Update: Starbucks moves to AT&T hot spots and away from T-mobile

Some customers will have two hours of free access

Starbucks Corp. said today that it is moving away from T-Mobile as its in-store Wi-Fi provider and will transition to AT&T Inc.'s Wi-Fi service in more than 7,000 of its high-end coffee shops beginning this spring.

The deal will benefit Starbucks Card holders and Wi-Fi users who are among the 12 million people who subscribe to AT&T broadband service, according to the companies. Starbucks Card holders will get up to two hours of free Wi-Fi service in Starbucks shops per day, and AT&T broadband customers will get unlimited service.

T-Mobile, in comparison, offers its hot spot service in about 5,000 Starbucks stores for $6 an hour, or $9.99 a day, according to its Web site. Starbucks said its T-Mobile HotSpot customers will have continued Wi-Fi access at no extra cost because of a separate deal between AT&T and T-Mobile.

Starbucks spokeswoman Sanja Gould said in an interview that there were "no technical issues" with T-Mobile. Rather, AT&T was an "ideal partner" because of its reliability, quality and customer support, she explained. In addition, AT&T has provided Starbucks with point-of-sale systems and other store technologies for 10 years, making the Wi-Fi deal an expansion of an existing, successful relationship.

The Wi-Fi business with AT&T represents a new "comprehensive communications agreement" that allows Starbucks to streamline business operations while enhancing the customer experience, Starbucks said in a statement.

Analysts agreed that T-Mobile's service was not known to have any particular technical problems, so the decision was evidently based on money and market opportunities. "Starbucks and T-Mobile have been doing business together for quite a long time, so the deal must be better for both customers and the company," said Jeffrey Kagan, an independent analyst.

In a separate statement, the two companies said the new Wi-Fi services will be a mix of two free hours of service and then paid service. For AT&T, the deal means that there will be 17,000 U.S. hot spots for its Wi-Fi network and more than 70,000 globally. All of those hot spots are managed by Wayport Inc. on behalf of AT&T.

Up to two hours of free Wi-Fi service per day will be available for Starbucks Card holders, while 12 million qualifying AT&T U-verse Internet and broadband customers will have unlimited free access. In addition, more than 5 million of AT&T's remote access services business customers will be able to access Wi-Fi at Starbucks locations.

After the two free hours, customers with Starbucks Cards will be able to purchase two more hours for $3.99 per session. They will also be able to get monthly subscriptions for $19.99.

AT&T business customers who have remote access services can have unlimited flat-rate access at Starbucks as well.

Kagan said that offering free service to AT&T broadband customers is a "brilliant move" by AT&T, since the company faces challenges in its efforts to offer bundled Internet and wireless and voice services.

"This deal shows the changing and increasingly competitive world of telecom," Kagan said. "Companies have to think of ways to hang on to the customer without contracts." And while AT&T wins, Starbucks does as well, he said, because it can expand the digital entertainment it provides customers while giving them more reasons to spend time in its stores.

Copyright © 2008 IDG Communications, Inc.

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