Hot Spots: A Competitive Edge?

As public-access Wi-Fi hot spots percolate out of coffee shops and into the wider world of hotels, fast-food chains, and other locations, many companies are starting to view the wireless technology as an essential amenity for attracting customers.

But what's still unclear is how much businesses can charge customers to use the Wi-Fi links--or whether they should simply provide the Internet and e-mail access capabilities for free in the hope that increased sales of food, drinks, and other products will more than offset the cost of the technology.

Burgers With Wi-Fi

That issue is currently being weighed by McDonald's, which this week launched a Wi-Fi pilot project at 75 restaurants in the San Francisco Bay area through a deal with ISP Wayport.

Mark Jamison, vice president of business strategy and development at McDonald's, says the company will use the San Francisco trial and similar ones in Chicago and New York to evaluate potential pricing models for the service and Wi-Fi technology's capability to attract customers.

Altogether, McDonald's plans to equip several hundred restaurants in the U.S. with Wi-Fi connections by year's end. Jamison says the fast-food chain is charging $4.95 for two hours of Wi-Fi access at the San Francisco locations, but customers who buy a meal can use the technology for free. If a free service tests best with potential users, then that is "the path to follow," he adds.

Valencia Group, a Houston-based hotel operator, decided to offer free Wi-Fi access in all public areas in the luxury-class Hotel Valencia Santana Row, which opened in June in San Jose. Matthew Nuss, Valencia's executive vice president, says company officials view the Wi-Fi capability as a must-have amenity for guests.

"Wireless, in our opinion, is the next running water," Nuss says. "It's become part of the infrastructure of a hotel." The Valencia Santana Row installed seven wireless access points and pays about $2000 monthly for the 100 megabit-per-second pipe that supports the Wi-Fi service. Nuss says the service is well worth the technology cost because it helps the hotel attract technology-savvy travelers.

Wi-Fi On the Run

Schlotzky's, an Austin-based operator of deli-style restaurants, currently offers free Wi-Fi service in 15 of its 600-plus restaurants. Monica Landers, a Schlotzky's spokesperson, says the chain started offering Internet access capabilities a year ago as a community service and quickly found the technology paid off in terms of increased customer traffic.

Twelve company-owned stores in the Austin area that offer Wi-Fi service each pull in an extra 23 customers daily on average, Landers says. She adds that customers spend an average of $6 each per visit, so Schlotzky's easily gets a payback on the $300 a month it pays to run a T1 line to a restaurant. At a meeting next week, Schlotzky's officials plan to encourage franchisees to add Wi-Fi service in their restaurants.

VIA Rail Canada, which operates passenger trains throughout Canada, has kicked off a four-month test in which it will offer Wi-Fi access on some trains between Montreal and Toronto.

Guy Faulkner, product manager for corridor services at Montreal-based VIA, says the railway won't charge for the service during the trial. But VIA will ask passengers what they would be willing to pay for Wi-Fi access, he says.

Seattle-based Starbucks launched Wi-Fi service in its U.S. cafes last August and now offers access in about 2000 locations. Users must sign up for the service with T-Mobile, at rates starting at $19.99 per month.

Lovina McMurchy, director of Wi-Fi business and alliances at Starbucks, says the company plans to stick with that approach. But she adds that Wi-Fi hot spot deployment is "a learning experience" for businesses and said it's hard to tell how different pricing plans or free services will play out. At this point, a lot of companies are still just "dabbling" in Wi-Fi through pilot projects, McMurchy notes.