Wi-Fi, the much-hyped sibling of the wireless industry, might have lost a little of its luster with the closure of one of its more ambitious players and troublesome security warnings from governmental agencies.
The once-hailed Wi-Fi company Cometa Networks Inc., originally backed by power players AT&T Corp., IBM Corp. and Intel Inc., shut down its network last week due to lack of funding.
Cometa said it needed “substantial external financial and strategic investor capital” to continue to grow, but investors were unwilling to put money into the company because they did not perceive a sufficient financial return.
The company will discontinue operating its hot spots in the coming weeks, and the majority of its 40 employees, located in San Francisco, Seattle and Schaumberg, Ill., will be let go, according to Jennifer Gehrt, spokeswoman for Cometa.
Yankee Group analyst Roberta Williams suggested the closure of Cometa’s network could be good for other well-known Wi-Fi players like Wayport Inc., which are likely to swoop in and take over the abandoned Cometa hot spots.
“It is disappointing to have to stop our nationwide expansion at the time,” said Gary Weis, chief executive officer of Cometa. “We do not think this reflects on the strength of the Wi-Fi industry or value proposition. We will work closely with our customers and partners to determine how they wish to proceed.”
Since the company formed in late 2002, Cometa inked partnerships with Sprint PCS and iPass and launched a trial Wi-Fi hot-spot network throughout Seattle. Its services are offered in Barnes & Noble bookstores around the country.
Cometa, along with Toshiba Inc., was involved in pilots with McDonald’s restaurants before the food-service giant last month contracted Wayport to provide its high-speed wireless Internet access, which likely came as a blow to Cometa. Cometa recently re-aligned with Toshiba to incorporate some or all of Toshiba’s U.S. SurfHere hot-spot locations into Cometa’s network.
Yet, the Wi-Fi space has exploded with nearly all major wireless carriers announcing their own wireless local area network initiatives, metro-scale Wi-Fi networks popping up across the country and Wi-Fi-equipped laptops gaining popularity.
But Cometa has not lived up to its original business plan, which called for it to roll out access in the top 50 U.S. urban markets during 2003, with AT&T providing network infrastructure and management and IBM providing wireless site installations and back-office systems.
A nationwide network for broadband wireless Internet access was to be created through partnerships with service providers, including telecom companies, Internet service providers, cable operators and wireless carriers, as well as with enterprises and private businesses like retail chains, hotels and universities. The idea involved customers keeping existing sign-on procedures, e-mail addresses, IDs, passwords and payment methods regardless of where they accessed the Wi-Fi networks.
In fact, Cometa’s sole focus on Wi-Fi technology, especially at a time when the market is unsure of how to accept the technology, was likely part of its downfall, said the Yankee Group’s Williams. Companies with existing core businesses, like wireless service providers, wireline telephony companies or even hotels, restaurants and airports, are more likely to succeed in the space for now, while its revenue opportunities are uncertain.
Still, public Wi-Fi is a difficult area, said Williams, citing uncertainties surrounding the business model, which are common in a new market. Wi-Fi service providers are specifically struggling with how to offer such services, deciding whether it should be free, made part of a bundled offering or charged for minutes of use.
Indeed, free hot spots are gaining momentum, according to Albert Lin of American Technology Research. Some companies view free Wi-Fi as necessary to support their primary businesses, Lin noted.
Lin cites Schlotzsky’s Deli, which claims 40 percent of its customers have said the free service is one reason they choose its restaurant. “Schlotzsky’s increased customer traffic validates their claim that giving customers Wi-Fi is simply a good competitive business practice not too different from air conditioning in a restaurant,” Lin wrote in a research note.
Lin does believe certain models work for charging for Wi-Fi service. One is airplanes: “an ideal location where a captive audience with relatively little to do would easily pay the $15 (as proposed) or so fee per flight,” said Lin.
In addition to Cometa’s disheartening meltdown, Wi-Fi was dogged earlier this month when the Australian Computer Emergency Response Team (AusCert) issued a warning on security vulnerabilities discovered in the 802.11 protocol, which was followed up by a similar notice from the U.S. Computer Emergency Readiness Team (US-Cert).
According to the warnings, 802.11 is vulnerable to an attack that could cause all WLAN nodes, including clients and access points within range, to deny transmission of data, effectively jamming any device on the network. Vulnerable devices are those that use an IEEE 802.11 DSSS physical layer, including IEEE 802.11, 802.11b and low-speed (below 20 megabits per second) 802.11g wireless devices. However, 802.11a and higher-speed 802.11g devices are not susceptible.
AusCert said there is no solution today, and it believes public access points are the most vulnerable to attacks. US-Cert suggested using non-DSSS 802.11 protocols, including FHSS and OFDM, which are not affected by the vulnerability. Users can also protect networks with physical barriers like walls, fences or elevation, and the group suggests not relying on 802.11 for applications that require high availability, like public safety and critical infrastructure.
Conversely, Calypso Wireless last week offered some potentially good news for the sector. Calypso said it is negotiating with a major original design manufacturer about its patented ASNAP technology that enables seamless switching between cellular and Wi-Fi networks.
Calypso did not name the vendor but said a potential agreement “may result in a source of sizeable revenue for Calypso.” In addition, the company said it is contacting all major microprocessor companies, including Texas Instruments, Broadcom Corp., Advanced Micro Devices and RF Micro Devices, regarding its patent.
Earlier this month, the company said it is negotiating with a large software company to incorporate ASNAP into its operating system. Calypso also said it expects its patent to have major implications on network equipment and software vendors, including Microsoft Corp., Cisco Systems Inc., Lucent Technologies Inc. and Qualcomm Inc.
So far, the company has deployed its technology with Nedetel S.A. in Ecuador. For that deal, Calypso is using Cisco’s wireless network infrastructure system and equipment.
