hereUare loses MobileStar as Partner

hereUare Communications Inc. has felt the sting of VoiceStream
Wireless’s acquisition of
MobileStar Network Corp.

hereUare, a San Jose, Calif.-based aggregator of commercial Wi-Fi-based
hotspot nodes, and MobileStar have parted ways and, as a result, hereUare
has lost about 600 valuable nodes in Starbucks locations for its network.

The breakup resulted from VoiceStream Wireless’s decision to integrate
the MobileStar service offering into its own arsenal of wireless services.
The Deutsche Telekom unit, which bought MobileStar in January, disclosed its

to integrate the wireless local area network (WLAN) service with
its cellular wide-area network (WAN) earlier this month.

In a recent interview, hereUare CEO Clark Dong told his
company is still trying to renegotiate with MobileStar’s new parent company
but so far the talks have not been productive. “They’re trying to figure out
what they are going to do so the outcome isn’t clear,” Dong said.

The defection is a clear blow to hereUare’s burgeoning business. The
approximately 600 nodes represented as much as half of its network of Wi-Fi
access points. Prior to the defection, hereUare said it had over 1200 nodes,
or 62 percent of the entire public Wi-Fi market, in its network, as of Feb.

To be sure, Dong is still upbeat about his prospects. His company still
has Wayport as well as 20 or so other wireless ISP (WISP) partners. And he
believes WISP still have leverage in their efforts to cooperate or compete
with the traditional cellular carriers.

“It’s just one type of venue,” he said, referring to the coffee houses
that VoiceStream now controls.

The Laws of Physics

hereUare’s business model was created by Dong, an electrical
engineering-trained veteran of the communications industry who previously
served at Hybrid Networks and Sun Microsystems Inc. . The company is able to
partner with WISPs by offering access-control and back-office solutions
(such as billing) in hopes of creating a roamable network of regional,
interconnected WLANs.

“Most of the smaller players can’t do that [on their own] and they don’t
want to invest to do that. They provide access infrastructure and we’ll do
everything for them on the back-end,” he explained.

As part of an introductory pilot program called
, hereUare last fall was able to offer subscribers free
wireless broadband access across its network, which at the time included the
Starbucks locations. The final phase of the Jumpstart program is scheduled
to end this month. And once that ends, MobileStar will no longer be part of
the hereUare network meaning subscribers won’t have access in Starbucks
locations even if you choose the “pay-as-you-go”
service plan.

While Dong acknowledges that his business model may need fine-tuning, he
remains committed to the two tenets that his company is built on: 1) people
will need more bandwidth over time and 2) people will be accessing this
bandwidth wirelessly. But due to the business conditions and the simple laws
of physics, he predicts more combinations between WISP and traditional
carriers in the future.

“I think there is a pretty good chance that Wayport will be scooped up
like Mobilestar was,” he proclaimed. However, Dong qualified his statement
by adding he was merely speculating about Wayport. A spokesperson for
Wayport said while it’s logical for the Austin, Texas-based WISP to talk
with telco carriers about strategic partnerships, no M&A activity is

In fact, Dong believes his own company might be acquired by a larger
telco, acknowledging recent analyst speculation that deep pockets are
required to bring the Wi-Fi technology to the next level. “Ultimately, we’re
going to be picked up by a carrier,” he added.

But Dong believes, while the cellular carriers have a clear business
advantage over the nascent WISP industry, the simple laws of physics favors
WISPs in their efforts to roll out last-mile connectivity through WLANs.
That is because wireless high-speed access is governed by four fundamental
factors: spectrum, power, modulation density and radius.

The issues of spectrum and the power used to transmit signals are both
regulated by the FCC, so they are already fixed. Modulation density, meaning
the way your signal is transmitted through whichever assigned spectrum, is
currently state-of-the-art and difficult to improve upon. In other words,
modulation is also fixed.

That only leaves radius (or the relative size of your network) as the
only variable that businesses can control. The smaller the range between the
transmitter and receiver, the less power you use and the higher speed making
WLANs the only alternative for cellular companies to provide ultra
high-speed networks. (FYI, 3G speeds are measured in kilobits as opposed to
the megabit world of WLAN).

“There needs to be a business model to show the industry that this is the
paradigm shift…one that illustrates that this is how the technology will
be deployed. The paradigm shift I talk about is that network operators can
no longer install cell towers every few miles to cover an area.” Dong

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