Although heavily financed by private equity powerhouses 3i and Apax partners, and strategic deals with industry heavyweights such as Intel, Cometa Networks announced this week they are pulling the plug.
The official press release is here, and a journalist article is here.
This piece of news brings an interesting perspective into the land-grabbing process currently happening in Europe. A number of operators have mushroomed in the recent months, rapidly deploying Wi-Fi hotspots around Europe: T-mobile Hostpots, Eurospot Swisscom, Orange Wi-Fi, The Cloud (white label like Cometa), All Telecom, HotCafe, etc.
What business model are they pursuing ?
* telcos will provide backhaul connections (eg: T-com)
* integrators will design, install and operate the hotspots (eg: HP, IBM...)
* service providers will operate the brand, customer service and to some extent billing (eg: Starbucks, McDonald's, Hilton...)
* network operators will take the lease and manage service provider relationships, although subcontracting the actual technical work (eg: Eurospot)
* aggregators / Mediators will collect flows of authentication and billing and resell their infrastructure as white label to others (eg: Roampoint)
* hardware manufacturers (eg: Cisco/Linksys, Intel, etc.)
* broadband ISPs bundling WiFi into their CPEs (eg: Tiscali)
* a mix of all of this (eg: Hotcafe), leasing locations, installing the hardware, etc.
Expect more news of companies going bust in this space as consumer and corporate takeup develops slower than expected and forces young corporations to run out of cash.
Other companies will cash out by reselling their assets to larger players, willing to consolidate the market, without even positive EBITDA...
A number of reasons today still hinder the development of this market:
* Wi-Fi enabled devices are still rare. Device manufacturers of camera, portable game consoles, music players, PDAs, phones, PCs, etc. are working on it and chipsets should fall below $2 easily.
* wireless access need not proven: consumers still don't need to connect on the road. Expect them to develop a taste for wireless VoIP (mobile Skype), wireless gaming, etc. in the near future.
* Ease of use not optimal: check a previous post here. Users still have to deal with complicated configuration parameters (SSID, WEP Key, DHCP, etc.) which make this less simple than using a standard phone device.
* wireless access costs too high: why are wireless players charging more than 6€/h the price for a wireless internet connection, when a very decent webcafe connection costs only 1€ ?
* poor wireless security : quality of the signal can be very easily altered with the current set of technologies. Expect Wi-Max and later technologies to resolve this.
* revenue canibalisation threat: many a telco player still believes that WiFi-related technologies will carve out significant revenues from the expected GPRS/UMTS projected income. Hard to swallow looking at the significant investments required for UMTS (including license costs), and rather marginal costs required for Wi-Fi operations...
Comments welcome.
