BT and FON May Do Lunch

FON made news recently with its jab at Starbucks’ WiFi biz. The Spanish success (it boasts the largest number of hotspots in the world) offered a free wireless router to anyone within the immediate vicinity of one of thousands of Howard Schultz’s establishments that had broadband Internet access. Such a move by anyone, in the US at least, would be a clear transgression against agreements made between consumer and ISP, but nevermind that. FON’s going full steam ahead, and it clearly hopes to grow to a size too big to shut down. Failure isn’t an option. It’s now got millions from outside investors, all of which want great long-term results.

And now it looks as if BT (British Telecom), a network of communications services provided to markets in over 170 countries, will play the part of one of the investors in the latest round of funding arranged by – and for – FON. The “startup” (FON, not BT) may gather 10 million Euros in short time, in order to hold it over for a while longer and to help it continue its peachy growth by pushing out more $0-5 routers (end user cost) while pissing off Internet and mobile phone service providers – and of course one of the largest consumers of coffee beans on the planet – as a result.

Except not all ISPs/pipline owners are upset at FON. BT owns quite a few of those tubes moving ones and zeroes about a large portion of the world, and some of its suits evidently think it’d be better to go with the flow than to try fighting against the raging river. Which is smart. It’s difficult to imagine FON dying down anytime soon, and BT will get some good PR from the move. If it chooses to go through with it.

FON’s investors range from Google to Index Ventures to Skype; it has attracted a total of roughly $35 million since it started looking for VC. Clearly, it didn’t need to search far and wide to get it. And it’s likely to get even easier for FON to expand its reach.

Immensely popular in Europe – particularly metropolitan areas – FON has yet to make a significant footprint in the US. Yes, that is precisely because ISPs wish it just faded away, but he thinks that all the activity across the pond will start to make Americans envious, so much so that they’ll eventually demand the product, making it difficult for nation’s telecom industry to ignore much longer. The providers may choose to replicate FON’s success without adopting FON outright, but such a move may flop like the Zune did against the iPod. It’s a stretch to tie all of those strings together, but I think I made my point.

Essentially, if BT goes through with the infusion it allegedly plans to provide FON, count on the rate of adoption to increase dramatically. Others will hesitate to follow along, but cave they will.