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EarthLink buys OmniSky

OmniSky is just the latest in a parade of wireless ISPs that have shuttered, sold off their assets or filed for bankruptcy in the past few months.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
Internet service provider EarthLink on Friday announced plans to buy subscriber lists and other assets from OmniSky, a wireless Internet service provider.

EarthLink said the assets include the 32,000 OmniSky subscribers. OmniSky also plans to file for bankruptcy protection, making the deal subject to U.S. Bankruptcy Court approval, EarthLink said.

OmniSky is just the latest in a parade of wireless Internet service providers that have shuttered, sold off their assets or filed for bankruptcy in the past few months.

Yada Yada, a wireless ISP launched last year, announced on its Web site on Thursday that it would shut down. The site said service would end that day, with desktop Internet access available until Dec. 13. Customers who prepaid for December and beyond will get refunds, the site said.

Competitor Arch Wireless, which owes creditors about $2 billion, filed for bankruptcy protection Thursday and plans to submit a reorganization plan to a U.S. bankruptcy court by Jan. 15. It intends to continue operating, upheld by a recent infusion of $100 million in capital from a group of banks led by TD Securities--and some of the debtors themselves--according to a statement released by the Westborough, Mass.-based company.

The three are the latest companies to have trouble providing access via a wireless Internet connection. This year, at least eight companies offering some type of wireless Internet connection have filed for bankruptcy, ended their services, sold off some of their property, or needed to find extra funds to survive.

The contraction of the once bustling wireless ISP industry is happening for many reasons, analysts say, including the Darwinian nature of a new type of business venture. Only the strong survive when there aren't many customers to split among so many companies.

EarthLink diversifies with wireless (4:57)
Arley Baker, director, EarthLink

Play clip
In addition, cell phone providers are starting to offer their customers services that deliver at similar speeds, cutting into the wireless ISPs' business. Americans are also not taking to wireless Internet access yet because they are used to the much faster digital subscriber lines or cable broadband connections of their personal computers.

"I admire the idea behind all these companies. Not to say these ideas are bad; they were just too early," said Sarah Kim, wireless and mobile technologies analyst for The Yankee Group. "And it's also sort of a time when people can't see the value. They buy the service, spend $300 to buy a wireless modem and get 9.6K connections? It's just not thrilling."

Perhaps the most well known of these companies was Ricochet, the wireless Internet service offered by Metricom. Customers, who could get speeds three times those of dial-up connections anywhere they wanted, adored the service. But the company was only able to garner 51,000 customers--more than half of them in California.

The company shut down, owing $1 billion to creditors. Its network of antennas was recently bought out of bankruptcy.

MobileStar, which has a deal to outfit 3,000 Starbucks cafes with Internet access, temporarily shut down its network earlier this year. The company recently got an infusion of $2.5 million in cash to stay alive.

Another wireless provider, Massachusetts-based Broadband2Wireless, launched this year with "world domination plans," but it folded before launching even half its network, Kim said.

"It was more like broadband to cashless," she said.

Another recent example was a company called Aerzone, a subsidiary of SoftNet Systems. The company modeled itself after MobileStar and had hoped to create wireless connections for airports. On Dec. 7, 2000, it announced expansion plans. Two weeks later, SoftNet Systems shut its service down, effective in January 2001.