BT plans for free wi-fi revolution

The alliance will involve BT promoting the Fon wi-fi network, which has more than 190,000 hotspots around the world, to its 3m broadband customers. BT customers will be encouraged to turn their home wi-fi system into a public network, which other Fon users can access.

Fon has already signed up more than 15 ISPs including NeufCegetel in France and Time Warner Cable in the US. The deal also means that BT Retail's Broadband customers that join Fon can make use of other Fon users' wi-fi connections anywhere in the world.

The move could allow BT to compete with mobile phone operators in offering an internet service on the go.

A UK-wide wi-fi network could increase the popularity of BT's Fusion phone, which allows customers to switch between fixed-line, wireless and mobile networks.

The benefit for customers would be getting cheaper calls over a wi-fi connection, but uptake of the phone has been slow because there are few wi-fi hotspots around.

Mark Main, senior analyst at Ovum, said the move was a major coup for Fon: "We've generally given a fairly cool reaction to Fon since it launched in November 2005. Our main objections have been that there's a big difference between doing someone a favour such as giving someone a lift from A to B and handing over your car-keys to let them take your car there themselves.

"Broadband tariffs in the UK are often based on volume of data consumed, and anything that leads to more uncertainty over usage in a highly price-conscious market is not necessarily a good thing. BT's lowest-priced broadband package has a 5GB user limit and is probably a popular choice; a few hours of extra broadband data per month from a BT Broadband Fon customer perhaps watching a web TV service such as Joost or 4oD could increase data usage to the point where customers are contacted by BT to upgrade to the next tariff.

"Or that might well be the user perception, which could be a problem for BT. Security of transmitted data to and from the broadband home (such as email exchanges, chat and form-based data in web pages) by potential Foneros may well be perceived as a problem even if, in reality, it is not. This will be an issue for BT to manage."