The big-name backers of Silicon Valley's proposed wireless network are looking for a new company to build and operate the system after potential financiers rebuffed the original vendor.

Azulstar, a small municipal wireless company based in Michigan, now plans to work on specialized applications on the multifaceted network. The Silicon Valley Metro Connect consortium is seeking another contractor to handle the infrastructure as a whole, said Seth Fearey, vice president and chief operating officer of Joint Venture: Silicon Valley Network, a civic group that spearheaded the project.

It's only the latest setback for an ambitious plan that at one time was expected to start rolling out early this year. Fully deployed, the network would cover 1,500 square miles and offer multiple networks to 40 municipalities as well as businesses and consumers. Cisco Systems plans to donate equipment and IBM plans to serve as system integrator. But Azulstar, their partner in Silicon Valley Metro Connect, wasn't able to raise enough money to build the estimated US$100 million network.

Azulstar approached venture capital firms, traditional investment banks and corporations based in the technology-rich region, but found them skittish amid the upheaval in the municipal wireless industry this year, said Tyler van Houwelingen, the company's founder and CEO. EarthLink's drastic cutbacks in its high-profile muni Wi-Fi business, which sank neighboring San Francisco's citywide coverage plans, rocked the industry, he said.

"Everybody in this business is going through the same thing," Houwelingen said.

Azulstar's size may also have been a factor in the fundraising effort, Fearey believes. The company has built a handful of networks around the U.S. but hasn't been one of the big players in the industry.

The search for a new main contractor has halted, for now, the key steps of building test networks and crafting a model contract to take to the many governments in the area, Fearey said. That contract could be fine-tuned to meet the needs of individual cities. His group and Metro Connect have worked out almost all the details of the model agreement, but their negotiations are now on hold, he said. And the new contractor will have to be on board before the two test networks can be built, he added. In September, an executive of Metro Connect forecast that the contract and testbeds would be finished by year's end.

The IDG News Service is a Network World affiliate.