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Does Fon Charge UK VAT to Americans?

Well, Fon’s 7th birthday was on the 6th of February (counting from their official launch date in 2006), and to my surprise, they’re still in business! Still selling 3rd rate, re-badged, proprietary hardware to fools who hoped to make some wifi money. These poor fools have *purchased* routers which they now must use to provide free service to all of Fon’s e-partners! That’s why anyone partners with Fon; free advertising for a sketchy hardware vendor, free wifi for their customers.

The POI downloads have been promised to “be right back” for two years now. Understandably, since the POI was an excellent vector to track the growing distance between reality and Fon’s official hotspot and membership stats. The original boards.fon.com was removed and replaced with the sanitized forums.fon.com. I popped in there to get up to date on the POI issue. All the names are different, but the new board is full of the same frustration and complaint as the old one. The forum’s a hole to waste people’s efforts, folks! I didn’t find out who the moderator was or who the current pro-Fon troll-who-could-not-be-banned was.

I’ve decided to dip into the old history bag and resurrect a post I’d earlier discarded. This is an email exchange between myself and Fon “customer care”. Always beware when they replace the word “service” with “care”.

It had been my observation that, like the UK region, Foneros in the USA were only getting around one third of the money from sales at their hotspots, and nowhere near 50%. Fon swears they split the profit 50/50. Now, in the UK there is the Value Added Tax to deal with. This doesn’t apply to the USA, so why weren’t we getting a larger percentage? Worse yet, Fon hotspots in the USA only charged $3, which is considerably less than €3. Fon didn’t itemize deductions, so I thought it would be a simple matter of asking them directly. Hold on to your seats, because what follows is a fast ride into a brick wall.

Click to expand:
To back up a bit, earlier that month I got this email from Fon:

Sent: Wed, 4 Jun 2008 15:54:55 +0200
From: “Arthur Gallanter” <arthur.gallanter@fon.com>
To: AustinTX
Subject: Your Recent Posts

Dear AustinTx,

Over the years you have wrote an impressive amount of posts which were made to help others and discuss things about FON. This has slowly changed over time. Recently your posts have attacked FON’s recent decisions, attacked the legitimacy of our information released to the public, attacked our CEO Martin Varsavsky (who I might add has an outstanding record that will explain himself), and you have caused others to distrust FON’s name among our own Forum. You must understand why we may be upset by this especially since most of your attacks have no legitimacy at all and are no value to FON.

Nonetheless, you are obviously an advocate for Fon but it seems that you have lost your inspiration for the community. You question and attack our motives to the point where it causes more harm than good. You may believe that your posts attempt to reveal FON’s mistakes so that the company may learn for them. but in the end, they give a bad impression of FON to any of our member or newcomers who view this Forum.

As a response to all of those attacks.let me remind you that you are not a FON employee or any representative who is valid enough to speak for the company. You have no idea what is being developed or what is going on besides from being updated through posts, articles, or Blogs (most specifically Martin’s). Since you have no idea, it is absurd that you write as you do.

Did you know about the brand new FON Wiki that will be opened to the rest of the community by next month, before Martin posted this a few days ago? The answer is a flat no. Not only has the Wiki been developed and is in the middle of testing; we have also developed a brand new FAQ section, a new startup page, and a new instructional video for setting up the La Fonera/+ router. But you are writing no posts about this.

Instead you write about any negative recent event in the last 6 months. You write about 14 employees being let go, financial situations, etc. But you don’t even have a clue about how much this company has transformed in the last 6 months for the better of the community. Just what the Support Team has done alone in the last 6 months was unthinkable before. FON is in middle of some amazing things and has really moved toward the direction that is best for the Community, yet you still don’t post anything positive about this.

It has now become a rare sighting to see one of your posts that praises FON. Even with your post regarding the Wiki you questioned whether it was too late. Well we have had enough and will not tolerate your actions anymore in our Forum.

Having said this, we’ve decided to give you two options.either you stop posting things that have the intention to tarnish the FON name and hurt our community. or you continue to do this, leaving us with no choice but to delete your account and any of the postings that you have made. We will not tolerate this behavior any more in our Forums. You may go to any other Forum that is not associated with FON and say the worse things. However, this will not be acceptable here. It should be an easy decision. Either one or the other. The choice is up to you. We hope you decide to change your attitude and continue to be a great contribution for the FON Community.

With that said, we look forward to hearing back from you and what your decision will be.

Best wishes.
FON Customer Care

Right, so basically Gallanter unintentionally admits that he’s aware of the issues we, the Fon Community have been trying to bring to their attention, and getting silence in response. Then, Gallanter flip-flops back and forth. First, he says I’m not qualified to comment about Fon. He says I have no idea what impact their unpublished decisions have had on the Fon Community. Right, what would I know; a mere member of that Community? Then, he suggests that my past resistance obligates me to balance out by cheerfully discussing a short laundry list of items provided. Perhaps I could consider accepting the honor of breaking news about the new wiki he mentions, eh? He signs off, saying I may no longer say anything non-supportive of Fon in their forum.

Arthur Gallanter and mother Joanna Rees-Gallanter

Arthur Gallanter and mother Joanna Rees-Gallanter

So who is this punk, Arthur Gallanter? He’s the son of Joanna Reeves-Gallanter. I was a bit concerned for her for several years, as she had long been referred to only as “USA Top Fonero”. Eventually, she was made CEO of “Fon-USA”. Now, Arthur was in Spain to work for Fon before returning to the USA for college. He’s a bit of a teen entrepreneur himself, donating laptops to African schoolboys. He returned to Spain often, and basically became another son to Fon president Martin Varsavsky. My earlier post about Martin’s yachting photos? Arthur was with him.

Sent: Wed, 4 Jun 2008 21:04
From: AustinTX
To: arthur.gallanter@fon.com
Subject: Re: Your Recent Posts

Dear Arthur,

Thank you for your letter of concern. As this is a very busy day for me, I must reply in brief for now.

I completely agree with at least one of your points: I have no clue about how Fon has transformed in the last 6 months! I would love to hear about the wonderful things Fon is doing which do not receive any fair Press!

I think you will agree that what we both want is to improve communication. I invite you to schedule a chat with me in Skype or Gizmo at your earliest convenience. My calls with Dale Taormino and others have always proven to be constructive and mutually satisfying.

It is my earnest desire to continue supporting and advocating for the Fonero Community. We Foneros can do this much more positively if Fon representatives participate in our forum debates to supply missing information and correct public misunderstandings. It may surprise you, that I have no agenda nor demands to make of Fon, and in a gesture of goodwill, please observe my new forum signature.

Sincerely,
AustinTX

My hint about how Fon has not kept the Fon Community up to date was not taken. I had changed my forum signature to no longer say “Well, as Revolutions go, this one has certainly been revolting!”. What followed was a civil exchange of emails wherein Arthur urges me to voice chat with him before he left for vacation. The proposed date initially sounded OK, but he later insisted on a particular day and time which I would not be available. I also believe, as when I chatted with Dale, he wanted to arrange a room full of silent observers. He may have felt that I was insincere about speaking with him, but the truth is that I had a batch of hardware deployments and system images to do, and Internet access at work was restricted. We were still debating this for several days after the following email exchange started:

Sent: June 13, 2008
From: AustinTX
To: info@fon.com
Subject: How much does a Bill get?

Hello there. I am a Bill in the USA. I understand that Aliens pay $3/day to use my hotspot, and I get paid when Aliens buy a day pass at my hotspot.
I understand that Fon splits the NET PROFIT, which means that some fees, taxes, ect., are taken out of the $3, and then the remainder is split between me and Fon. I have searched Fon’s web pages and FAQs, but I have been unable to find out what those fees are, and what percentages they add up to.

Are those fees the same throughout the USA? If so, please itemize them and tell me what percentage each equals. Else, do fees vary depending on what my ISP and/or location is? If so, please itemize the fees and percentages for all USA ISPs and regions.
If the answers to all of my questions above are published somewhere, I would appreciate the web address.

Thank you in advance
AustinTX

Sent: June 14, 2008
From: info@fon.com
To: AustinTX
Subject: Response

Hello,
You will make about $1.35 per day pass purchased. What will also happen is that the money will be deposited once your receive a total of 20 dollars. It will be immediately wired to your PayPal account once the 20 dollar limit is reach.

If you wish to know more information. I suggest you visit our Online Forums and ask more questions to Beta Testers and other frequent users.

If you have have any more questions for me, please feel free to contact me by responding to this.

Best wishes, Arthur Customer Care

OK, weird. Arthur knew who I was, and that I knew who he was. Why was he suggesting I go ask the forum like I was a newbie? I was asking on their behalf.

Sent: June 14, 2008
From: AustinTX
To: info@fon.com
Subject: Re: Subject: How much does a Bill get?

Dear Arthur,

As you explained, I will make $1.35 per day pass purchased at my hotspot in the USA. This suggests that another $1.35 goes to Fon, leaving .30 (1/10 of the day pass fee) remaining. Is that correct?

Of that 10% remainder, what are the names of the entities who receive it, and in what, if any, fractional quantities? Please note that I am interested in what fees and taxes apply even to non-Earthlink customers. This information is not found in your FAQs, and people in the forums cannot answer this question.

AustinTX

Sent: Mon, 16 Jun 2008 14:42:30 +0100 (GMT-1)
From: “FON Customer Team” <fon-en@maileu.custhelp.com>
To: AustinTX
Subject: Response (Arthur) – 16/06/2008 02.42 PM

Hey AustinTX,

I stand corrected. The amount should be around $1.10 per day pass. I do not have the specifics but the entities who received it will be PayPal who operates the purchases and then whatever Taxes the country imposes. Let me know if you have any other questions.

Best regards,
Arthur
Customer Care

Sent: June 17, 2008
From: AustinTX
To: info@fon.com
Subject: Re: Subject: How much does a Bill get?

OK, so you’re saying that in the USA, $1.10 goes to Fon, and $1.10 goes to Bill. This leaves $.80 out of the $3.00 Alien payment, which I am specifically interested in. Are PayPal and “country taxes” the only entities who split that remaining $.80? What are the proper names of all of those entities (PayPal/VAT/ect.) in the USA? What is the percentage, or dollar amount which each of those entities besides Fon and Bill receive? This specific information is the purpose of all of my inquiries. “Some taxes and fees” is not satisfying. I feel strongly that I am entitled to this itemization because these fees are being deducted from profit for services of which I am a de-facto franchiser.

Sent: Mon, 18 Jun 2008
From: “FON Customer Team” <fon-en@maileu.custhelp.com>
To: AustinTX
Subject: Response (Arthur) – 18/06/2008 11.46 AM

The proper names of the entities would be Paypal, VAT, and other taxes that are imposed. If you wish to find even more specifics, I suggest that you contact Paypal. We do not have all this information since it is never really requested and it is not an issue. What you should know is that you split the exact profit 50/50 with FON.

I understand how you may feel entitled to more but if you were a “Linus” user, who would has the exact same commitment and benefits as you, FON would make 100% of the profit. The Bill function is a opt in function which we give to users who feel like they should make some profit for sharing their Internet. They do not sign any contract that entitles them to anything. They make half the profits and are able to travel and connect to any FON Hotspot for free. It’s very fair so please don’t be offended if we are not providing more information.

In this case, I don’t even have it that information on me. It depends on PayPal, country, state, and the tax laws. Please check with PayPal if you want more information.

Best wishes,
Arthur
Customer Care

So again, he speaks to me like a dummy, intentionally misunderstands my questions, and repeats back my own question to me as if it were an answer, without enlightening me in the slightest. He knew I was asking for a full list of parties which the “fees and taxes” went to, and what percentage of the money each was given. He wasn’t even paying attention to me. He didn’t even realize he shouldn’t have included the VAT in a discussion about my payments as a USA Bill.

Sent: June 18, 2008
From: AustinTX
To: info@fon.com
Subject: Re: Subject: How much does a Bill get?

Dear Fon Customer Care:

I’m sure you didn’t mean to sound so dismissive, but in your last response, you seem to be saying that you don’t know the answer, that I shouldn’t need to know any more than I already do, and that you personally felt that my question was neither common enough, nor important enough to research. This would not be typical of good Customer Service.

Additionally, you implied that part of the fees collected in the USA indeed went to VAT. As you know, VAT is a consumer tax. It is collected by VAT registered traders on their supplies of goods and services. The value added tax is imposed throughout the European Community and European Free Trade Association (EFTA) countries and many other trading nations, but not the USA. Your answer was incorrect, and I encourage you and your department to familiarize yourselves with this.

You stated that you don’t get requests for that information, and that therefore, it is not an issue you have handled before. Since I actually have requested this information in my previous email, therefore, it seems logical that it is now an issue for your department as of that moment. If you are not able to provide this information, please escalate this ticket to a senior representative.

PayPal has already told me that, while they can tell me what transaction fees that they typically charge to the public, they cannot divulge their transactions with Fon. Neither does PayPal transact Fon’s other regional financial obligations. I am absolutely confident that Fon does have this information, and that Fon has no legitimate reason to keep it confidential. I may not possess a signed contract from Fon, promising to provide this information, but Fon still has those obligations due to local laws. Likewise, I accept that I am bound by honor to my agreements with Fon, though Fon does not possess any signed contract from myself.

As a Bill, I am paid a *percentage* of a remainder, after other parties are paid a fixed amount. I am not paid an arbitrary, fixed amount. I participate in an intertwined, potentially variable and co-dependent financial relationship with them, and this entitles me to receive full itemization for verification purposes. This very month, your company president actually wrote to the public that Fon practices full disclosure, and I agree that this is what I am entitled to.

Once again, I formally request: who are the names, in the USA, of the entities to whom the ~26.66% difference between gross and net goes to, and what percentages, or dollar amounts, each gets of the original gross payment from the Aliens. If you are not able to provide this information, please promptly escalate this request to a senior representative.

Respectfully,
AustinTX

Sent: 20 Jun 2008
From: “FON Customer Team” <fon-en@maileu.custhelp.com>
To: AustinTX
Subject: Response (Arthur) – 20/06/2008 02.07 PM

Hello Once Again,

I have good news for you. I submitted your request to our legal department and they were kindly enough to respond quickly. Here is their message…

“Dear FON user,We have escalated your request to our senior representative and we got specific confirmation that we cannot provide you with the fees that Paypal charges to us. As you correctly stated, after your conversation with Paypal, those fees are confidential and we are not allowed to reveal them to our customers.

Finally and regarding the Sales Tax we can confirm we do not apply any to our DayPass sales as that sale takes place from our company located in the UK and therefore no taxes are applicable to that sale.”

Okay, well I think they made it clear enough. All of our Customer Representatives have been informed this so please do not ask anymore. If you have issues that are technical, then please contact us.

Goodbye,
Arthur
Customer Care

So Arthur provides me with a supposed letter from higher up, who doesn’t have the courtesy to refer to me by name, saying he can’t answer two particular questions (which weren’t even similar to ones I was asking) and Arthur wraps it up by agreeing it sounded like a fine answer to him. Then he informs me that the customer reps have been coached with this answer, and that I was henceforth to ask them only technical questions. So once again, I struggled to lay out my question unambiguously:

Sent: June 20, 2008
From: AustinTX
To: info@fon.com
Subject: Re: Subject: How much does a Bill get?

Dear Arthur, and Fon Customer Care,

First of all, thank you so much for your most recent, most curiously phrased response. I find your enthusiasm for this Customer Care issue to be remarkable, but not unexpected.

As of this point, you have informed me that, of each $3 collected by Fon, for sale of a wifi day pass to an Alien in the USA, approximately 26.66% ($.80) is subtracted first, before splitting the remaining $2.20 between Fon and Bill. If this is incorrect, please provide accurate amounts/percentages as part of your complete response to me.

Regrettably, your quote from Fon “legal department” is not at all clear. It appears to state that there are no taxes subtracted from day pass sales in the USA. This is most curious, as I was not aware that UK companies are exempt from taxation for their sales within the USA. Being a rather ambiguous phrase, perhaps they were only referring to the EU VAT? Please note that I have never requested confirmation of any taxes, nor fees that do not apply to Fon’s sales in the USA. As we proceed, bear in mind that I am interested in discussing only those taxes, and fees which do apply to Fon’s sales within the USA.

As a Bill, I receive a payment which is a fraction of a remainder, under legal contract-by-participation, and therefore I am entitled to know what amounts are deducted, and for whom, before I receive my share. Again, please provide the name(s) and amount(s) of the USA taxes, if any, which Fon pays for it’s USA day pass sales. Also, please provide the name(s) and amount(s) of the USA fees, if any, which Fon pays for it’s USA day pass sales.

I feel that my question is, and has always been quite clear. You’ve implied that there are no taxes, or fees other than your lump $.80 per-transaction contribution, apparently to PayPal, but paradoxically, that you can’t confirm what amount goes to PayPal, or other entities. I’m sure you understand how this makes your position appear self-contradictory.

Are you, in fact, stating that the entire 26.66% ($.80) goes to PayPal alone, to cover their transaction fees? If not, then again, who are each of the entities who receive part of that 26.66% (.$80), and how much of it does each entity receive? Obviously, this is something which Fon may disclose with impunity, and only PayPal cannot discuss with me, as you are their customer and they lack resources. You, yourself recommended that I contact PayPal directly. What was your purpose in doing so, if you knew they would be unable to disclose their business relationship with Fon?

Arthur, you’ve advised me that all of your representatives have now been coached as to how to answer requests similar to mine, and that I should not waste my time asking any more. Also, you signed your email “Goodbye”, which I’m sure you’ll agree is quite dismissive and unprofessional and unbecoming of a Customer Care representative. You seem to be determined to transform my simple and reasonable Customer Care request into a crisis of some sort. You admit you have provided me with incorrect answers throughout this exchange, and you have been corrected by your superiors. You appear to lack any enthusiasm for research, or in reading my questions as I have actually meant them to be interpreted. It seems that you personally may be incapable of serving me in the capacity required. I continue to maintain a complete record of my exchanges with Fon, and I do not insist that you alone be responsible for responding. You are quite welcome to transfer this case to another friendly representative, or escalate it to your superiors.

I persist in my hope of receiving a proper, and coherent response to my questions from official Fon channels. If I should lose that hope, I would reluctantly resort to orchestrating a group effort involving the Fonero Community, The Press, and Tech Bloggers. With regard to taxation issues within the USA, the IRS might also take interest in this matter. My home city of Austin, TX is a regional hub for the IRS, and I know several influential permanent employees of that bureau. Please do not delay fulfillment of my reasonable questions any further! At this time, there is a considerable group of individuals who are interested in this matter.

Diligently,
AustinTX
“FON User”

Fon Customer Care never responded to any of my emails afterwards. To this very day, Fon’s website actually claims that they split the REVENUE with the Bill. That’s totally false. They split the post-“fees and taxes” PROFIT. Why are these “fees and taxes” as high in USA as VAT is in Europe? Who do these fees and taxes go to, and what amounts? Why such a secret? It strongly suggests that Fon is pocketing more than they make it sound like, and the run-around I got demonstrates how much contempt for this question Fon has.

Aliens pay $3. Fon deducts $.80 for “fees and taxes”, splitting the remainder with the Bill. Why? PayPal charges a straight 2.2% volume discounted merchant rate. That’s six or seven cents. Who’s getting the other $.73, Fon? That’s 41% of the fee unaccounted for!

P.S. None of these emails or correspondents requested confidentiality, except for one item omitted which was about a warning to a board troll.

One Response to Does Fon Charge UK VAT to Americans?

  1. Vagner says:

    We need to develop more FON in Brazil, now it is only interesting in the state of Rio de Janeiro, through HI Telecom operator in other states such as São Paulo the portal FON foneros to attract new members, does not work in bill credits for the SMS number 45222, only by credit card, oq new foneros away, for not trusting password enter your credit card on the web but they rely credits per SMS! Earlier this mode worked but then the partner operator HI Telecom blocked this type of payment out of the state of Rio de Janeiro, fungindo the idea of FON!
    Please Sir Martin, could help in São Paulo and other states of Brazil!

    greetings

    Vagner Alves Ferreira
    Fonero Member since 2008
    Jacarei / SãoPaulo / Brazil

    vagner.jac @ hotmail.com