US hotspot pioneer on the ropes

HereUare Communications Inc, a pioneer aggregator of public wireless local area network (PWLAN) hotspot services, has put itself up for sale and said it could close down completely if it can't find a buyer within two weeks.

The crisis at the company, which as recently as February claimed to offer access to 47% of US hotspots, could mark a turning point for the highly fragmented US hotspot sector which analysts believe is long overdue for significant consolidation.

San Jose, California-based HereUare said its future has been jeopardized by the current depressed investment climate, which has dissuaded its original backers from advancing further funds to the company. It has already pared its staffing levels to the bone, but earlier this week executive VP and co-founder Steven Cochrane told The Source for 802.11 that "our investors said we're not putting any more in, so shop the company."

On the face of it, HereUare would appear to be an attractive acquisition target for any telecom operator looking to build a footprint in the increasingly popular PWLAN hotspot space. The company's wholly owned subsidiary, WiFi Metro, operates 40 hotspots in the San Francisco Bay Area, and also has access points in Chicago and Seattle.

However, the bulk of the access points that support services which HereUare sells are controlled by other operators in widely dispersed locations around the US. It remains to be seen whether these access point operators are firmly wedded to the HereUare network, or indeed whether they are in locations which capable of generating profitable levels of traffic.

Earlier this year, one of HereUare's key WLAN partners, MobileStar, was rescued from bankruptcy by VoiceStream, the US mobile operator owned by Deutsche Telekom AG. After acquiring MobileStar, VoiceStream removed its 600 WLAN access points from HereUare's network, which at the time represented more than half of its available access points.

Analysts believe that as more operators like Voicestream recognize the opportunity presented by PWLAN, aggregators and independent operators like HereUare may increasingly be squeezed from the market.

Although the cost of installing PWLAN access points is relatively low as the market matures, business travelers, the most lucrative customers for PWLAN operators, will increasingly seek to subscribe to operators with the biggest footprint and the most credible business service credentials.

Smaller players such as HereUare had hoped to overcome this threat by creating roaming and aggregation agreements, but they still face an uphill task establishing themselves as well-known brand-name suppliers, particularly in today's risk-averse post-dot-com and telecoms boom investment environment.

© ComputerWire