MobileStar shutting down network

A wireless Internet service provider for dozens of hotels and hundreds of Starbucks outlets is shutting down portions of its network, according to sources close to the company.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
A wireless Internet service provider for dozens of hotels and hundreds of Starbucks outlets has begun shutting down portions of its network, according to sources close to the company.

The company, MobileStar Network, laid off 88 workers Tuesday, which a source described as "everybody." It also hired the Diablo Management Group to "oversee an orderly sale of the assets," according to two sources.

The network that served 500 Starbucks locations and dozens of hotels and airports appears to be shutting down. Service to airports apparently is the first to go. American Airlines, which used MobileStar to provide wireless access at its Admirals Club lounges, said service to some of these areas has been discontinued as of Thursday.

Managers at several hotels once served by MobileStar, including the Hilton Palacio Del Rio in San Antonio, all said Thursday they can no longer access the network.

MobileStar also offered wireless Internet service in several different cities, including New York, San Francisco and Dallas. People in Dallas said in e-mails they have not been able to use the MobileStar service as of Wednesday evening.

MobileStar was also providing wireless Internet access for 500 of the 3,000 Starbucks coffeehouses nationwide. The service apparently was still running Thursday. But Starbucks is already looking for a new provider, hoping to continue with plans to offer wireless service at all 3,000 of its U.S. locations, according to a company statement.

"Starbucks is aware that there may be an interruption in MobileStar's wireless service," a Starbucks statement said. "Starbucks is working on alternatives to continue providing wireless service to its customers."

MobileStar has yet to make any formal announcements. Phone calls to its office in Richardson, Texas, were not returned. The company has also severed ties with a public relations firm it hired, sources said.

Before laying off its employees, the company had tried to raise cash for at least six months and had reached a tentative deal just a few weeks ago, but that "went away," a source said.

Some of the original investors say the company has fallen victim to troubling economic times that have proven to be fatal for other wireless service providers, including Metricom, the provider of the Ricochet high-speed wireless service. Metricom was shuttered earlier this year, leaving about 51,000 subscribers without service.

Like Ricochet, MobileStar's product was well liked.

"This is not a throwaway company; this is not a bad idea," said Blair Whitaker of Norwest Venture Partners, one of MobileStar's early investors.

MobileStar used a wireless technology known as 802.11, a wireless protocol that allows people to connect their computers and laptops so they can share the same Net connection. Customers could get Internet access in public areas, such as airports or business areas of cities like Dallas, near the company's Richardson headquarters.

The MobileStar service had cost about $30 a month to use. It was available in the Seattle-Tacoma area, the San Francisco Bay Area, New York City and much of Texas. The company was also hoping to launch service in Atlanta, Chicago, Boston and the Washington, D.C., metro area.

The company also sold its gear to 19 hotel chains, where consumers could get Internet access in lobbies and rooms.

Hilton Hotels used MobileStar to service about 50 of its locations. MobileStar also said on its Web site that it had a partnership with Ramada Inns. But Rich Roberts, communications director for Cendant Corporation's hotel division, said that isn't true. One Wyndham Hotel out of more than 256 used MobileStar for service to its customers, a Wyndham Hotel representative said.

The same access was used to help some displaced New Yorkers after the Sept. 11 attacks. Six Starbucks in Manhattan opened their doors to those needing access to family and friends.