Will You Buy WiFi?


    John Stanton of T-Mobile has partnered with Starbucks and surfs the net wirelessly in one of the chain's cafes in Bellevue, Wash.

    (2 of 3)

    Elsewhere, Braveheart-style battles rage between the IT department's obsession with security and the workers' demand for freedom. Slowly, freedom is winning — good news for equipment manufacturers like Cisco Systems, which recently announced it would acquire top wireless-router maker Linksys for $500 million in stock. "Once people have wireless inside their offices," says Frank Keeney, co-founder of the Southern California Wireless Users Group, "they never want to go back. It's a tremendous productivity tool."

    That goes double for road warriors, the real source of potential wealth in the wider Wi-Fi world. These are the field sales reps, insurance adjusters, real estate agents and delivery managers. There are more than 11 million road warriors in the U.S. alone who regularly dial in remotely to corporate networks, and 90% of them are using slow-as-mud 56K modems via standard phone lines. The advantage of untethering office workers is relatively unproved (Won't they just instant message one another during meetings?), but even the most technophobic CEO can imagine the benefit of her top salesman's being able to tap into the database minutes before he sits down with a client — and place his order immediately afterward. "Intuitively, I felt there was going to be a market for this in the business community," says Ted Schell, a venture capitalist with Apax Partners in New York City, one of the backers of Cometa.

    Fourteen months ago, after mulling a list of defunct Wi-Fi start-ups, Schell brought AT&T;, IBM and Intel together to discuss a jointly funded $30 million Wi-Fi network blanketing 50 U.S. metropolitan areas. He dubbed the venture Project Rainbow. Each side could see the benefit: IBM sold approximately $1 billion in Wi-Fi services in 2002, Intel was looking for a way to get into the wireless chip game, and AT&T; provided the communications backbone for 8 million road warriors. But as IBM's representative John Boutross remembers, the talks were initially very static: "These large players were being very polite and careful not to infringe on anybody else's territory." To get these wallflowers to dance, a matchmaker was called for.

    Enter Larry Brilliant, who had been doing a little consulting for Intel. Brilliant knew the benefits and pitfalls of Wi-Fi, and he was accustomed to working with start-ups. (In the years since the Well, Brilliant had created 14 networks including his own failed Wi-Fi company, AirZone.) The pace of the discussion frustrated him. "It was harder to negotiate a treaty between these three elephants than between India and Pakistan," he says. Brilliant should know. He once brokered a subcontinental smallpox treaty in six weeks. Talks among Project Rainbow's founders over the nondisclosure agreement alone dragged on for three months.

    The new company, today called Cometa after the Italian word for comet, was unlikely to get funding without a CEO. So Brilliant agreed to fill the role for as long as it took him to draft a business plan and find a suitable replacement. His chosen successor was Gary Weis, 55, an engineer and M.B.A. who had worked at AT&T; and IBM. Weis wanted the job, but it took more elephant wrangling — six months of negotiation — to secure his services.

    Meanwhile, Brilliant threw himself at the question of how exactly Cometa was going to make money. It wasn't 1999 anymore. The company had to be able to show skeptics a return on investment. Signs from abroad weren't good: in 2001, KT Telecom spent more than $14 million setting up 8,900 access points across South Korea. Two years on, only 123,000 out of a country of 45 million — most of them tech sophisticates — have signed up. (One reason is that South Korea's cell-phone data technology and service offerings are vastly superior to those in the U.S.)

    And what about those 11 million U.S. road warriors: How can they be sold on Wi-Fi? Starbucks, in partnership with T-Mobile, had already launched its in-house Wi-Fi network, which you could pay for by the minute or subscribe to by the month. The San Francisco-based Surf and Sip network offered a similar service in independent coffee houses. If the typical road warrior turned out to be a fan of Grande Double Lattes, Cometa could be sunk before it started.

    Another big question: What kind of threat is the free-Wi-Fi movement? In major cities, many home users are leaving their networks open — either as a public service or, in more cases, accidentally — meaning anyone can use those networks to surf freely without a password. The practice of looking for those networks — known as wardriving, in homage to Matthew Broderick's wardialing in the movie War Games — got a boost when the descendants of ham-radio enthusiasts figured out that you could pick up a much stronger signal by welding an empty Pringles can to your Wi-Fi card.

    1. 1
    2. 2
    3. 3