Sharing Connectivity

Martin Varsavsky’s idea that everyone would benefit if only we could share Wifi connections and seamlessly get online anywhere on the globe by sharing our network access was originally shunned by the telcos. Their rules didn’t allow it.But times have changed. Wifi came to be seen as a complement, rather than an alternative, to traditional mobile carriers’ networks. Operators opted to partner with Fon, which now has eight million hotspots worldwide. And Varsavsky has once again proved himself prescient.

When Fon launched in 2006 nobody was talking about the collaborative economy. The Madrid-based start-up, which offers a global Wifi sharing service created by serial entrepreneur Martin Varsavsky, was viewed as a radical start-up that was out to overturn the telecom industry.

Varsavsky, had, in fact, spent half of his career doing just that. He pioneered call-back services when he launched Viatel in 1991, exploiting loopholes in EU regulations to challenge the continent’s dominant phone companies. He later built Spanish Internet company, Ya.com, and famously lured away 25 of incumbent Telefonica’s executives in a single day. (The company was later sold to T-Online International, Deutsche Telekom’s Internet subsidiary, for €550 million). He also founded Jazztel, one of Spain’s largest public telecom companies and a continuous thorn in Telefonica’s side. (The company’s current valuation is $1.4 billion.)

So, when Fon got backing from Atomico, Google, and venture capital firms Sequoia and Index Ventures to start spreading ubiquitous wireless broadband access, telecom industry executives were understandably worried. At the time Wifi was seen as a service that would replace traditional cellular technology by besting it in both performance and price.

Martin Varsavsky’s idea that everyone would benefit if only we could share Wifi connections and seamlessly get online anywhere on the globe by sharing our network access was originally shunned by the telcos. Their rules didn’t allow it.

But times have changed. Wifi came to be seen as a complement, rather than an alternative, to traditional mobile carriers’ networks. Operators opted to partner with Fon, which now has eight million hotspots worldwide. And Varsavsky has once again proved himself prescient.

Mobile operators are desperate to offload the 50-fold increase in data traffic that consumers are expected to generate by 2015 because their current networks can’t handle it. Fon has proved that the service doesn’t just help consumers; when operators add Fon into the mix, it improves the quality of service, saves on capex and reduces churn.

BT was the first to modify its sharing rules to accommodate the service. Since then 10 other telcos have signed up as partners (see the chart). The latest, announced in March, is Deutsche Telekom. As a result of this partnership, Deutsche Telekom predicts there will be 2.5 million new Fon spots in Germany by 2016.

So what is next for Fon? It still hasn’t managed to crack the U.S. market but it recently opened an office in New York and Varsavsky says he is optimistic that a deal can be announced “soon.”

While the company is now growing at a nice clip Varsavsky paid a price — both figuratively and literally — for being a sharing economy pioneer. After the BT deal was signed the pace of partnerships stalled and it took a while to get the hardware right. The company started to run out of money and the original backers balked at putting in any more funds. Varsavsky believed so strongly in Fon that he put some of his own money into the venture without diluting the shares of financial backers.

Then the iPhone and iPad came along and business started picking up. Consumers started sharing video clips, photos, and whatever they happened to be doing, seeing, or eating. With the serious strain being put on operators’ networks by mobile data traffic, Varsavsky’s hunch turned out to be spot on. He taught operators that they needed to start caring about sharing before they could envision how much everybody — including themselves –would need to embrace it.

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