Analysys Mason: Wi-Fi provider Fon's partnerships bring multiple benefits to operators

Stephen Wilson

An increasing number of operators are signing partnerships with Fon to deploy Wi-Fi networks that partition a proportion of bandwidth from consumers' fixed broadband line for public use. The results of such partnerships have been promising, particularly in terms of reduced churn for operators. However, certain areas of such partnerships could be extended, and the user experience on the Wi-Fi networks could be improved. I will examine Fon's operator partner base and discuss the benefits for operators and forthcoming developments (for more information see Analysys Mason's recent Viewpoint Wi-Fi provider Fon and operators form partnerships: an assessment of the value proposition).

Fon's operator partner base is expanding

Fon has increased its operator partner base during the last few years (see Figure1) and recently announced a multi-country deal with Deutsche Telekom. Such growth reflects positive impressions generated by early Fon partners such as BT, which last year signed a contract to extend its agreement with Fon for at least another five years. Most partners have been fixed-line players or integrated fixed/mobile operators so far, although Fon is also targeting mobile-only players.

Figure 1: Fon's partnerships with operators [Source: Analysys Mason, 2013]

Churn reduction is the main benefit for operators

Operators are likely to benefit in a number of ways from partnering with Fon.

  • Churn reduction: Analysys Mason believes that operators can significantly reduce churn through a Fon partnership. A reasonably high single-digit percentage difference is attainable in terms of absolute churn rate between operator fixed broadband customers that access the Fon Wi-Fi hotspots and those that do not but use other value-added services. Such a comparison is fairest because it isolates the impact of Fon, since it is natural that customers who use value-added services will have a lower churn rate than those that do not.
  • Customer acquisition: Operators have also reported positive effects of launching a Fon partnership in terms of improved customer acquisition. One operator noted that launching a partnership with Fon had a positive impact on financial performance in terms of improved customer acquisition that was about one-third of that of the churn reduction impact. One potential scenario is that of a student moving into a new property without fixed broadband. To begin with they may log in to the neighbour's Fon hotspot using the access rights linked to their parents' broadband connection. Once the student subscribes to fixed broadband, they may be more inclined to take a service from the operator that has a partnership with Fon.
  • Increased revenue: Direct revenue from selling access to the Fon hotspots should also amount to tens of millions of euros for an operator that has millions of Fon hotspots. Revenue garnered from selling access to Fon hotspots is split 50/50 between the operator and Fon, although the balance shifts to 60/40 in favour of the operator as the number of hotspots increases.
  • Cost savings: Operators can also save on costs when partnering with Fon. For example, a mobile operator may be able to offload data traffic and reduce costly congestion on crowded mobile networks. However, mobile operators may face the risk that mobile data revenue will be cannibalised because customers access the Fon hotspot network instead. Nonetheless, it is far from clear that postpaid mobile data users will choose a smaller data plan and instead use Wi-Fi for their data needs.

Automatic offload will become easier

Operators have already made efforts to make it easy for customers to connect to Fon hotspots. Allowing consumers to log in to the Fon Wi-Fi network automatically is likely to be beneficial, because it will remove the need for a cumbersome login process. Most operators that have signed partnerships with Fon have already developed their own applications to automate the login process. However, the drawback is that most of these operator applications are only available on Android and not on Apple's iOS. Operator applications available on iOS tend only to allow access to the Wi-Fi network after the application has been opened.

EAP SIM authentication is a potential area of development for operators, which would allow subscribers to seamlessly connect to Wi-Fi based on credentials on their SIM card, rather than downloading an application. Fon credentials have yet to be tied to EAP SIMs, although this is expected to occur in the next 12 months. This will be useful for mobile operators that have signed partnerships with Fon, but fixed-line operators without access to SIM cards will have to rely on a different approach.

Fixed-line-only operators, such as BT, can use EAP TTLS technology, which will enable the operator to deploy an application that can be used to log in automatically. BT expects to implement the technology on its Fon hotspots later this year. EAP TTLS also has the benefit of allowing automatic login on both tablets and laptops, and should help drive Fon hotspot usage on these devices.

Automatic login offers benefits of convenience for subscribers and will help increase usage on Fon hotspots, but operators need to think carefully about the drawbacks of making access to the hotspots automatic. For example, an operator such as BT sells access to its Wi-Fi hotspots on a limited basis. This means that subscribers who automatically log in to the Fon network run the risk of running down their Wi-Fi minutes allowance automatically unless they take action to disconnect, which seems unsatisfactory. Fon hotspots also dynamically allocate bandwidth, so when a private user wants all the bandwidth, the public signal may be throttled or switched off, which would be irritating for a subscriber who had been automatically logged in.


Fon operator partnerships have shown promising results, although operators also have the possibility of launching their own bandwidth-partitioning software, as Iliad has done. In addition to improving automatic offload, future developments will extend into the so-called long-tail public Wi-Fi market incorporating public locations such as cafés and restaurants. Even if free access is provided to customers in such locations, Fon and its operator partners (as well as the business owner) might seek to develop new business models such as selling access to the captive portal to consumer brands. We also expect that Fon will sign more partnerships with leading operators worldwide in the coming months.

Stephen Wilson is the lead analyst for Analysys Mason's European Country Reports research programme and contributes research to the Fixed Networks programme. Stephen has more than five years of experience covering the telecoms industry and specialises in analysing fixed broadband access technologies and strategies, as well as developments in European telecoms markets across fixed and mobile sectors.