A company that equips coffee shops and bookstores for wireless Internet offerings is shutting down, casting doubt on a business niche many analysts had considered a sure bet.
Despite initial investments from AT&T Corp, Intel Corp, IBM Corp and venture capital firms, Cometa Networks Inc could not get additional financing to expand beyond the Seattle area, said Kent Hellebust, Cometa vice president of marketing.
The Schaumburg, Illinois-based company will help customers such as Tully's Coffee Corp and Barnes & Noble Inc find new providers in the Seattle area before shutting its doors in the coming weeks, Hellebust said on Wednesday.
Cometa attracted marquee investors and media attention in late 2002, when it began selling "Wi-Fi" access to cafes, bookstores and Internet service providers.
Short for wireless fidelity, Wi-Fi radiates an Internet connection that multiple computers can share, at very fast speeds, for about 100m with the installation of a single "hot spot."
Because it uses unlicensed radio frequencies, Wi-Fi is easy and inexpensive to operate.
The US has at least 3,700 public hot spots, according to research firm IDC. Many laptops come with equipment that automatically enable Wi-Fi access.
Telecommunications executives thought Cometa's business strategy was savvy: Cometa would equip buildings with wireless access, while corporate customers would shoulder costs for marketing, support, billing and other complexities.
But as Cometa looked to expand, Hellebust said, potential investors told it the return on the capital would be insufficient.
"We are obviously very disappointed," Hellebust said.
Some analysts say Cometa's closure could signal a tough row in the increasingly crowded niche, populated by Deutsche Telekom AG's T-Mobile USA, Verizon Communications, Wayport, Boingo Wireless and others.
Those companies are also battling a more nebulous foe -- legions of renegade computer enthusiasts and network administrators who provide free Wi-Fi access at their homes and offices.
Because hot spots provide access to anyone nearby, swaths of New York, San Francisco, Seattle, San Jose, California, and even smaller communities such as Aspen, Colorado, have free service for anyone with a Wi-Fi-enabled laptop.
John Yunker of Byte Level Research said Cometa may have overestimated the number of people willing to pay for Wi-Fi. And, he said, the optimistic startup miscalculated how fast it could grow.
In late 2002, Cometa hoped to build 20,000 hot spots by the end of this year. The privately held company would not say how many customers or how much money it has, but Yunker said it fell far short.
"It takes a week to deploy it in a single hotel," Yunker said. "Then add in time to write contracts and set up deals -- you do the math."
Seattle-based Seanet Corp inked a deal with Cometa late last month to provide some of Seanet's 15,000 customers with Wi-Fi.
Seanet has been scrambling to find a new wireless provider since they learned of the closure on Monday.
"It's still a shock that they're going down," said Andrew Shirey, director of sales and marketing for Seanet.
Executives at rivals were quick to blame Cometa mismanagement rather than an overall lack of enthusiasm for Wi-Fi or problems for other Wi-Fi business strategies.
"They spent too much money before they needed to and demanded carriers pay high minimums for access to a network that wasn't yet built," Sky Dayton, chief executive of Boingo Wireless, said in an e-mail.
"No carrier wanted to go along with that," Dayton said.
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