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Monet closure adds to list of data-only defeats

When Monet Mobile Networks Inc. launched service in November 2002, many in the industry believed that the promise of advanced wireless data technology had finally become a reality-which is why the carrier’s bankruptcy filing came as such a surprise.

“Personally, I’m very, very sorry to see that Monet didn’t make it,” said Andrew Seybold of The Seybold Group. “I thought that their business premise was a good one.”

Monet’s business plan was to offer wireless Internet access in eight cities in Wisconsin, Minnesota and North and South Dakota. The carrier offered unlimited data to laptop, desktop and handheld computer users for about $40 per month with a $100 modem. The carrier operated a CDMA 1x EV-DO network, providing speeds of between 300 to 700 kilobits per second, and users could roam throughout Monet’s coverage area.

The carrier essentially sold an alternative to cable and DSL Internet access in a relatively rural area. Although heralded as a solid business model when Monet launched service, those in the industry now agree the carrier’s calculations were fundamentally flawed.

“Initially, my position was that they might have a chance,” said Ira Brodsky, president of Datacomm Research Co. But, he said, “trying to compete head on with cable companies offering cable, and telecommunications companies offering DSL is very difficult … there’s just not much opportunity.”

Monet’s small coverage area and singular focus on data conspired to shrink its revenue possibilities, industry watchers agreed. Monet, which raised a total of $81 million in venture funding, managed to accumulate about 3,000 customers during its 16 months of service. The carrier reported total gross income in 2003 of $1 million, according to its bankruptcy filings. Monet plans to shut down its network April 2.

George Tronsrue III, the carrier’s former chief executive, told RCR Wireless News that Monet would have reached financial break even by 2006, but could not cobble together enough funding to reach that goal. After unsuccessful attempts to sell the company, Monet filed for bankruptcy March 4. The company is now in the hands of a bankruptcy trustee.

“It appears that the low population density and broad geographic footprint of the area targeted, coupled with the decision by Monet to offer only data services, did not provide sufficient economics to expand the business,” said Emily Gin, senior manager for Qualcomm Inc.’s corporate public relations. Qualcomm is the company behind CDMA technology. “Also, like many other major technology standards, EV-DO is more rapidly adopted in major metropolitan areas initially. For example, Verizon Wireless has just announced it will launch EV-DO nationwide due to the success it had with its initial commercial rollout in Washington, D.C. and San Diego, California.”

Monet’s failure “has no impact on the CDMA industry whatsoever,” Seybold said. “Verizon has their voice component, which is generating lots and lots of revenue. It’s a totally different situation.”

“I think the lesson here is that it had nothing to do with EV-DO,” Brodsky said. “It just comes down to the economics.”

The CDMA Development Group, which promotes the network technology around the world, did not return repeated requests for comment. Qualcomm said EV-DO offerings have proven successful in South Korea, the first country in the world to launch the technology. Qualcomm said there are now 5 million EV-DO users in South Korea.

Monet offered services as an alternative to potentially expensive cable or DSL installations. Although many of the nation’s largest wireless carriers are launching similar offerings with PC cards and unlimited wireless Internet access, Seybold argued that their business propositions are essentially different. He said their wireless data offerings come in addition to their voice business, and are generally targeted at major metropolitan areas with millions of potential customers.

Monet’s bankruptcy follows similar tracks by other data-only plays, including Motient Corp., Ricochet Networks Inc., XO Communications Inc., Teligent Inc., Winstar Communications, two-way paging carriers and others. Those in the industry have offered a variety of reasons for such failures, including network speed, coverage, pricing and competition.

“There’s not a terrestrial data-only network in the world that is making money,” Seybold said. He said Qualcomm’s OmniTracs fleet-tracking network is profitable, but relies on satellite signals.

However, those in the industry continue to argue for the potential of wireless data networks. Seybold said the key is to find a technology and business plan in which each broadcast tower covers enough territory and the right type of users to make the provider profitable. Brodsky said wireless data carriers may find profits by providing high-speed links between business’ local area networks or as backhaul for wide area voice networks.

“I think someone who offers wireless data service has to be really careful,” Brodsky said. “It’s still kind of a niche market.”

Nevertheless, Monet’s shutdown could cause other providers to reconsider their plans. Wireless voice carriers like Verizon Wireless and AT&T Wireless Services Inc. may rethink deploying high-speed networks in smaller markets, and Wi-Fi providers too may reconsider their rollout plans. And NextWave Telecom Inc., which has said it will deploy a nationwide wireless data network, could also be affected.

“We may wake up one day and find … that 15 years from now there will be people who use wireless as their only data access,” Brodsky said. “I’m a big believer in wireless data, but we’re just not there yet.”

Monet counted $2.8 million in assets and $32 million in liabilities in its bankruptcy filings. LG InfoComm U.S.A. Inc. is the company’s senior secured creditor and Qualcomm is its junior secured creditor. LG InfoComm, the U.S. business of South Korean handset maker LG Electronics Co. Ltd., supplied Monet’s EV-DO network infrastructure. The company declined to comment on Monet’s shutdown.

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