Cometa, We Hardly Knew Ye
By Carlo Longino, Tue May 18 20:45:00 GMT 2004

Big-talking Wi-Fi wholesaler Cometa Networks, which said it would deploy 20,000 hotspots across the US in just two years, will apparently shut down Wednesday, sounding the latest death knell for paid Wi-Fi.

Glenn Fleishman over at Wi-Fi Networking News broke the story after an anonymous tip and was able to confirm it, with one Cometa exec saying they couldn't raise the capital necessary to fund further expansion. The company had only installed about 250 hotspots in its first year, and was recently passed over by McDonald's in favor of Wayport to unwire the fast-food chain. Cometa had a slightly different business plan that other aggregators; it made deals with venues to install and provide service, then sold the service to resellers and aggregators. It's hard to sustain a business like that with just 250 locations, but it looks like just the most recent nail in paid Wi-Fi's coffin.

Paid Wi-Fi access is a difficult business, and one that's still struggling to find a viable and successful business model. Free access is proving strong competition in many areas, and as we said yesterday, is now starting to offer more benefits beyond its obvious low cost. Free hotspots are now prevalent enough that they're a viable alternative in most every location, and paid hotspots are going to be left fighting over business travelers, a demographic that's time and again proved it's not as big as wireless startups like to think.

T-Mobile may find success with its hotspots because of the Starbucks effect: part of Starbucks' genius is that you can go in any of their locations in the world and know exactly what to expect. This is trickling down to T-Mobile: if you're traveling, it's easy to find a Starbucks, and its a safe bet they'll have Wi-Fi, making it an obvious choice for somebody on the road who needs to get online. It was likely McDonald's plan to similarly take advantage of its ubiquity, but the typical McDonald's is a much less conducive environment for Net access and PC use than an average Starbucks.

Free high-speed access, wired and unwired, is becoming commonplace in hotels up and down the price and luxury spectrum. I was in a suburb of Fort Worth, Texas, this weekend, and the mid-range hotel where I stayed had free in-room ethernet, and the half dozen other hotels on the street, all in a similar price range, all offered -- and prominently advertised -- free high-speed access of some kind. Perhaps airports are a place where people will pay for access, though already some airports are independently providing free access and airlines like JetBlue have free service at some of their gates, a move other airlines are likely to soon match. So what venues are left to target travelers? Greyhound stations?

Many businesses are realizing that free Wi-Fi benefits their business more than whatever minimal revenue they can generate from charging for access. And as soon as free Wi-Fi enters a geographic or competitive area, it forces others to go free as well. Paid Wi-Fi is clearly a market that's on the cusp of failure. The fact that Cometa was launched with VC funds from people like Intel, which is throwing money around to build its Centrino wireless brand and help boost the Wi-Fi market as a whole to sell more chips, but couldn't raise money to carry on, speaks volumes.