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Thursday, May 20, 2004 - Page updated at 12:00 A.M.
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Closure of Cometa not likely to hurt area Wi-Fi network

By Nancy Gohring
Special to The Seattle Times

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Seattle Wi-Fi users may find slightly fewer hotspots because Cometa is closing its doors, but the shutdown shouldn't hurt the overall growth of the hotspot market.

Several industry experts said other providers will largely fill the gap, but at least one local Cometa outlet may drop its Wi-Fi service.

Cometa launched what was to be a nationwide network of hotspots in Seattle last September to much fanfare. The Schaumburg, Ill., company, which was backed by IBM, Intel and AT&T, predicted it would build 20,000 hotspots across the country in a few years.

Yesterday, Cometa announced it will shut down during the next several weeks due to difficulties raising money for national expansion. Six employees in Bellevue will lose their jobs.

Cometa developed hotspots — areas in which laptop users have wireless access to the Internet — in places such as Tully's coffee shops and Barnes & Noble bookstores. It sold network use on a wholesale basis to operators such as AT&T and Sprint; they, in turn, sold access to end users.

Cometa hasn't said how many hotspots it has in various markets, but there are 300 nationwide, and the majority are in Seattle. Just last week, it announced new hotspots in some Nordstrom stores, Larry's Markets on the Eastside and some Barrier Motors dealerships.

All of the hotspots won't necessarily shut immediately. Cometa is helping venues evaluate their options, which might include shifting networks to another operator or turning them off, said Kent Hellebust, Cometa vice president of marketing.

Larry's Markets will remove signs in its Redmond, Bellevue and Kirkland stores that indicate Wi-Fi availability while it decides how to proceed, said spokeswoman Elizabeth Bertani. The company will poll users on how valuable the service was to them, then decide whether to keep it.

Bertani suspects few customers have accessed the hotspots. "Our stores aren't really the kind of place where people hang out for hours," she said.

Nordstrom hopes to find another service provider so that its Wi-Fi service can continue without disruption.

Wi-Fi service provider iPass, which aggregates hotspots including Cometa's and sells them to business travelers, doesn't expect the closure to have much effect on customers.
 
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"We suspect a company like Tully's will find another provider to pick up the slack, and then we'll find them in our network," said John Sidline, director of corporate communications for Redwood Shores, Calif.-based iPass.

Some in the industry said Cometa's news didn't come as a big surprise, especially since the company lost a bid to build hotspots at McDonald's restaurants to competitor Wayport. "They put a lot of emphasis on trying to win the McDonald's business, which they didn't. That may have been the final nail in the coffin," said Sidline.

Despite Cometa's big-name backers, its business focus was questionable, said Michael Cai, a senior analyst with Parks Associates. "They targeted the wrong venues. People who really need hotspots are frequent travelers, and the locations they need hotspot services are hotels, airports and maybe coffee shops," he said.

Roberta Higgins, a Yankee Group analyst, said it's not clear whether any standalone company like Cometa can succeed by targeting the mass market in locations such as bookstores or grocery stores. Operators such as T-Mobile or STSN have a better chance because they bundle Wi-Fi with other offerings and target business users, she said.

Other lines of business can help fund Wi-Fi operations for those companies, since venture funding is difficult to secure in the hotspot-operator market. "The (venture capitalists) are scared by hotspots. The business models still aren't proven, and there's a lot of uncertainty," said Higgins.

Most of the funding has been targeted at equipment vendors rather than operators, said Cai. Cometa received investments from Apax Partners and 3I, but Cai credits Cometa's big-name backers such as AT&T and IBM for its ability to attract the VCs.

Neither Cometa nor its investors disclosed how much money the company received. The loss of Intel's minority stake in Cometa won't have a material impact on Intel, and the sum was relatively small, said Intel spokeswoman Laura Anderson.

She said Cometa's history was a success: "The launch was successful in meeting our strategic goals. It attracted attention to the industry and for public wireless deployment."

Nancy Gohring is a freelance writer in Seattle who reports frequently on telecommunications and technology.

Copyright © 2004 The Seattle Times Company

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