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May 18, 2004

Cometa Networks Closes Its Doors Starting Tomorrow

By Glenn Fleishman

Cometa Networks has confirmed that they are ceasing operations: Wi-Fi Networking News was able to confirm through multiple independent and reliable sources this morning that Cometa Networks will start the process of running down its hotspot network operations tomorrow. Cometa vice president of marketing Kent Hellebust acknowledged the news in an interview early this afternoon.

“We’ve built a profitable business in the Seattle test market and to go national requires additional capital,” Hellebust said. The company was unable to obtain the capital necessary for this expansion, and will wind down operations through phases to best serve existing venues and resellers rather than abruptly terminating service to subscribers and locations. “The networks will be running for coming weeks and then will be phased out,” Hellebust said. “The employees have been notified at Cometa Networks.”

Cometa Networks was funded by Intel Capital, the company’s investment arm, and two venture capital firms. AT&T and IBM committed resources to the project as well. From the start, Cometa was treated as dubious by many established players in the industry due to their frequent claims that they would install 20,000 locations with Wi-Fi service within two years of their Dec. 2002 launch. But their high-profile backers meant that Cometa might be in a position to make good on their projections.

Their model was to resell these locations to cell operators and other partners of that scale, as well as to aggregators like iPass. After more than a year of operation, Cometa had a handful of partners and about 250 locations, including 150 trial service hotspots set up with McDonald’s in the New York tri-state area and Seattle and most of the rest across many kinds of venues in their Seattle test market.

However, McDonald’s opted for Wayport to install Wi-Fi in its over 12,000 domestic U.S. stores and franchisees. This decision quickly caused Toshiba, another McDonald’s trial partner, to close its hotspot operation and start work to transfer locations to Cometa. Cometa was able to announce that Barnes & Noble had chosen Cometa to build and resell access to its over 550 U.S. bookstores, which seemed like a big step in Cometa re-establishing itself as a growing operator with locations that were worth reselling and aggregating.

Cometa put a brave face on its future in an interview with Wi-Fi Networking News on April 21, 2004. The company’s CEO and a vice president painted a picture of a more conservative growth pattern that reflected more of the pattern followed by FatPort and Surf and Sip, smaller but steadily growing hotspot operators that emphasized partnerships, reselling, and cash-flow positive short-term goals. VP Hellebust said today that Seattle subscribers and revenues were growing. “We feel proud of what we’ve achieved in the Seattle test market.”

However, the company’s capital resources couldn’t support their model, and Cometa Networks will start running down its clock, with the end date not yet determined.

Cometa’s former chief technology officer Michael Kleeman said in an interview today that Cometa had built a business-class network, “but if you don’t get up to scale, don’’ get up to revenue, then you are going to fall short.” He left the firm in October, and has focused on consulting on aspects of networking involving voice over IP and, separately, national security.

Kleeman said that each of Cometa’s partners—Intel, AT&T, and IBM—provided invaluable support and education in building a national network that met the needs of business customers. But even with this backing, he said, “You still have execute. Even if with big parents, startups still have to be scrappy.” He credits Cometa with establishing a high mark for service quality.

Posted by Glennf at May 18, 2004 12:18 PM

Categories: Financial, Hot Spot

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