Straining the supply chain

We know from history that some of the greatest generals have been defeated when their supply lines were overextended. Hannibal at the gates of Rome and Napoleon before Moscow are two of many.

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With that thought in mind, I've been looking at the problems facing the wireless industry, especially the challenge of delivering Wi-Fi for public access, as opposed to more insular corporate use.

I have no quarrel with Wi-Fi on campus. It's great. Although I don't have an MBA, it seems to me that providing Wi-Fi as a tool for public access to corporate networks is a broken business model, not dissimilar in many respects to the dot-com business model that failed in part because there were just too many hands touching the same service and wanting a piece of the pie.

The poster child for the public-access Wi-Fi endeavor is Cometa Networks. In case you've forgotten, Cometa Networks was sprung fully grown from the collective heads of AT&T, IBM, and Intel. (See "Coming of Cometa"

Larry Brilliant, president and interim CEO, makes a good case for why Cometa Networks will succeed, and he probably does have an MBA. He talks about 20,000 hot spots in 50 major metropolitan areas across the country, assuring corporate users that they will always be either a five-minute walk (a quarter mile) or a five-minute drive (two miles) away from a Cometa-enabled hot spot.

And these hot spots, in major chain stores such as McDonalds, which is pilot testing the program, and in books stores and other retailers, will guarantee enterprise-class security, reliability, and availability.

Nevertheless, with all due respect to Brilliant, I tell you something is not right with the business plan. The supply chain is being stretched too far.

Let's look at how Cometa Networks envisions the supply chain. It must go to the carriers, both land-based and wireless, and sell them on the promise that they are building a national, enterprise-class Wi-Fi network around the country, which the carriers will be able to resell to its corporate customers.

However, to deliver on that promise, Cometa also has to sign up and share revenue with network aggregators such as iPass, companies that own no network of their own but allow users to gain access at any hot spot no matter who the real service provider is.

To achieve the promised national coverage, Cometa must also sell the concept and share revenue with the national brand retailers who will host the service that will eventually host the 20,000 Wi-Fi locations. Cometa must convince these -- dare I say hard-headed? -- retailers of the bottom line benefits of Wi-Fi at their locations. It is also promising to share revenue based on the percentage of total revenue their outlets bring in, according to Brilliant.

In the meantime, the Cometa resellers must convince the General Motors and State Farms of the world that coverage will be reliable and ubiquitous, so reliable that instead of allowing employees to use Wi-Fi on an ad-hoc basis, sort of a nice-to-have, it can be relied upon to such an extent that a company will change its business process to accommodate this new form of access.

I believe that the supply chain is stretched beyond Cometa's ability to reliably maintain and control it, and that the revenue-sharing model is extended beyond the company's capabilities of supporting a profitable business concept.

Brilliant himself admits how complex the undertaking is. “Look at how complex the ecosystem is: real estate owners, IBM doing installs, RF engineering, network engineering, algorithms to figure out where to locate the 20,000 lily pods [Wi-Fi locations], the billing system, so that a reseller with a legacy system doesn't have to change, then the reseller has to sell it as an add-on service to the CFO. [It's a] huge supply chain. I don't understand how any one company can do all of it themselves.”

What I don't understand is when so many companies are needed to offer one service, how will it sustain a profit and be reliable for business users?