Cometa crash bursts hotspot bubble?

Public WLANs 'overhyped'

  • alert
  • submit to reddit

Top three mobile application threats

Analysis Cometa Networks, once the symbol of the Wi-Fi hotspot bubble, has ceased to trade, throwing into sharp relief the fact that public WLANs, for all their advantages, have been overhyped and given burdens of expectation that they could not reach. Not to mention that hotspots have largely failed to find a credible business model as they come under pressure from free services.

Cometa was launched in late 2002 amid much fanfare, with plans to build a nationwide wholesale network of 20,000 hotspots in the US, and with financial backing from IBM, AT&T and Intel Capital.

Ironically, given the big names that provided the initial backing, the immediate reason for Cometa's closure was insufficient funding to expand its network out of its initial territory of Seattle, Washington. The initial investment from the high profile backers was enough only to build about 250 hotspots in the Seattle and New York areas - hardly close to the promised 20,000 by the end of 2005.

It seems it had become clear to potential backers that there would never be sufficient return on the capital required to build a national system, especially with the build-your-own approach going out of style. Even T-Mobile, the largest hotspot provider in the US, has shifted from its build-only strategy to roam with iPass, while the companies most likely to cash in on hotspots now seem to be the aggregators rather than the builders.

In addition to that challenge, there is increasing competition to the paid-for Wi-Fi model from free services - either offered by retailers or restaurants, for example, to increase usage of their core offerings, or provided by a community project such as a municipal hotzone.

The more ambitious hotspot builders have been ahead of the curve of mass usage, which has failed to materialize and, though showing signs of picking up, may well go to the free services.

The most successful companies have been those specifically targeting business travellers, such as the aggregators, or using Wi-Fi as a value add to core services, as T-Mobile has. It seems that the profit potential from hotspots will remain confined to that sector as consumers turn to community or free alternatives.

Body count

Other casualties included Toshiba's SurfHere, Joltage, which shut down last year, and MobileStar, which went bankrupt in late 2001 and was acquired by T-Mobile as the basis of its hotspot roll-out.

Against this backdrop, various setbacks had already hit Cometa, which hinted at problems to come. It failed to build hotspots in sufficient numbers to justify a wholesale business model, and so also failed to attract large retailer or carrier partners because of its scant coverage and high access charges. In a prepared statement, Sky Dayton, chairman of aggregator Boingo Wireless - who said Cometa rejected a proposed roaming deal with his company - described Cometa fairly accurately as "a good idea badly executed". He believes Cometa "spent too much money before they needed to and demanded carriers pay high minimums for access to a network that wasn't yet built. No carrier wanted to go along with that."

In March, AT&T withdrew its backing, and shortly afterwards, Cometa lost the bid to be McDonald's national hotspot partner to Wayport, a decision that also pushed the third contender, Toshiba, out of the US hotspot game (Cometa was to take over its locations - now it remains to be seen who will snap up the outlets that had already been rolled out).

The loss of AT&T deprived Cometa of a national reseller with a powerful brand, and the failure to extend its McDonald's trial to a full partnership left it with only bookstore chain Barnes & Noble as a major retail partner. This contrasted starkly with the expansion of the other would-be national operator, T-Mobile, which has adapted its strategy far more nimbly than Cometa has to the rapid changes in the Wi-Fi market. For instance, it is partnering with cable giant Comcast and investing in next generation broadband wireless technologies, notably Flarion Flash OFDM.

This indicates that, while hotspots were Cometa's raison d'etre, T-Mobile's aggressive roll-out with partners such as Starbucks and Borders Books is not really about Wi-Fi revenues. Even as usage of public WLAN picks up, these are scarcely likely to justify the investment made in a nationwide deployment.

Instead, it is increasingly clear that the hotspots are just an early stepping stone towards providing the most all-embracing mobile service available from any US operator, offering mix-and-match packages of Wi-Fi, home-based broadband, cellular and future high speed mobile data - and moving towards an integrated service that allows users to roam seamlessly between all the options.

That sort of vision is far more likely to attract support and to generate return on investment than a straightforward WISP operation, taking a high capital outlay approach in an increasingly low margin and uncertain sector.

© Copyright 2004 Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

Related stories

Intel-backed Wi-Fi network calls it quits
Wayport wins McDonald's hotspot gig
IBM, Intel, AT&T unveil US Wi-Fi JV

Combat fraud and increase customer satisfaction

More from The Register

next story
A black box for your SUITCASE: Now your lost luggage can phone home – quite literally
Breakfast in London, lunch in NYC, and your clothes in Peru
Broadband Secretary of SHEEP sensationally quits Cabinet
Maria Miller finally resigns over expenses row
AT&T threatens to pull out of FCC wireless auctions over purchase limits
Company wants ability to buy more spectrum space in auction
EE dismisses DATA-BURNING glitch with Orange Mail app
Bug quietly slurps PAYG credit - yet EE denies it exists
Like Google, Comcast might roll its own mobile voice network
Says anything's possible if regulators approve merger with Time Warner
Turnbull leaves Australia's broadband blackspots in the dark
New Statement of Expectations to NBN Co offers get-out clauses for blackspot builds
Facebook claims 100 MEEELLION active users in India
Who needs China when you've got the next billion in your sights?
Facebook splats in-app chat, whacks brats into crack yakety-yak app
Jibber-jabbering addicts turfed out just as Zuck warned
prev story


Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
SANS - Survey on application security programs
In this whitepaper learn about the state of application security programs and practices of 488 surveyed respondents, and discover how mature and effective these programs are.