Wi-Fi Crusader in $5 Router Giveaway

By Eric Auchard

FON, a Spanish start-up on an ambitious crusade to turn home Wi-Fi connections into wireless "hotspots" for nearby users, is set to unveil on Monday a plan to hand out 1 million wireless routers for just $5 apiece.

FON, which aims to create a network of home users and small businesses to resell wireless access to passersby, said on Sunday it will subsidize $60 Cisco Linksys or Buffalo routers for $5 in the United States or 5 euros in Europe.

Routers are small boxes users connect to cable or telephone Internet connections to broadcast wireless signals to nearby devices, inside a home, business or surrounding neighborhood.

Juergen Urbanski, North American general manager, said FON, which in February raised $21.7 million from backers including the founders of Google and Skype, is looking to turn the brand-name equipment into what it calls "social routers."

The goal of the Madrid-based company is to build block-by-block networks of shared wireless connections around the globe, turning local Wi-Fi users into an army of "foneros" -- its term for people who share wireless access.

As the company's name implies, FON aims to provide wireless Internet access not just to computer users but also for mobile phones and the latest portable gaming devices as they roam.

"(Wi-Fi) coverage is universal in big cites, but access is not," Urbanski said of how many of the wireless Internet links broadcasting from businesses, homes, hotels and cafes remain private and unavailable, even to users ready to pay for them.

Urbanski, a former director of marketing at data storage maker Network Appliance Inc., said FON is aiming to have 50,000 working hotspots worldwide by September, 150,000 by year-end and 1 million hotspots by the end of 2007.

So far, 54,000 people globally have signed up to become "foneros," up from 3,000 in February, according to the company. The $5 router giveaway is designed to overcome obstacles to helping consumers quickly set up hotspots using FON software.

In exchange for receiving a $5 box, users must agree to share their wireless connections with other FON users for 12 months, the company said. Shipping and taxes are extra.

"We are changing the economics of Wi-Fi," Urbanski said during an appearance on a wireless innovation panel at the Supernova conference on Friday in San Francisco. "We are just piggy-backing on the back of existing Wi-Fi connections."

But FON could face legal battles with telephone and cable TV carriers who bar users from sharing Web access they supply, similar to how Hollywood sued and put the original Napster out of business for enabling millions to illegally share music.

Urbanski said FON is seeking to win over carriers who lease the underlying Internet connections by arguing its strategy can expand the market for Wi-Fi by giving customers a way to roam away from home, making them more loyal subscribers at home.

"The reality is that we are all talking with .... many of the large ISPs in the United States," Urbanski said of efforts by the company to head off a confrontation with the carriers.

FON also is set to release later this week a previously announced billing system that is key to its multistage plan to transform the appeal of free wireless access into a sustainable business that pays parties for their contributions.

Users who grant access to their Wi-Fi connections at home would be free to roam on other FON networks. Users who decline to share their home Internet access can pay $3 a day to share a wireless connection with other FON users.

Copyright 2006 Reuters Limited.

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