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BT to Invest in FON?

FON, the Spanish share-your-Wi-Fi services company, is close to announcing a new round of funding that could total to as much as 10 million Euros (shade over $13 million.)

While some of its existing investors – Index Ventures, Skype and Google – are coming back with more cash, the word from telecom circles in Europe is that British Telecom is going to invest in the wireless router company. It is one of the new strategic investors in the company. FON had raised about $22 million in a previous round of funding. With this round the company has raised close to $35 million in venture capital funds.

FON is the latest start-up by Spanish telecom entrepreneur, Martin Varsavsky, who has made a name for being a thorn in the side of incumbents. Ah the sweet irony that is life! We have not been able to confirm the rumors so far, but will update the story with more info as it surfaces. Varsavsky declined to comment.

There were some rumors of a partnership between FON and British Telecom, where FON software was going to be bundled into BT Wi-Fi gateways. If you are wondering why BT is interested in FON, there is a seemingly logical explanation.

When I visited BT last summer while reporting a story for Business 2.0, the senior management of the British incumbent carrier was pretty bullish on the whole notion of dual-mode phones and municipal wireless. They talked about their Fusion strategy quite excitedly, even though the first version of BT Fusion was BTF: big time flop.

Dual-mode phones are phone that have Wi-Fi and cellular capabilities in one single handset, and in an ideal world there is a seamless handoff between the two networks once you are in range of a Wi-Fi network. [Okay those of you, who are smirking in the back of the class, stop, because we all know the jokes.]

While this does seem like a distant dream, eventually it will happen. Nokia, for instance, is pretty confident that most of its mobile phones in the near future will have Wi-Fi capabilities built into them. BT can offer voice (and other services) over Wi-Fi when in range of a FON node, and when out of range it can switch to the Vodafone network for cellular access.

T-Mobile USA is trying something similar up in the U.S. Northwest, though it is through a customer’s own Wi-Fi network. of France has also been playing with a similar idea and has bundled FON-like software in its residential gateways.

18 Responses to “BT to Invest in FON?”

  1. the jewish community in murcia was among the first to fon.We sent our idle adsl to the street in pl santo domingo in haagen daz where we meet for coffee.
    we take our own signal when we are outside as well ANYBODY can suck it when we close.
    welcome to murcia

    btw fon has bigtim competition as murcia is a hotzone itself with over 30 zones almost everywhere free.
    how will fon compete?

  2. I still don’t quite buy this dual mode WiFi/GSM deal. The problem is that here in Europe (well, UK at least) the access point providers want you to pay for WiFi (e.g. BT Openzone £11/mth for only 4hrs access) – in the USA my experience was that free WiFi is more common. Again, here, no federation across providers.

    The thing that I do think has opportunity is the femtocell idea that got a little blogtime last month around the Barcelona GSM fest. Now that starts to make sense, certainly in the UK, where ‘quad’ play is starting to gain mindshare. Consider: from one supplier customer gets a) LLU or cable DSL, b) an Oyster femtocell to backhaul voice from 3G/GSM phone via IP over the DSL into their network & c) TV via cable or sat. Actually, that idea downsizes a quad play into a triple because voice is converged onto 3G/GSM. They’ve just gotta get the price right – at tops the call minutes via the femtocell have to be half the price of the regular cell calls on top of the core bundle cost.

    I’m skeptical about WiFi+cell for the same reason I don’t quite get VoIP for the average Joe: the cost. VoIP only adds up if you make unbilled calls, i.e. on same or peered SIP nets, or burn many international minutes.

    BTW, my only financial interest in any of this is that I’m a Fonero but I’m under no illusions about Fon becoming the candu WiFi.

  3. Dear Jack Pendelton,

    To set the record straight, you clearly don’t know what you are talking about.

    1. Giving away routers – the readers benefitted from it, that’s why we gave them away.
    2. This is a story which clearly neither BT or FON wants to be out, which proves you wrong.
    3. I don’t own shared in FON or in fact any other company except my own. Never have and never will. It is as simple as that.
    4. Lastly, before you make disparaging remarks, how about taking a deep breath.
    5. You are entitled to your opinions, but hopefully this will give you something to think about.
  4. “T-Mobile USA is trying something similar up in the U.S. Northwest, though it is through a customer’s own Wi-Fi network.”

    In Washington State only, five months into the trial, which is strange. It’s still not ready for prime time, one might conclude.

    And all T-Mobile hotspots are included in the Wi-Fi roaming deal. I tested the service and the dual-mode phone automatically recognizes and connects to T-Mobile service in Starbucks, etc.

    As for “Jack Pendelton”: Just because Om is bullish on a service doesn’t imply that he has shares in the company. I think ethical slurs should be restricted to actual knowledge.

  5. Jack Pendelton

    It seems that you have been given Fon shares, Om, by putting out rumors, promoting them by giving away routers…maybe you can clarify why you are so interested in this startup.

    The BT deal is actually contrary to your speculations, Fon is going to pay BT so that its users can get connected, kind of a roaming agreement. Do you really think BT would risk putting an unproven and buggy (check the Fon forums) firmware on their own routers? Why would BT invest in Fon anyway, what do they have to gain?

    Nothing to see here, please move along….

  6. Unlike most incumbents BT doesn’t have a mobile subsidiary: BT Cellnet was sold a few years ago (2001?)

    With no cellphone business to cannibalize, BT’s free to partner with FON, push dual use phones (the “bluephone” etc) and seems excited about WiMAX.