I'm actually rather amused by this, FON offering free routers to people who live next to a Starbucks (or any other cafe or restaurant if you read the small print).

Now, I did the rough maths a while ago to justify whether a restaurant, cafe or bar could profit from FON, and 2 to 3 paying customers a week would be plenty to cover costs. With a free router the figures get slightly more tempting, and dsl prices in Europe have been creeping down a little over the last year.

I have no idea whether FON are making any money yet, my hunch is that they're burning VC money KLF-style right now, but if they can get to a tipping point of enough coverage, the user numbers will ramp up enough to make it worthwhile for everyone. Offering free routers is a small part of this, getting FON coverage in places where people expect to see Wi-Fi (Starbucks) is a bigger move, not unlike the Burger King's cunning restaurant placement technique in many ways.

Personally, I still think that 3G/HSDPA etc are too well entrenched to be beaten by FON, but with current European mobile data-prices there's a significant niche that FON could own.