October 27, 2003 5:18 PM PST

McDonald's orders shakeout for hot-spot providers

Fast-food chain McDonald's will decide in the first quarter which hot-spot service providers will receive passing grades in current test programs, according to the company.

McDonald's now has hot-spot pilot programs in the Bay Area, Seattle, Chicago and New York City with Cometa Networks, Toshiba's SurfHere and Wayport. Those trials are expected to end during the first few months of 2004.

Greg Waring, director of business development at McDonald's, said the company was evaluating products, as it does routinely, and could go with the offers of one or more providers. "By the end of the first quarter we will have selected a Wi-Fi service provider or providers. We're doing what we do with any of our suppliers. It could be singular or plural, but right now it's too early to tell."

The company or companies selected by McDonald's would greatly benefit in overcoming one of the major hurdles in the hot-spot industry: helping consumers find locations, said Pyramid Research analyst John Yunker. Service providers for McDonald's would be able to piggyback off the chain's status as a household name, making their services synonymous with the familiar brand.

The McDonald's deal would be a shot in the arm for Cometa and SurfHere since McDonald's is among the higher profile trials the companies are involved in. Wayport is already working with cellular carriers such as AT&T Wireless, Sprint and SBC Communications.

"McDonald's could make or break a company," said Yunker. "They could break it in the sense that if the provider can't make a success out of it, a chain with that many locations would be a pretty big mistake if things don't go well."

Yunker added that service providers will also have to please franchisees, because the corporate parent only has so much control over them.

"If you don't give your franchisees a decent solution, they may revolt and use their own vendor. We've seen similar actions in the hotel industry," Yunker said.

Franchisees tend to prefer the local treatment, so service providers will have to be very attentive.

The chain has 13,000 locations in the United States. McDonald's is also running hot-spot test programs in 25 other countries around the world and the providers in the United States may not necessarily be the providers outside the United States.

 

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