NA thing, as David suggested.
For client or not, there's a problem with quotes. Were I to say for example, "XXX is the best thing since sliced toast and everybody should be using it," then I'd be pushing the bounds of ethics. Why? Because its too easy for vendors to go to people that like technology XXX, and get the quote from them. The source gets publicity, the vendor gets "endorsement" and everyone gains but its not actually any better than Tiger Woods appearing on an Accenture ad.
Quotes only become at all ethical if they can in some way explore the context and give some - ahem - analysis of the release. If a product really is the best thing since sliced toast, there should be valid reasons for saying so. If reasons are stated they also serve to constrain any hyperbolae. Anything else is just uncorroborated opinion and should be avoided.
I agree it would be interesting if there was a code of PR ethics, which required those quoted to state their interests :-))
Jon
P.S. I've worked extensively with spanish companies, and I've not noticed Spaniards to be intrinsically corrupt, just pragmatic. In this case, the model was already broke.
Posted: February 13, 2006 3:58 AM
Tom,
Saying that vendors pay for quotes or that analysts give quotes to vendors who have commercial relations with are two very different things.
Check our take on this, and more:
ARmadgeddon:101 series: Analysts and press quotes
Jon,
Great comment -we agree that a good analyst must provide context. Does that automatically exclude IDC then?
Posted: February 16, 2006 5:54 AM
Well, after few months FON has turned into a big fiasco. FON has lots of problems and they are simply blowing VC money.
FON does not much market traction (even by giving out router almost for free just to show the number of registered users), nor they have been able sign-up partners (besides original investors, Google and Skype)
FON has been a big disappointment.
Posted: August 6, 2006 1:15 AM