FON

FON's new Wi-Fi router is a community hotspot

October 23, 2013: 11:24 AM ET

Buyers can use other FON routers anywhere, free of charge.

By Michal Lev-Ram, writer

fonera02FORTUNE -- The "sharing economy" seems to be working for cars and vacation rentals, so why not Wi-Fi?

FON, a Madrid-based company, is trying to cash in on the growing collaborative consumption trend by offering a new, $59 router that turns home Wi-Fi networks into community hotspots. Users open up their network to other FON members, and in turn are able to use any other FON Wi-Fi hotspot free of charge. "It gives you the ability to roam the world for free," says Martin Varsavsky, CEO and founder of FON.

Shared Wi-Fi may sound like a novel idea, but FON's actually been around since 2006. While it's had some success abroad (the company says its routers power a total 12 million hotspots globally), this is its second attempt to make a splash in the U.S. market. The first one didn't work out so well.

"When we started, it was a world of laptops, and frankly there wasn't enough demand to drive FON," admits Varsavsky. "Now it's a world of smartphones and tablets. There's much more demand for Wi-Fi now, and everyone has a Wi-Fi device in their pocket."

American investors embraced FON early on (in 2006 it raised $22 million from Index Ventures, Sequoia Capital, and other notable firms). But mobile operators weren't so quick to fall in love with the quirky company, which refers to its users as "Foneros." Back then, in the pre-iPhone era, carriers saw Wi-Fi as a threat to their cellular networks. Fast-forward to today, and they're trying to offload mobile network traffic by notifying users when they're in the vicinity of a Wi-Fi hotspot, among other tactics. Global operators like BT (BT) and Deutsche Telekom (DTEGY) have invested in FON. In the U.S., the company recently partnered with AT&T (T) -- customers who pay a premium are now able to access FON's network of overseas hotspots while traveling abroad.

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But like other sharing services, FON's value is determined by the size of the community it spawns. And despite the 12 million global hotspots it boasts, the company's product doesn't make much sense outside of urban areas, where proximity to other shared networks could appeal to users.

Lucky for FON, it's got a nice new trick up its sleeve -- the latest, enhanced Fonera router lets users' friends sign in with their Facebook (FB) credentials, no other password required. In other words, if a family member or friend that's in your online social network is visiting your home, they can log onto your Wi-Fi network using their own Facebook credentials. (Anyone who has had houseguests and ever blanked on their long and unmemorable Wi-Fi password will likely appreciate this feature). In order to ensure security and privacy, FON says its new router separates a user's traffic from their friends' by utilizing different Wi-Fi signals. "One of the simplest obstacles to Wi-Fi has been passwords," explains Varsavsky.

According to FON, the new router has been tailored for the U.S. market, and will be available on Amazon.com and FON's website. Whether its Facebook friends-recognizing feature is enough to spur critical mass -- and a community of U.S.-based, Wi-Fi loving Foneros -- this time around remains to be seen.

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