Comments on Google and Skype's Investment in WiFi Startup FON (GOOG, EBAY)

Includes: EBAY, GOOG

Google (GOOG) and Skype joined VCs Index Ventures and Sequoia in funding Spanish WiFi startup FON. Founded by serial entrepreneur Martin Varsavsky, FON is building a global WiFi network bottom up, with one million hot spots by 2010. FON allows subscribers to use special software to share each other's wireless Internet connections, sometimes at no charge.

Early responses to the news:

Light Reading: Skype is facing a barrier to mainstream use because its VOIP service is still very much tied to the PC, where the broadband connection is. Skype is WiFi-ready, and might become more popular if wireless broadband was more available...Google has installed a WiFi network in Mountain View, California, and has entered a proposal to build a larger one in San Francisco. Analysts say a key logistical problem in such projects is the placement of enough wireless access points to achieve seamless coverage. By enlisting wireless routers in the home, FON may provide part of the answer.

Eric Schonfeld, B2Day: As for Google, I think it sees WiFi hotspots as another direct window into the Internet. Right now, all it can see is where people go from its search pages. But if it could get some sort of monitoring software on millions of WiFi hotspots, it would be able to see and analyze all the traffic on the Internet, just like an ISP can today. No such software has been announced, but it's something to keep an eye out for. Google could bundle it with, say, free WiFi security and analytic software.

Joi Ito (who recently joined the company as an advisor): There is clearly a battle between telephone companies who believe they deserve to recoup their investment in infrastructure by gouging people for voice and soon wifi access. On the other hand, companies such as Skype and now FON are trying to push the bottom-up Internet philosophy to one of the final layers where the monopolistic dinosaurs still reign. FON's ability to get Skype and Google who are natural competitors to work together to try to lower the cost of access to for users reminds me of Yahoo and Google both supporting Firefox to provide users with an free and open alternative browser.

Om Malik: [Martin Varsavsky, FON CEO] says, that if he could get Google and Skype to work together, then he can convince the ISPs, though he doesn’t think the “3G people are going to be happy.