Back in 2005 the Argentinian businessman Martin Varsavsky came back from a business trip to Japan. When entering his house he found a letter on his doorstep. It was not a “welcome home” letter but a bill from his telecom provider for €5000 for the use of mobile internet during his business trip abroad. As you can all imagine, Martin was not particularly happy. Having an entrepreneurial mindset he decided to find a solution for the costly use of mobile internet and founded a new company in 2006 called Fon (Fon.oeioei.nl, 2014)!
Fon is a global WiFi network that consists out of Fon hotspots through which members can share their WiFi with other members. Let’s explain the concept. To become part of the Fon network you have to have a WiFi router that is compatible with the Fon network through a special piece of software that reserves a small part of the bandwidth to establish a hotspot. By doing this you offer your internet to other Foneros (this is how members of the Fon network are referred to) and in return you can use their internet when you’re within the range of a hotspot. Although nowadays multiple WiFi hotspot networks like this exist, Fon was the first one of its kind. The company is still going strong and currently has over 18.5 million hotspots worldwide (Fon.com, 2016).
Fon has an interesting and versatile business model which has evolved in a high pace over the years, so let’s take a look. In the beginning people could join the network for free, by modifying their router with the Fon software. However, the success of a network like Fon strongly dependents on network effects. Therefor it was very important to increase the number of Fon hotspots, but the technical threshold to participate was too high for many people. To eliminate this problem and increase the number of hotspots Fon began producing their own routers (a.k.a. ‘social WiFi-routers’), which were called Foneras. The early adopters got a free router and they could then introduce new Fon members who would also get one for free. After a certain period of time the network had grew so big that it was no longer necessary to give the routers away for free, so they started selling their routers for reasonable amount of money (Fon.oeioei.nl, 2014). Once they had established a large enough network Fon introduced a second source of income by providing access to the network for outsiders. It does so in two ways. Firstly, through a WiFi access pass, which grants the user access to a single hotspot against a small payment which is divided among the hotspot provider and Fon (Fon.com, 2016). Secondly, income is generated through the mobile Fon application. After signing a monthly subscription this application seamlessly connects a user from hotspot to hotspot (Fon.com, 2016). However, Fon also established a fourth source of income by signing deals with large telecom providers like KPN. These telecom providers equipped their routers with Fon software, which automatically connects their customers to the Fon network. By doing this, telecom providers try to offer their customer added value by giving them access to a global WiFi network.
I find the Fon business model a brilliant concept. Firstly, by creating pieces of software and hardware they were able to create a global WiFi network without having to invest in the costly internet infrastructure like cables or masts that are normally needed. Secondly, Fon was able to establish not one, not two, not three, but four different sources of income from their network while simultaneously providing a source of income for their members. Thirdly, all of this was mainly build on the value co-creation of their own members. However, in my opinion there are also some points of critique. As we often see with sharing platforms like UBER or AIRBNB the platform is not a 100% legal. In the case of Fon the operate in a certain grey area. Internet providers do not have to accept the fact that Fon creates a WiFi network on their internet infrastructure. Although many see it as something positive and thus allow it, Fon has for example been sued in Germany and lost the case (Myfonblog, 2009). Secondly, also a common problem with P2P platform providers is that they cannot guarantee a 100% safety for their members. Members that offer their WiFi to the world run the risk that illegal practices are being executed on their IP address, which can bring them in big trouble (Myfonblog, 2009). Thirdly, although Fon started out as a sharing network in a very pure form they have in a way turned their back towards the idealism they started out with. How come? Well, in every country where Fon has a contract with a telecom provider they have stopped and banned the sale of their routers. In this way they made the Fon network exclusive for customers of the telecom provider they have contracts with. From my point of view they are not still the open sharing network they once were because of these exclusive deals with telecom providers. Although I still think it’s a very good initiative that definitely seems to have added value for millions of people around the world. What do you think? Would you want to be part of the Fon network?
Bergmans, S. 2014. Overal Ter Wereld Gratis Internet. [Online] available at: http://fon.oeioei.nl/ [Accessed 12 February 2016]
Fon. 2016. [Online] available at: www.fon.com [Accessed 12 February 2016]
Myfonblog. 2009. A Legal Battle For Fon. [Online] available at: myfonblog.blogspot.nl/2009/09/legal-battle-for-fon.html [Accessed 12 February 2016]