Big-name backers, bravado and media fanfare might get a start-up momentum when launching, but they weren't enough to keep Wi-Fi service provider Cometa Networks afloat.
This week Cometa announced its demise, only 17 months after debuting amid much hoopla. Industry watchers say the failure says a lot about Cometa, but not necessarily much about the future of Wi-Fi.
"This is more of an isolated event," says Amy Cravens, a senior analyst at In-Stat/MDR. "Cometa came out of the chute with big plans but it wasn't the right time or the right place."
Backed by AT&T, IBM and Intel, Cometa boasted that it would change the face of the public Wi-Fi service market with its wholesale approach. The company promised to build 20,000 access points in two years, but managed only about 200.
In December 2002, investors scoffed at the possibility that Cometa was trying to do too much. "Apax and 3i [Cometa's two investors] have very substantial [financial] capabilities," said Ted Schell of Apax. "We don't see any problems around Cometa having enough capital to carry this out." The company was funded with about $6 million, according to reports, and that was enough to get it off the ground.
"They wanted to get big carriers and get them to commit big dollars for a network they were going to build," says Dave Hagen, president and COO of Boingo Wireless, a public access Wi-Fi network aggregator. That means that Cometa wanted the service providers to pay for its network build-out and that wasn't attractive to many, he says.
If the carriers weren't willing to kick in more, neither were Apax nor 3i, both of which also sat on Cometa's board of directors. Cometa CEO Gary Weis and Intel held the other two board seats. The board ultimately decided to shutter the company after investors came to the conclusion that their estimated ROI wasn't going to be enough, says Kent Hellebust, vice president of marketing at Cometa.
There were signs six months ago that Cometa was not going to meet its deployment goals, Cravens says. "And then Wayport won the McDonald's hot-spot contract, which was supposed to be Cometa's," she says. Although the company had trouble executing as a successful business, AT&T, Sprint and iPass all used Cometa hot spots to support wireless LAN services. None seem publicly concerned that Cometa is going away. "The impact on customers will be minimal," an AT&T spokesman says. "We expect a high number of Cometa hot-spots to be served by other Wi-Fi providers."
Cometa says it is working with all its customers to determine the best course of action in spinning down the business. Hellebust says "it's up to each venue" to determine what will happen with each hot-spot. Although Cometa owns the gear, the company says its customers will have the ultimate say in what happens to it.
Sprint says Cometa's demise will have no effect on its plan to have 10,000 hot-spots deployed by year-end. Sprint says it now has 2,300 of them. And of iPass' 9,750 hot spots, the service provider says Cometa only serves 97 of them, with the largest concentration in Seattle. A company spokesman says iPass has roaming agreements with seven other Wi-Fi providers in Seattle and doesn't anticipate coverage problems.