February 27, 2003 4:20 PM PST

Price cut for Starbucks Wi-Fi

BURLINGAME, Calif.--T-Mobile said Thursday that it's cutting the price for Wi-Fi service inside hundreds of Starbucks, a sign of possible trouble brewing for the biggest effort of its kind in the world.

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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starbucks and t-mobile
I just completed a 7k mile odyssy around the southern tier of states, up the pacific coast highways, into BC and across the northern tier on US 2 to MN, and thence down the mid-america states to my home in GA.
When I was leaving I knew I was going to need an email connection so I signed up with t-mobile at a starbucks (I don't remember where but it wasn't too long into the trip. I don't think I found more than 1/2 dozen starbucks with t-mobile on the whole trip ending in BC. None thereafter.
I admit I was doing the 'look into immigration opinions' on the way so that I wasn't often in the center of higher end communities. This must mean something.
I shoulda used McDonalds. Although they weren't fully implemented they had a wi-fi location at many locations, often free because their store system was 'open'.
T-mobile and Starbucks may appeal to the salespeople in transit. But for those of us looking at America it's a no-sale.
Jim Blyler, free-lancer
inspectjim (inspecting America).
Tiger, GA
Posted by inspectjim (2 comments )
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Price Cut for Starbucks Wi-fi
I just completed a 7k mi driving odyssey around the Southern tier/border states, Pacific Coast states (+ BC) and east via US 2 along the Northern border states to MN and back down to GA.
When I first started I signed up with T-Mobile at a Starbucks thinking I would be able to connect all along the mostly unplanned way. Wrong. If I made a half dozen connections with T-Mobile I would be surprised. The alternative locations for T-Mobile to Starbucks would have been major airports and/or high-end hotels. This was not a flying trip and I spent half of my nights either on the road or sleeping in my car. Most of my net connections were made by parking at real estate offices and non-Starbuck coffee shops, as well as some public libraries (giving me a chance to catch up on stories in the printed media). Note, too, that I was able to make connections in some McDonalds without signing up for their service.
The purpose of my trip was 4-fold: A real look at the devastation of 3 hurricanes along the gulf, Ivan, Katrina and Rita; Latino and farm-labor immigration concerns; hi-tech industry employment; and, border and potential terroist target security. Also, by the way, to see my kids in LA and upper MN.
My method of travel may not provide T-Mobile's or Starbuck's preferred type of customer. But you can't study the grass-roots of a country without self-immersion.
My final summation re T-Mobile: A no-sale.
I recommend the purchase of a simple and inexpensive wi-fi signal tester to find hot-spots for wi-fi connections. I've found that most hot-spots that are secure will give you a temporary password if you just ask.

Jim Blyler
Inspectjim@alltel.net
Tiger, GA
Posted by inspectjim (2 comments )
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Let's be Economical and Profitable
I am writing this to you sitting in a local cafe that provides free
wifi instead of starbucks, where my friends are, and where I like
the music. Sitting across from me is an upperclass suburbanite
mother who is taking a break from her homemaker duties in
order to sip a nice frothy latte and send emails. She has been
coming here for 1.5 years, I am a new customer.
I am also a college student earning degrees in both Economics
and Psychology, who knows that increased price for a good or
service leads to decreased demand. When I went to Starbucks to
study a week ago with my new laptop, I realized that I would be
hit with a $30/mo $6/day just to use the Internet, when I could
go to my local library or anywhere on campus and get this
service for free. In fact, it seems that everyone agreed that this
was an absurd price because I have only observed two people in
a jam-packed floor of students and locals ever use the internet.
I believe T-mobile and Starbucks need to rework their strategy
in order to both maximize customers for Starbucks and T-
mobile's profits. Customer's would willingly pay $6 for latte and
a treat but they would not pay that much for a day's worth of
internet. However, if a customer was in Starbucks the whole day
doing homework or business until closing time, they would
invariably get tired, thirsty, or hungry, and purchase more
products. Unquestionably, in today's age of the internet, it is
nearly impossible to go a whole day without checking one's
email, or contacting business client's. Thus, I believe T-mobile
should not charge any fees, but should take a percentage of
"new" business generated by their services. This could easily be
calculated by past performance percentages, and then test
drived at certain locations, and by observing profit increases in
Malaysia where Starbucks provides free Wifi. Please contact me
with any replies or considerations at mdw4z@virginia.edu.
Posted by mdw4z (1 comment )
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