Pricing Structures at FON
Martin posted on how FON talks with ISPs and with it revealed some good infos about pricing structures for all those business minded people listening in. At first, ISPs are sceptical…
_But when we have our foot in the door and we explain exactly how Fon increases ARPU and reduces churn, ISPs do a 180 on us. The key here is our rules. First on prices. Fon will charge aliens (paying customers who pay because they have not donated wifi) $2 in the States and 2 euros in Europe. This rate is a bargain for 24 hours. With this rate we become the “easy jet” of wifi. But interestingly this rate is not low enough to get a neighbor to want to connect through another neighbor. In France for example you get good monthly broadband connections for 22 euros per month. So at 2 euros per day it just does not pay to be an alien._
So in the end it’s about taking all your stakeholders into account in your pricing strategy. FON could go lower than 2 EURs, and that might be one of their week points. Other providers of WiFi access points might be able to go lower, but FON has a hard time doing it, because that’s one of the good sale points with ISP because of the point made by Martin above. If they would go lower than it would make sense for me to sit together with my neighbors and let them all use my box via the standard FON way (with just giving them access of course being illegal in any case).
One thing I do not fully understand from his post, which will probably become clearer once I have my box, which should be in the next few days is how much they can pay when. If I am a Linus, so offering my box free to other Linuses, then the ISP will obviously not get money for Linuses accessing my box, or do they? If I connect as a Linus to a Bill box, I need to pay $2. If a Bill accesses my box he has to pay $2. Aliens obviously always pay. So the only downside is clearly that a T-Online Linus and a Arcor Linus will be able to share each others bandwidth. But hey, they both do have DSL, so that’s probably ok for the ISP because more people might get DSL if it gives them a roaming account right with it.
If I understand Martin’s post correctly … after reading it one more time, the revenue sharing he is talking about is that if a Bill or Alien connects to my box the ISP gets 50% and FON 50%, so I get nothing, but I do get the roaming. A Bill would get 50%, with ISP and FON each getting 25%. So in this case, there is a virtual cost connected with being a Linus, and I would have to see how many people connect to my box and choose to be a Bill or Linus accordingly. If I get a lot of connections, charging money will be worth more than the few roaming days. My first idea, in that revenue always goes to the box owner first, if it is generated via his box, actually sounds more logical. Then Linuses are just an additional community above the Fonero community. We will see soon enough.
Technorati Tags: FON, nocat, Pricing Structure, WiFi