! --EDS NOTE: Original posted 8/2, 9:45 pm PT--> <! --EDS NOTE: 8/3, 5:25 am, copyedits --> Metricom will shut down its pioneering Ricochet wireless Internet service next week because it has failed to find a buyer for the company, the company said Thursday.
The company also announced an auction of company assets on Aug. 16 and the immediate termination of 282 employees.
As reported earlier by CNET News.com, the company has begun notifying customers and resellers of the high-speed service that the 17-city network will shut down on Aug. 8.
Although it has just 51,000 subscribers in 14 states, Metricom is considered a Silicon Valley pioneer for creating a network that allows people to surf the Web from a park, the train or a car. Metricom investors, including WorldCom and Microsoft co-founder Paul Allen, poured as much as $500 million into the company.
The technology was impressive--though occasionally frustrating because of installation difficulties and slow connections. But the high cost of building the network made it difficult to earn a profit. The company filed for Chapter 11 bankruptcy protection last month.
"They are out of money," said a source who requested anonymity.
Also Thursday, Metricom said it received a letter from the Nasdaq Stock Market notifying the company that its shares will be delisted Friday.
Metricom users, such as Ron Hender, an editor at the San Francisco Chronicle, will now have to find alternative ways of getting online when they are out of the office.
"That's not going to be good for the high-school football season," said Hender, whose duties include remotely filing stories about San Francisco Bay Area high-school football teams.
Like most Metricom users, he was impressed by the technology. Before he became a Ricochet user, he had to hunt for phone lines to plug into, a journey that sometimes led him to file his stories from pizza parlors.
"It was nice not having to worry about access," he said. "I was really happy with it."
Despite the planned shutdown, it is possible for another company to acquire Metricom's assets in bankruptcy court and resurrect the service.
That sort of revival came for Iridium, the world's first mobile satellite phone service, which last year was poised to shutter its service after also filing for Chapter 11 bankruptcy protection. But Iridium's assets were eventually acquired, and the service was recently relaunched in a more limited form.
According to its Web site, Metricom is planning to auction off its network, including pole-top antennas and other equipment, all patents, and rights to the wireless spectrum, during the Aug. 16 sale.
Metricom was founded in 1985 and has built a small but loyal following, many of whom rave about the technology. Analysts say the service, which costs about $75 per month, was a technological marvel but too expensive to attract anyone other than early adopters and a smattering of businesspeople.
In July, the company filed for bankruptcy protection after failing to secure enough subscribers or cash to keep it going through the summer. In court records, it outlined how it has left a debt trail of nearly $1 billion.
WorldCom, Metricom's largest creditor, claims it is owed $355 million, according to court records. WorldCom owns an estimated 50 percent of Metricom's preferred stock. Metricom also owes more than $300 million to "many" bondholders who bought Metricom issued bonds, according to Paul Silverstein, an attorney representing the bondholders.
Some analysts have said Metricom's downfall is only the beginning of consolidation among wireless Internet service providers.
Bryan Prohm, a wireless industry analyst for Gartner, a market research and consulting firm, has previously described it as "the only logical Darwinian outcome."