Thanks to the iPhone, Fon finds its sweet spot in Japan


Updated. Fon may have launched in Madrid, but lately the company has taken on a very Japanese flavor. According to the company, which pioneered the concept of a global community Wi-Fi network, 1 million, or a full one-sixth, of its global access points now reside in Japan.

It owes a big part of its success there to operator partner Softbank Mobile, one of Japan’s largest carriers with 25 million subscribers. Softbank gives every customer who buys a smartphone or tablet a Wi-Fi router, which Fon calls a Fonera, and automatically configures all of its devices to access Fon’s network. Considering Softbank for years was the only carrier in Japan to sell the iPhone, you can imagine how considerable that traffic is. Fon was originally launched to connect laptops, but today in Japan 80 percent of its traffic comes from either the iPhone or iPad.

For those of you who aren’t familiar, Fon was born in 2006 with the aim of building the world’s first global community Wi-Fi network. Fon members, or Foneros, buy a Wi-Fi access point or router that hosts both a private network for the user’s home or office and a public network. Members get free and automatic access to all other Fon access points, and Fon sells access to non-members via subscriptions or day passes.

Fon was a pretty revolutionary idea when it launched, and consequently it attracted some impressive investors – Google, Skype and Sequoia Capital all invested in the beginning, and later Skype co-founder Nikas Zennström’s Atomico and British Telecom signed up for a piece of the action. Fon didn’t exactly take off for the clouds though. Its business model depended on selling hardware to customers, which made viral growth difficult. It competes against the likes of Linksys and NetGear on store shelves. While it offers a community network those two companies don’t, the value of that network depends on reaching a critical mass of members, which it failed to achieve.

In May, Fon announced it had 6 million access points in 100 countries, which may sound like an awful lot. But to put that in perspective, in April, French telco Iliad launched a community Wi-Fi network with 4 million access points with a mere flip of a switch – that’s in a single country. When you’re talking on a global scale, 6 million access points is paltry. The biggest complaint I have heard from Fon users is they can never find a Fonera to connect to.

There are signs, though, that Fon’s fortunes are changing, in large part due to the smartphone explosion and carriers’ new willingness to use Wi-Fi to relieve their congested mobile broadband networks. Nowhere is that more evident than in Japan. According to Fon, Softbank has cut its 3G mobile data traffic in half during peak hours by offloading that traffic onto Fon routers.

Fon’s network density in Tokyo neighborhoods

Since Softbank has every interest in making Fon’s network as big as possible, it distributes Fon’s routers to all of its customers for free, which solves the critical mass problem. In the U.K., BT has uploaded software into its home routers that turn them into “soft” Foneras.

Those carrier deals are starting to drive a growth spurt for the company. Fon says it’s adding 1 million members every three to four months. The typical smartphone user redirects 500 MB to 1 GB — depending on the country — over Fon’s networks and connects on average once very 36 hours. Those are some mighty tempting figures to an operator looking for ways to conserve 3G and 4G capacity.

Japan is by far Fon’s most successful market, but Fon could easily repeat that success in other countries if it finds the right partner. My bet is that Fon is eyeing France, which is embroiled in a vicious price war sparked by Iliad’s Free. All of France’s big three are looking to Wi-Fi as a means of combating Free’s ultra-cheap voice and data plans. Bouygues recently signed a deal with Devicescape to gain access to its virtual hotspot network. Orange is leaning on its public Wi-Fi hotspots. And, of course, SFR has contracted with Fon.

Update: An earlier version of this post incorrectly stated that Softbank was the only carrier in Japan to offer the iPhone. Softbank lost its exclusivity in October when KDDI began offering the iPhone 4S over its CDMA networks.

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