Has the rainbow landed?

A few months ago I wrote about Project Rainbow and now the rainbow is trying to land, renamed as Cometa Networks.

This is Project Rainbow — without two of the would-be major players — and it aims to bring up a nationwide 802.11-based wholesale hot-spot network starting in 2003. The target is to have a wireless base station within a 5-minute walk in major urban areas and within a 5-minute drive in rural areas. People would be able to use the network of base stations to access their normal ISPs and mail systems. Good stuff if Cometa can figure out how to make money at it.

The three main players in Cometa are AT&T, IBM and Intel. AT&T will provide the data network to interconnect the base stations, IBM will provide the installations and support systems, and Intel Capital, along with two venture capital firms, will provide the funding.

The two Project Rainbow players missing from the Cometa roster are Verizon and Cingular, two big cellular phone companies. This is the specific sector that might be the most affected by the rollout of 802.11-based services, because the cellular industry has been betting very big bucks on 3G cellular technology and spectrum licenses.

Competition from 802.11-based networks, which do not have to pay for the use of spectrum, will not be fun for cellular carriers. The entire cost of deploying the 20,000 base stations Cometa is planning will be less than the cost of one spectrum license. Verizon is hedging its bets and experimenting with its own 802.11-based service in the Boston area.

Cometa might not be an ideal name; it sounds somewhat like a communicable disease and Google comes up with 138,000 hits for the word, including a French report on UFOs and defense. Also, Cometa is diving into waters where there already are quite a few swimmers. Companies such as EarthLink-connected Boingo Wireless and HereUAre Communications have deployed base stations and offered services for a while. Particularly nice is EarthLink’s setup, which lists open and free private base stations along with the Boingo ones on its Web site.

Cometa has the big-name backers that might be key to success, but success will only happen if it can get the right locations for the base stations, and if it prices the service such that people will be willing to pay for it. Cometa is assuming that it will be able to work out agreements to place equipment in major hotel and retail chains, universities and real estate firms. I hope these folks do not want too much money for the use of their property.

The biggest problem with these types of services has been service providers’ inflated expectations of people’s willingness to pay big bucks for them. Unless they live on the road, it will be hard for most people to justify spending more than a few 10s of dollars per month. It will be interesting to see if Cometa can figure out a business model where a few 10s of dollars per month per customer will make a profit.

Disclaimer: Harvard does not often talk in terms of  “a few 10s of dollars per month” so the above must be my own opinion.