FON's Muni Wi-Fi Moves

Just as EarthLink is jumping out of the muni Wi-Fi market, FON is jumping in. The company has started seeding cities' key municipal buildings, such as libraries, with free Wi-Fi routers. Can it make this business pay for itself?

Just as EarthLink is backing out of municipal Wi-Fi business, another company, FON, seems to be going in full speed ahead. As you’ll recall, FON is the company, backed by the likes of Skype and Google, that sells routers and allows router owners to surf other FON owners’ networks fee-free. The outfit also gives out tons of routers for free, just to increase its network density. Well, lately, it’s started giving out free routers to municipalities.

I just talked to Joanna Reese, who heads FON’s operations in the U.S. She says that FON has started to seed certain cities’ key municipal buildings, such as libraries, with hundreds of free Wi-Fi routers. In return, cities help promote FON to their residents, who buy FON routers and grow the cities’ Wi-Fi networks.

This sounds like a costly undertaking to me, and one where pay-off is uncertain. But FON is, apparently, talking about such give-aways with a number of cities, including San Francisco (where EarthLink cancelled its project) and Los Angeles. Reese says to expect some announcements early next year.

Indeed, it sounds like 2008 could be a big year for FON in the U.S. Partners Comcast and Time Warner Cable are expected to start reselling its routers in the first quarter. The company is also, apparently, talking to content partners about putting their news stories and Web services up on FON's landing page. I imagine that ads will be coming along as well, bringing with them a new revenue source.

All of these moves sound extremely interesting. But I can't help and think about the tremendous cost of these roll-outs for FON. Assuming a router costs $30, and FON gives out 10,000 of them, that's $300,000 right there. This company is venture-funded and, I imagine, no where near turning a profit. At the same time, lots of national, high-speed networks are rising up, and snapping up users. What will be even more interesting to see if whether FON can make these huge investments pay off.

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