Starbucks Serves Up WiFi Access

By Michael Singer

August 21, 2002

UPDATE: Starbucks, T-Mobile and HP launch their campaign to offer T1-speed wireless access in the mega-coffee chain's stores. But will anyone buy into this?

SAN FRANCISCO -- Yea, give me a double latte, half-caf, extra whipped cream and... a Wi-Fi connection.

Coffee giant Starbucks launched a nationwide campaign to put wireless access with T1 speeds in some 1,200 of its U.S. and European stores with about 2,000 of its stores but the end of the year.

But, some customers may see the deal in the same way they view Starbucks' coffee... vary overpriced for something that should be free.

The project is part of a three-way deal between Starbucks, T-Mobile International, the wireless subsidiary of German-based Deutsche Telekom , and Hewlett-Packard .

The pact builds on Starbucks' previous relationships and a 12 month beta test. The agreement expands not only T-Mobile's wireless footprint, but also turns Starbucks into the largest "Wi-Fi" (802.11b) network supplier in the country.

An additional 800 Starbucks locations in the U.S. are scheduled to feature the service by the end of the year. With an eye toward global expansion, Starbucks and T-Mobile have also initiated a six-month pilot in select London and Berlin locations.

"We have evolved the brand that is the third place people go between home and work," said Starbucks chairman Howard Schultz. "People see us as extension of the front porch or the office. As a result of that, this is a rare opportunity to address our collective vision. Our customers have been waiting for just such an offering: high-speed wireless Internet access in a familiar and widely available location that keeps them connected while on the road, or between the home and office."

The network is accessible for Starbucks customers with a wireless-ready notebook computer or Pocket PC. To connect, customers need a T-Mobile HotSpot account and Wi-Fi capability for their wireless device.

T-Mobile is offering Starbucks customers a free trial of its T-Mobile HotSpot service for 24-hours afterwhich the company will charge ISP prices. In addition, T-Mobile will offers a variety of Internet access service plans, including National and Local Unlimited monthly subscription plans, as well as Prepay and Pay-As-You-Go plans on their Web site, at their stores and at Starbucks.

The three companies stress that the motivating factor is not a technology, but a stream of requests by customers to have wireless Internet access in the stores.

"I feel fortunate to kick this off," said HP president Michael Capellas and self proclaimed coffee addict. "I have always been excited about the ability to tie in all of these devices. But, let's keep this in perspective. What we are doing is building the next generation of Internet access. This is about customers and how can we make it easy for them. The more we can make the technology fade into the background the better."

Palo Alto, Calif.-based HP is acting as the preferred technology provider for Starbucks, but as of now, no Wi-Fi cards will be sold at the Starbucks outlets.

HP's real contribution is in its new Wireless Connection Manager. The free, downloadable software makes it simple for mobile users to configure their notebook or PDA. The software is available as a free download.

"We took a look at what it would take for customers to get set up," said Capellas. And our engineers found that if you are not running XP it took you about different 14 steps including a reboot."

Starbucks said it would begin identifying its stores with "T-Mobile HotSpot" decals, although roaming wireless enthusiasts have identified and tagged many spots well before today's announcement.

How It Began
The genesis of this latest pact began with separate deals Starbucks already had in place with Compaq, which is now part of HP, and MobileStar, which went under and had its assets acquired by VoiceStream Wireless.

In May 2001, Compaq announced it would provide Starbucks locations with iPaq handhelds running the Pocket PC operating system for use by customers in 4,100 stores over five years. The expectation was for users to get not just Web access but also a platform for streaming audio and video on-demand. The deal was rolled out in at least Dallas, San Francisco, New York and, or course, Seattle.

Earlier in 2001, MobileStar Network of Richardson, TX, began providing a wireless infrastructure for Starbucks, frist using frequency hopping (FHSS) technology, and later moving to 802.11-based direct-sequence spread spectrum (DSSS).

In late 2001 VoiceStream Wireless, itself a subsidiary of German phone company Deutsche Telekom, made plans to acquire the bankrupt MobileStar and its network. In March of this year the company announced a name change to T-Mobile, unifying its cellular and hotspot brands under one logo. The plan is for WLAN services to be a compliment to the existing nationwide GSM/GPRS service.

T-Mobile currently has hotspots in airports and even some Starbucks locations in San Francisco and New York. T-Mobile sells access in everything from per-minute plans to local subscriptions to national subscriptions.

Is It Crowded In Here, Or Is It Just Me?
One of the problems that the project is running into is competing 802.11 networks. With more Wi-Fi rollout to thousands of locations to come, the coffee giant has already expecting some problems in other locations close to neighborhood area networks.

"We got here to set up yesterday and found three networks in the area, one of which we hadn't seen before," said T-Mobile senior engineer John Paul.

Starbucks and T-Mobile have already experienced problems at the Pioneer Courthouse Square in Portland, OR. The park, the sight of the city's first real schoolhouse and sometimes called Portland's living room, is used daily by traveling commuters, tourists, shoppers, students. A grassroots effort to provide free 802.11-based Internet access in a "cloud" around downtown Portland has been at odds with the local Starbucks in the square.

Starbucks and T-Mobile said the issue should be resolved by the end of the week.

Another question up in the air is, where will the revenue from this venture come from?

"It will be the "after the morning rush" people providing the revenue," says David Chamberlain, Research Director for Wireless Internet Services and Networks at Probe Research. "It could help Starbucks expand and pull in revenue from the people who will tinker on a laptop... and want a cappuccino."

Chamberlain is skeptical, however, that any Wi-Fi hotspot network in a coffee chain can sustain itself, simply because of the numbers. "Consider all the laptops [available] and all those going to Starbucks with laptops, and that have an 802.11 adapter, and that are willing to pay the price [for wireless access]. There's a finite number; there's a small market you're trying to extract numbers from."

And why would anyone pay for access to a network when major metros like San Francisco, New York and Seattle are blanketed with free and homemade 802.11 networks by people who live next to the coffee chain's stores?

"With free networks there is often no quality commitment," said T-Mobile U.S. Operations chairman John Stanton. "Customers will ultimately select our network because of its ease of use and high speeds. The Internet has layers and there is a difference between browsing a catalog and downloading large files."

Eric Griffith, managing editor of 802.11 Planet, contributed to this report.



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