Wi-Fi Startup Cometa Networks Is Going Out Of Business

Startup Cometa Networks on Tuesday said it planned to shut down after failing to attract the additional investment needed to expand its Wi-Fi network nationwide.

The Schaumburg, Ill.-based company, which launched in late 2002, had sold network access wholesale to carriers, retailers and other companies, which in turn offered the wireless Internet service to customers. Cometa had 150 Wi-Fi access points, or hotspots, in the Seattle area.

The company, which plans to officially suspend operations on Wednesday, claimed the Seattle operation was profitable. Nevertheless, potential investors believed the return from financing a national network would be insufficient.

"We were in the process of deploying nationally, but we required additional funding on the capital side," Kent Hellebust, vice president of marketing for Cometa, said. "The return was considered by potential investors to not be sufficiently attractive for them to invest the required capital. Therefore, without the capital, we're going to be winding down over the next few weeks."

The company's 40 employees would be let go, and they would receive severance packages, Hellebust said, declining to say how much workers would be paid.The company's failure did not reflect any weakness in the market for wireless Internet access through Wi-Fi technology, Hellebust said. In the Seattle area, the company's customers included bookseller Barnes and Noble and AT&T Wireless.

"(Cometa closing) is a reflection of a somewhat more demanding investment environment for Wi-Fi than it was a year and a half ago," Hellebust said.

The company, he insisted, proved that a wholesale business model for Wi-Fi could be successful, claiming that Cometa's network in the Seattle area had increasing subscriptions, usage and revenue.

While Cometa believes in Wi-Fi, analysts have said the market is unproved, given its youth. Despite the projected 57 percent annual increase in hotspots through 2007, deployments have been little more than the creation of a basic infrastructure, market researcher International Data Corp. said in report released last year. Success will depend on whether companies offering Wi-Fi services can attract and retain subscribers over the long term.

Cometa's original investors included AT&T, Intel Capital, IBM and investment firms Apax Partners and 3i.0