Cometa crash bursts hotspot bubble?

Public WLANs 'overhyped'


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

Similar topics

Broader topics

Narrower topics


Other stories you might like

  • US, UK, Western Europe fail to hit top 50 cheapest broadband list
    Syria, Sudan, Belarus, Ukraine came top. Are you starting to see a pattern?

    In an analysis of 3,356 fixed-line broadband deals in 220 countries, price comparison website Cable.co.uk found that the UK has the 92nd cheapest internet, beating the US, which came in 134th place.

    Based on 41 packages, the average cost per month for broadband in Britain came in at $39.01. Stateside, this rose to $55, from 34 packages measured.

    For these bulwarks of western democracy, 92nd and 134th place isn't particularly impressive. But if you really want to shave the dollars off your internet bill, you have a number of options.

    Continue reading
  • The right to repairable broadband befits a supposedly critical utility
    A bolt of lightning has caused me days of misery, because the fix requires too much proprietary tech

    Column I heard an electric discharge, a bit like a Jacob's ladder, immediately before a deafening crack of thunder. I'd never been so close to a lightning strike! All of the lights in the house went bright, then dimmed, then went back to normal. "Uh-oh," I thought, "I'm in trouble now." Everything in the house had been hit by a nasty surge and the oft-spoken aphorism that broadband services are now a utility to rank with water and electricity was suddenly very, very, real to me.

    But it was electricity I worried about first. I use top of the line surge protectors so my most sensitive devices – computers and monitors, of which I have many – all seemed fine. But I'd overlooked two other connections that come into nearly every home: the antenna and the phone line.

    My television seemed to have taken a direct hit. It still worked – mostly – but appeared unable to receive any digital broadcasts. That circuit, lying on the other side of the antenna lead, likely took a big hit from the lightning strike. But the rest of the television seemed fine – at first. After a few days, and several spontaneous reboots, I began to intuit that devices don't always immediately fail when hit by lightning. Sometimes they gradually shed their functions and utility.

    Continue reading
  • Telecoms growth forecast for 2022 may be optimistic
    Analyst view: 4Q21 drop plus strains from war mean component shortages drag on

    The telecoms kit market had a good 2021 with revenues close to $100bn, up more than 20 percent since 2017, but growth is now slowing, according to analyst Dell'Oro Group. Huawei is also starting to feel the effect of sanctions, but still leads the global market by a fair margin.

    However, the Dell'Oro Group's prediction of slightly less growth for 2022 may turn out to be optimistic amid warnings that the Ukraine war is already having an impact on the fragile supply chain recovery.

    Dell'Oro's analysis is based on the telecoms market sectors it monitors, including Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and Service Provider Router & Switch.

    Continue reading
  • Fibre broadband uptake in UK lags behind OECD countries
    Not very 'world-beating'

    Optical-fibre internet now makes up 32 per cent of fixed broadband subscriptions across the OECD countries, and is the fastest growing broadband technology. However, there is a mixed picture with cable still dominant in the Americas and the UK still predominantly DSL.

    These figures come from an update to the OECD's broadband portal, indicating that fibre subscriptions grew by 15 per cent across the OECD countries between June 2020 and June 2021, with demand for faster internet speeds as employees worked remotely due to COVID-19 restrictions cited as one reason.

    Fixed broadband subscriptions in OECD countries totalled 462.5 million as of June 2021, up from 443 million a year earlier, while mobile broadband subscriptions totalled 1.67 billion, up from 1.57 billion a year earlier.

    Continue reading

Biting the hand that feeds IT © 1998–2022