PORTLAND, Maine — Redzone Wireless CEO James McKenna has about 4,000 internet routers stored in a warehouse, just gathering dust.
The company claims the discount Netgear routers are defective and wants to send them back. Netgear says that wasn’t the deal.
The contract dispute has left the Camden internet startup with $510,000 of equipment it says is unusable, a cost it would have to eat if it doesn’t win coming court battles in California and then Maine.
“It’s unfortunate because it’s burning us,” McKenna said in a telephone interview.
It’s not just the equipment cost. Redzone received the routers in June 2015, the same time it was assembling state officials to unveil its pioneering fixed wireless internet service and compete with cable and DSL internet providers in its first markets.
The service uses a specific range of the wireless spectrum the Federal Communications Commission set aside for educational institutions, which Redzone uses through a 30-year agreement with the University of Maine. The company’s expanded since its launch to cover about 30 percent of households in the state.
Soon after launching, Redzone said it received “numerous complaints” that the routers would frequently and randomly disconnect from the internet every day, requiring them to restart the routers.
McKenna in August 2016 told Netgear the problems had cost the startup about 250 subscribers and more than $100,000 in annual revenue, according to court documents. McKenna declined to disclose the company’s current subscriber count.
“Our credibility has been affected, and as a result I’ve directed my team to use only [user equipment] from other vendors until Netgear has fixed the problem,” McKenna wrote to Netgear in an August email.
McKenna said the Netgear routers were just one of about seven routers that they’ve installed in customers’ homes.
The Netgear routers were initially designed and built for Sprint, but Redzone said the equipment met its needs and initial testing showed no problems.
Netgear wrote that “one of the primary reasons that Redzone was attracted to these routers was because Netgear could provide it with attractive pricing.” They struck a deal for $115 per router, plus $50,000 for custom software.
By September, Netgear told Redzone it had no more obligations to fix the problem under its contract and in October filed a lawsuit to asking a judge to back up its claim that the routers are Redzone’s problem.
Netgear claims it sold the equipment to Redzone “as is” and that it even went above and beyond the terms of its contract by helping Redzone come up with a software patch to automatically restart the routers when they lost connection.
That case was moved to a federal court in California and Netgear officially delivered that complaint to Redzone on Tuesday. Redzone responded to that complaint with a federal complaint in December, but Redzone’s Maine complaint seeking a refund for the routers and damages is on hold pending the outcome of the California case.