February 27, 2003 4:20 PM PST
Price cut for Starbucks Wi-Fi
Starting March 1, unlimited access to the wireless networks will cost $30 a month, down from $40. T-Mobile will also slash the price of a "day use pass" to $6, which allows access for 24 hours inside any of about 1,200 wireless Starbucks. More changes are on the horizon, T-Mobile director Frank Ramirez said at Thursday's Eyeforwireless Mixed Wireless Conference.
"We want to continue to be the most affordable service out there," Ramirez said.
The service, begun in August, is the first time a U.S. cell phone provider sold access to Wi-Fi networks, which create a 300-foot zone of high-speed, wireless connections. AT&T Wireless also now sells Wi-Fi access, but only in airports. Sprint PCS, Nextel Communications and Verizon Communications intend to provide a similar service in the future. Like T-Mobile and AT&T Wireless, the carriers are targeting owners of the millions of Wi-Fi-enabled laptops and personal digital assistants.
But the price cuts and some rare customer information provided by Starbucks on Thursday did little to offer any hope that the T-Mobile and Starbucks business is catching fire.
"From T-Mobile's side, it looks like they are trying to realize a return on their investment a little faster," said John Tremblay, business development director at Tatara Systems, which makes equipment that cell phone carriers use to add Wi-Fi into their service mix.
Starbucks New Ventures Director Lovina McMurchy said that inside the busiest Starbucks only 20 Wi-Fi device owners use the networks every day. Users are usually "mobile pros, like a sales force that's always on the road," she said.
Based on just 20 customers a day, there won't be enough revenue generated to cover the cost T-Mobile pays to provide the high-speed Web connection, conference attendees noted.
T-Mobile has not disclosed what it pays to provide a broadband connection to each Starbucks. The average price is anywhere from about $400 to $1,000 per location.
"User growth has been disappointing. I'd expected it to pick up," said Monica Paolini, a consultant with market research firm Analysys.
But Ramirez said a faster network connection is worth the investment to draw in and keep customers. Also, McMurchy said Starbucks is using the pricey Web connections for internal use, such as transferring a day's accounts to Starbucks central computers.
"We understand there is a high degree of costs to maintain it," Ramirez said. "We're committed to the long run. We feel this is a good commitment."
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