Will You Buy WiFi? (cont'd)
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.
Then came the habit of warchalking — which began in London and spread around the globe — in which wardrivers would mark the presence of free networks with a strange hieroglyph — parentheses in reverse order — in chalk on the sidewalk for all to see. "The beauty of Wi-Fi is that it is so decentralized," says Anthony Townsend, an N.Y.U. professor who runs a network of 141 free access points called NYCwireless. Even Brilliant keeps his home Wi-Fi network open, and is happy for his Mill Valley, Calif., neighbors to use it.
If Cometa was going to work, Brilliant knew, it had to think big. Despite the expense, it had to build 20,000 access points across America. These access points have to be as secure as Fort Knox and support Virtual Private Networks, or VPNs (think of a VPN as a solid, encrypted tunnel of data in the middle of any signal). Free Wi-Fi rapidly loses its appeal when you realize those home users could potentially take a peek at the data on your laptop as part of the bargain.
Brilliant also insisted that Cometa had to make deals with corporations, not individual road warriors. "We need to sign them up 50,000 at a time," he says. If consumers use the service, it will be through potential partners like AOL Time Warner (parent of TIME) or EarthLink. Cometa would still be in charge of the infrastructure, but the Cometa brand would be invisible to Joe Public. Software developers would work directly with the providers to produce different flavors of Cometa.
Cometa recently inked a cunningly symbiotic deal to test Wi-Fi in 10 McDonald's outlets in Manhattan. If the test works out, Mickey D's 30,000 U.S. locations will provide the kind of footprint in the heartland that Cometa needs. McDonald's is interested not only in better serving road-warrior diners but also in the savings to be had from a network where everything down to the milkshake machine's maintenance schedule can be accessed at a moment's notice. The company has Wi-Fi in Australian, Japanese, Swedish and Taiwanese restaurants.
Brilliant's big thinking isn't enough to convince some skeptics. Seybold says it would take 72 people connecting to an access point every day for three years to recoup the cost of constructing it. And if each access point covers only a 300-ft. radius, that's going to leave a lot of urban America outside the Cometa canopy.
But time and technology are on Brilliant's side. The Institute of Electrical and Electronics Engineers — those geeks who came up with the name 802.11--tentatively announced the creation of a new Wi-Fi standard earlier this year. It's called 802.16a, or more memorably, Wi-Max. It can comfortably cover a square mile, meaning it would take only 49 transmitters to blanket San Francisco. As Brilliant says with a grin, "Now it gets interesting." If you can cover entire cities with wireless Internet access, you suddenly have a very cheap alternative to cellular networks. But even Wi-Max won't kill 3G, which works much better when you're driving at high speed.
Brilliant will stick around to see the outcome, even now that Weis has taken over the CEO role. "I'm on the board of directors," Brilliant says. "They can't get rid of me." After all, there's still one more mountain to climb.
— With reporting by Leslie Berestein/Los Angeles, Joshua Macht/New York, Laura A. Locke/San Francisco and Donald Macintyre/Seoul
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