AT&T, IBM, And Intel Form Wireless VentureAT&T, IBM, And Intel Form Wireless Venture

Three industry powerhouses are betting that a wireless LAN technology will fundamentally change business communications. AT&T, IBM, and Intel, along with two VCs, on Thursday announced that they've formed a company called Cometa Networks that will provide wholesale broadband access services nationwide.

Known as the 802.11 standard or Wi-Fi, a few innovators have changed the paradigm in which the technology operates. Within the past few months, a handful of companies, led by T-Mobile USA, have begun offering wireless access services using Wi-Fi. The business model: They install Wi-Fi wireless fidelity receivers in so-called "hot spots" across the country. Subscribers using an 802.11-compatible device in those locations can get 200-Kbps access to the Web or to business applications.

But business adoption of Wi-Fi has been slow and will remain cautious for the next year, says Craig Mathias, a principal with the Farpoint Group. One of the big roadblocks for the public LAN services thus far is the relatively small number of devices that are 802.11-compliant.

That number now totals about 3 million. But with Intel's next-generation 802.11-compliant chip set for delivery next year, those numbers will increase an order of magnitude, says Cometa CEO Lawrence Brilliant. "What we will not do is build out a network and see who comes," Brilliant says. "First you have to have the CPE--the handsets, the devices. All of those coffee shops are suffering because there aren't enough 802.11 devices out there today." After Intel's next chip proliferates, he says, "it will be almost impossible to find a device that's not 802.11 compliant."

Cometa's strategy is to leverage networks, sales forces, and innovation that already exist. The company will sell its service to telcos, Internet service providers, cable operators, and wireless carriers, who will, in turn, rely on their own sales force to spread the word to customers. And, it will rely on AT&T's nationwide IP backbone to carry the traffic from the Wi-Fi equipment to the Web or to business applications. IBM will handle wireless installations and back-office systems.

The concept of public LANs may be ripe, considering 14 million people will work remotely at customers' sites by 2004, according to the Yankee Group. The target market is retail chains, hotels, university, insurance companies, and pharmaceutical firms. For the past 12 months, Cometa's owners have been talking to CIOs at companies in those industries. The CIOs said that to use such a service, it must be available within a five-minute walk of their urban offices and a five-minute drive of non-urban locations. That translates into 20,000 nodes that Cometa must install in the top 50 metropolitan areas, beginning early next year.

So will this wireless hoopla be any different than past efforts? "In the next five years, we'll all be using this," Mathias predicts. "It will be as big as cellular in terms of number of subscribers. Whether you use a wireless LAN at home, in the office, or in public, the login and security is all the same." The services are easy to use. Customers of public LAN services from Cometa, T-Mobile, and others, such as Boingo, and Wayport, get to keep their existing network access procedures, logons, passwords, E-mail addresses, and payment methods. The carriers will handle network security.

But there are some hurdles. Pricing may be too high. Now, unlimited high-speed wireless data services from Sprint--available anywhere, not just from hot spots--cost $100 a month. The hot-spot services should cost about $50 a month. Also, coverage will be spotty for a while, leaving many wireless-data seekers to consider slower-speed nationwide wireless data services from companies such as Sprint, which recently unveiled an offering that lets mobile workers access their corporate applications using instant messenger.