Carrier WiFi

BT Buys Into FON Filosophy

BT Group plc (NYSE: BT; London: BTA) took a step further away from being a traditional telco today by announcing a partnership that encourages its DSL customers to share their broadband access capacity with strangers and so create what the carrier believes is "the world’s largest WiFi community." (See BT, FON Team Up.)

BT has teamed up with, and invested an unspecified sum in, Fon , the WiFi community venture that encourages people to share their bandwidth. The British carrier is encouraging the 3 million-plus subscribers to its Total Broadband service, which comes with a wireless-enabled home hub, to become "Foneros."

By downloading and installing FON's software, BT's broadband customers can convert their home wireless routers into WiFi hotspots that can be used by other Foneros.

In turn, those customers can hook up to any other FON user's hotspot (currently there are 190,000 FON hotspots worldwide), as well as use BT's existing public WLAN access points around the U.K.

That existing BT network includes the so-called "Wireless Cities" the carrier is building out. (See BT Boasts Wireless Cities.)

The British incumbent isn't the first service provider to join the FON program -- Time Warner Cable Inc. (NYSE: TWC), French carrier Neuf Cegetel Group (Euronext: NEUF), Jazztel plc in Spain, and Onet in Poland are also promoting the service. (See TWC Taps WiFi Partner, FON, Onet Target Polish WiFi, and Jazztel, FON Collaborate.)

And BT isn't the first big name to invest in FON -- Google (Nasdaq: GOOG), Skype Ltd. , Sequoia Capital , and Index Ventures are also investors. (See Google, Skype Back WiFi Startup and FON Raises €10M.)

But while BT has explained what it is doing, it hasn't actually identified the strategy underpinning the move. The carrier has not yet responded to questions about whether it hoped this would help curb broadband customer churn in a market made even more competitive this week by the arrival of Telefónica UK Ltd. , the U.K.'s biggest mobile operator with more than 16 million customers. (See O2 UK Launches DSL and BT Claims Broadband Leadership.)

Mark Main, an analyst at Ovum Ltd. , believes the announcement is "a big coup for FON," and " the cost to BT is probably fairly minimal and the risks are not great -- it may also start to position BT Retail as less of a corporate entity and more of a cool company, at least as far as the target consumers are concerned. As a marketing story it is a certain headline-grabber."

In practice, Main believes it will appeal only to a "small segment of users," as most people don't carry their laptops around with them, and there aren't many small WiFi-enabled devices in use.

In addition, Main notes that Foneros attempting to connect to hotspots inside people's homes will likely encounter poor WiFi performance, which would make services such as VOIP "unpredictable."

And then there's the issue of data volume usage. Main notes that "broadband tariffs in the U.K. are often based on volume of data consumed," so BT will need to convince customers they won't be penalized for letting others share their connection and use up their monthly data allowance.

BT Total Broadband, for example, is available in three options, with only the most expensive monthly tariff -- Option 3 at £18.99 ($38.73) per month -- allowing unlimited data downloads. Option 1 (£8.95/$18.25 per month) and Option 2 (£13.99/$28.53 per month), though, have 5-Gbyte and 8-Gbyte download limits, respectively.

BT will also need to convince its Total Broadband customers that their security isn't being undermined by creating a mini hotspot in their home, adds the Ovum man.

— Ray Le Maistre, International News Editor, Light Reading

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