Price cut for Starbucks Wi-Fi
T-Mobile is 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
"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."