Free Wi-Fi at Starbucks? Maybe, but Fee-Based Wi-Fi Will Not Disappear Soon

Ina Sebastian | October 17, 2007, 01:18 PM

Computerworld published an article, in which they predict that Starbucks Wi-Fi will be free within a year. They argue that the fee-based model, introduced by T-Mobile/Starbucks in 2002, is outdated. Free iTunes access with the iPhone is an indicator for more free models, as Starbucks seeks to leverage Wi-Fi for other revenue opportunities (such as purchasing Starbucks merchandise on Wi-Fi). Further, a “breakfast competitor” has begun to roll out free Wi-Fi (McDonalds in the UK), potentially affecting business with the proliferation of Wi-Fi enabled non-laptop devices.

Will Starbucks introduce free Wi-Fi within a year? Maybe or maybe not, depending on their plans to leverage the Wi-Fi network. In my opinion, the fee-based model is not outdated, and will not disappear soon.

Business travelers and professionals for example have been a strong target group for T-Mobile Hotspot. Business travelers are likely to check e-mail and access the corporate network from laptops, and they are also likely to pay for a quality high-speed connection (though many use combinations with free Wi-Fi). There is also an emerging nomadic consumer segment, which accesses Wi-Fi frequently (daily or weekly) at public hotspots and shows high willingness to pay (subscriptions). This consumer segment will be very important for public Wi-Fi providers going forward.

That said, the majority of public Wi-Fi users still prefer free access. Consumers would certainly welcome a free service at Starbucks. There have been some visible initiatives regarding consumer focused free Wi-Fi access in the recent past (like free Wi-Fi for iTunes access, Wi-Fi landing page with Starbucks merchandise, T-Mobile partnership with Sony for PSP users). Starbucks would have to weigh the benefits of providing free Wi-Fi against paying T-Mobile Hotspot for infrastructure and service.

What about the proliferation of Wi-Fi enabled non-laptop devices? Well, mobile professionals (the breakfast commuter crowd) already use Blackberries and smartphones to handle e-mail – no free Wi-Fi needed. Mobile Internet devices and other small Wi-Fi devices will increasingly hit the market in the next years, but major consumer adoption is still sometime off. Wouldn’t the use of these devices be even more interesting outdoors – on the road (e.g., searching for local information, GPS)? Definitely, Starbucks is on the right track with tying access for these devices to incentives and free applications.