Starbucks Dumps T-Mobile in Favor of AT&T

Starbucks has upgraded its Wi-Fi offering from a short to a venti, switching partners from T-Mobile USA to AT&T in a deal that will mean free coffee-shop wireless for millions of U.S. broadband subscribers.

The chain's network of hotspots, the best-known in the U.S., covers more than 7,000 company-owned stores. Users of AT&T Broadband and U-verse DSL (Digital Subscriber Line) services will get free access to the networks, and the carrier will soon extend benefits to AT&T Wireless customers as well, according to a news release. AT&T business customers with remote-access subscriptions will be able to buy unlimited, flat-rate access at any Starbucks location.

AT&T had 14.2 million lines of DSL in service at the end of last year. Its wireless arm has about 70 million subscribers. T-Mobile, a subsidiary of Germany's Deutsche Telekom, said it had 28.7 million subscribers at year's end.

Although 3G (third-generation) cellular networks are nearing typical wired broadband speeds, Wi-Fi hotspots in key locations such as airports, hotels and cafes remain an attractive option for people who need high-speed connectivity on the road. T-Mobile has provided the Starbucks networks as part of its national hotspot service for several years, with a variety of paid plans including US$6 for one hour, $9.99 for a day and $29.99 per month with an annual agreement. Prices under AT&T will be slightly lower, including $3.99 for two hours and $19.99 per month.

But the deal also opens up a whole new customer base for the hotspots: Starbucks customers with an active Starbucks stored-value card will get two hours of free access per day. All that's needed to keep a card active is to have money stored on it and to buy something with it at least once a month, said Starbucks spokeswoman Bridget Baker. Starbucks employees will also get free access.

Network Expansion

AT&T will take over the networks market by market, starting in the next few months and finishing by the end of the year, the companies said. Under a roaming agreement to be implemented by March 31, T-Mobile subscribers will also be able to use the AT&T Starbucks networks, Baker said.

The deal significantly expands AT&T's network of hotspots, giving it 17,000 U.S. sites (about 70,000 worldwide) and adding a popular Web-surfing location to its lineup, which today includes McDonald's restaurants, Barnes & Noble bookstores and some hotels and airports. It builds on an existing relationship in which AT&T has provided back-end networks for Starbucks stores for more than 10 years, Baker said. The carrier will provide Starbucks an enterprise-class network with increased bandwidth and redundancy, according to the release.

The prospect of high-speed access at Starbucks should help AT&T attract new DSL customers and hold onto existing ones, telecommunications analyst Jeff Kagan wrote in a commentary on the deal.

"The customer wins because they get to take advantage of money saving bundles, and AT&T win's because it keeps customers happy which means hanging on to the customer in an increasingly competitive marketplace, and Starbucks win's because it expands their digital entertainment platform and gives customers more reasons to spend time in the stores," Kagan wrote.

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