British incumbent BT, is reported to be in talks with Spanish maverick, FON which promotes users sharing access to their home wifi networks.

In the past, BT has said it would not allow FON users to link with BT wifi customers because it broke the company’s terms and conditions on sharing connections. If a deal is struck it will be the first time an incumbent has endorsed what many have regarded as an unrealistic business model.

News agency Reuters cites “two sources close to the talks”.

Fon launched at the end of 2005 and has managed to land Euro18m ($21.7m) in funding from Google, Skype and top venture capitalists, Index Ventures and Sequoia Capital.

Its users are divided into three and are known as either ‘Bill’ after Bill Gates, ‘Linus’ after Linux creator, Linus Torvalds, or ‘Alien’.

Bill members download software from Fon that turns their home wi-fi network into a hotspot offering anyone within its range, access to the internet for a fee.

Linus members allow their hotspots and bandwidth to be shared for free and can use any other members’ free of charge.

Aliens pay to connect to the Fon network and do not share their own networks. Fon and Bills will share the revenues earned from Aliens and other Bills.

The system is partly a grass-roots social movement that encourages users to share internet access with their neighbours and is viewed by many in the industry as potentially illegal. Despite concerns however, there are around 10,000 Foneros – FON users – in the UK.

BT would not comment specifically on the rumour but a spokesman said: “BT has been looking at ways to extend our wifi footprint in the UK inside and outside the home beyond our 2000 premium BT Openzone hotspots. A first phase of at leat 112 wireless cities and approaching one million wireless home hubs. We have also been examining possible partnerships to promote wifi however, we can’t give any more firm details of specific deals at the moment.”

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