Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The battle for the last-mile heats up as GOOG, Skype and VCs fund startup FON

Posted by Tom Foremski - February 6, 2006

By Tom Foremski for SiliconValleyWatcher

WiFi_Planet.gifGoogle, 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."

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