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April 23, 2007

Good for Time Warner

According to an AP story on The Wall Street Journal Online, FON and Time Warner are about to announce a deal which will encourage customers of Time Warner Internet access to share that access with strangers. Many Internet access providers including Verizon reserve the right to cut your service off if you should dare do such a thing.  The main threat from this kind of sharing is to the outsized profits – especially roaming profits – of the mobile carriers. Of course, Time Warner doesn’t happen to be a mobile carrier so they are free to disrupt and advantage themselves as a seller of Internet access.

Om Malik blogs:  “One of the reasons why a cable provider like Time Warner Cable of other incumbents might be interested in FON is because they want to offer quad play services, and hope to use Wi-Fi-based telephony to fill out their offerings.”

In a previous post, I described how FON provides WiFi routers which allow you to share Internet access on your home wireless network with whomever wants to sign on – securely according to FON. You can choose to be rewarded for this generosity in one of two ways – free use of all other FON hotspots or a share of revenue derived from selling access to your hotspot at standard FON rate of $/€ 3.00/day. Full disclosure:  I haven’t yet set up the FON router I first ordered a while ago but I do still intend to.

Among FON’s financial backers are Skype and Google. There is already a Skype phone which works at FON hotspots. So, no matter where you are in the world, if you roam into a FON hotspot and you have this Skype phone, you can make calls to most phones for pennies rather than dollars; there are no roaming charges just as there are no roaming charges when you use Skype or SkypeOut from your computer. At the most you pay $/€ 3.00/day for FON access; but, if you’re one of the people who share your FON access, then you don’t have to pay this either.

Calling from a full-sized computer is only a marginal threat to traditional cellular even though more and more people are doing just that; many of the calls made cheaply from computers are simply calls that never would have been made or would have been much shorter were they at traditional rates. But, if there are lots of places where you can use what looks like a cellphone – what, in fact, is a cellphone – to make calls at a 98% savings compared to roaming rates, then guess what happens to those inflated margins.

Will FON recruit enough FONeros to make a difference? Jury’s still out but the deal with Time Warner and an earlier one with British Telecom will help.

Back to Time Warner:  I don’t really know their strategy but it makes sense that they would let their subscribers get the extra benefit of free WiFi roaming and all the cheap phone calls this will quickly lead to in order to advantage themselves over their phone company competitors in selling Internet access. Good for them and good to see this welcome sign of competition in a US market which hasn’t seen many benefits from the so-far restrained competition between cable and telco providers.

Come to think of it, even though FON is a commercial enterprise, it exists by letting its customers share a valuable network asset for the mutual advantage – no small part of which is avoiding tolls charged by gatekeepers who own the legacy landline and cellular last mile.  More on network sharing for this purpose here.

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