hereUare loses MobileStar as Partner

By Bob Liu

March 22, 2002

EXCLUSIVE: The aggregator of commercial public Wi-Fi hotspots parts way with MobileStar following its acquisition by Deutsche Telekom's Voicestream Wireless.

hereUare Communications Inc. has felt the sting of VoiceStream Wireless's acquisition of MobileStar Network Corp.

hereUare, a San Jose, Calif.-based aggregator of commercial Wi-Fi-based hotspot nodes, and MobileStar have parted ways and, as a result, hereUare has lost about 600 valuable nodes in Starbucks locations for its network.

The breakup resulted from VoiceStream Wireless's decision to integrate the MobileStar service offering into its own arsenal of wireless services. The Deutsche Telekom unit, which bought MobileStar in January, disclosed its plans to integrate the wireless local area network (WLAN) service with its cellular wide-area network (WAN) earlier this month.

In a recent interview, hereUare CEO Clark Dong told his company is still trying to renegotiate with MobileStar's new parent company but so far the talks have not been productive. "They're trying to figure out what they are going to do so the outcome isn't clear," Dong said.

The defection is a clear blow to hereUare's burgeoning business. The approximately 600 nodes represented as much as half of its network of Wi-Fi access points. Prior to the defection, hereUare said it had over 1200 nodes, or 62 percent of the entire public Wi-Fi market, in its network, as of Feb. 26.

To be sure, Dong is still upbeat about his prospects. His company still has Wayport as well as 20 or so other wireless ISP (WISP) partners. And he believes WISP still have leverage in their efforts to cooperate or compete with the traditional cellular carriers.

"It's just one type of venue," he said, referring to the coffee houses that VoiceStream now controls.

The Laws of Physics
hereUare's business model was created by Dong, an electrical engineering-trained veteran of the communications industry who previously served at Hybrid Networks and Sun Microsystems Inc. . The company is able to partner with WISPs by offering access-control and back-office solutions (such as billing) in hopes of creating a roamable network of regional, interconnected WLANs.

"Most of the smaller players can't do that [on their own] and they don't want to invest to do that. They provide access infrastructure and we'll do everything for them on the back-end," he explained.

As part of an introductory pilot program called Jumpstart, hereUare last fall was able to offer subscribers free wireless broadband access across its network, which at the time included the Starbucks locations. The final phase of the Jumpstart program is scheduled to end this month. And once that ends, MobileStar will no longer be part of the hereUare network meaning subscribers won't have access in Starbucks locations even if you choose the "pay-as-you-go" service plan.

While Dong acknowledges that his business model may need fine-tuning, he remains committed to the two tenets that his company is built on: 1) people will need more bandwidth over time and 2) people will be accessing this bandwidth wirelessly. But due to the business conditions and the simple laws of physics, he predicts more combinations between WISP and traditional carriers in the future.

"I think there is a pretty good chance that Wayport will be scooped up like Mobilestar was," he proclaimed. However, Dong qualified his statement by adding he was merely speculating about Wayport. A spokesperson for Wayport said while it's logical for the Austin, Texas-based WISP to talk with telco carriers about strategic partnerships, no M&A activity is underway.

In fact, Dong believes his own company might be acquired by a larger telco, acknowledging recent analyst speculation that deep pockets are required to bring the Wi-Fi technology to the next level. "Ultimately, we're going to be picked up by a carrier," he added.

But Dong believes, while the cellular carriers have a clear business advantage over the nascent WISP industry, the simple laws of physics favors WISPs in their efforts to roll out last-mile connectivity through WLANs. That is because wireless high-speed access is governed by four fundamental factors: spectrum, power, modulation density and radius.

The issues of spectrum and the power used to transmit signals are both regulated by the FCC, so they are already fixed. Modulation density, meaning the way your signal is transmitted through whichever assigned spectrum, is currently state-of-the-art and difficult to improve upon. In other words, modulation is also fixed.

That only leaves radius (or the relative size of your network) as the only variable that businesses can control. The smaller the range between the transmitter and receiver, the less power you use and the higher speed making WLANs the only alternative for cellular companies to provide ultra high-speed networks. (FYI, 3G speeds are measured in kilobits as opposed to the megabit world of WLAN).

"There needs to be a business model to show the industry that this is the paradigm that illustrates that this is how the technology will be deployed. The paradigm shift I talk about is that network operators can no longer install cell towers every few miles to cover an area." Dong explained.

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