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Strapped for investment capital, Wi-Fi provider Cometa Networks announced on Wednesday that it plans to suspend operations after less than 18 months in business.

AT&T, IBM, Intel and two venture capital firms launched the collaborative venture in December 2002 to aggregate and wholesale wireless hot spot services.

In March of 2003, Cometa gained prominence as the provider of Wi-Fi service in McDonald’s restaurants in the New York City area, offering customers one free hour of Internet access with a meal purchase. The service was eventually rolled out to 60 restaurants in New York, New Jersey and Connecticut.

McDonald’s selected two other commercial wireless service providers—Wayport and Toshiba—to provide Wi-Fi in its San Francisco Bay area and Chicago-area restaurants, respectively, as part of a pilot program. Last month, McDonald’s awarded Wayport the Wi-Fi contracts for 6,000 U.S. locations, and began switching over the restaurants that Cometa had operated during the extended trial.

Baseline Magazine found some problems with Cometa’s service when it evaluated McDonald’s Wi-Fi trial. Click here to read more.

The company released the following statement regarding its suspension: “While Cometa has demonstrated the attractiveness of the wholesale Wi-Fi model by securing relationships with premier brands in both the Service Provider and Retail Venue industries, Cometa is dependant on substantial external financial and strategic investor capital. The financial return for investors was not perceived to be sufficient to attract the necessary capital to achieve critical mass.”

The loss of the McDonald’s contract may have played a major factor in that decision by Cometa’s stakeholders. Apax Partners, one of the two venture capital firms funding Cometa, declined comment on the move, referring all inquiries to Cometa’s vice president of marketing, Kent Hellebust.

The announcement took many customers by surprise, as Cometa had announced expansions in its network as recently as last week—inking agreements with Nordstrom and other retailers in Seattle on May 10. And just last month, the company took over Toshiba America Information Systems’ SurfHere network of 350 hot spots. Other existing hot spot providers in Cometa’s network included Barnes & Noble bookstores and the Tully’s Coffee chain in the Seattle area.

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