Cometa Networks Shutting Down

Despite recent promising announcements that seemed to put the company on the right track after a slow start, Cometa Networks of Seattle, Wash. will announce this week that it is shutting down.

Kent Hellebust, vice president of marketing at the company, told Wi-Fi Planet: “The initial funding [for the company] was for a market that has evolved quite a bit. We needed additional capital for national deployments — and that amount was substantial. The return on that investment was seen as insufficient [by venture capital firms], and without that capital we’ll be suspending operations.”

Cometa was formed in late 2002 in a joint effort by IBM and AT&T backed by Intel Capital and investment concerns Apax Partners and 3i. At the time, the company was claiming it would deploy as many as 20,000 hotspots across the United States alone — the company currently has about 250 locations. It was committed to selling hotspots as a wholesaler — they would set up the network and sell access to other wireless ISP or aggregators like iPass .

Boingo Wireless, another hotspot aggregator, says it was trying to strike a roaming agreement with Cometa but was brushed off. In a prepared statement, Boingo chairman Sky Dayton says the company “was a good idea badly executed.” He believes that the whole model was sound and that Cometa had the potential to be the leader, but “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.”

Cometa had recently announced major deployment deals including offering hotspots in Barnes & Noble book stores nationwide, as well as with auto dealerships and fashion retailers. They were also poised to buy out the hotspot services previously offered by Toshiba. This seeming upturn was despite the fact that Cometa lost a major account when McDonald’s choose Wayport over them for a national roll-out of 12,000 restaurant hotspots (this is the reason Toshiba sold out to Cometa in the first place).

Where all of Cometa’s deals stand is up in the air. Hellebust said that the company plans to make the transition as smooth as possible for partners, but all details on the shut down are yet to be worked out.

Initial layoffs of the company’s 40 full time employees will commence tomorrow.

Despite the troubles, Hellebust was quick to point out that the company’s problems were “not a reflection on the Wi-Fi market. In the networks we built, the numbers were up and to the right. Customers were happy. And if you look nationally, hotspot networks are increasing. We think end users find it valuable.”