When independent coffee shop owners and wired workers learned of Starbucks' plan to offer high-speed wireless Internet service in almost all of its 5,200 shops worldwide, they gave a puzzled look.
The independent coffee shops said Starbucks already offers Internet service and it hasn't affected their businesses. And proud San Franciscans, they said, never pick up their daily jolt of caffeine at a big corporation like Starbucks anyway.
Self-proclaimed wireless geeks wondered aloud why anyone would pay $50 a month -- the fee for one of the plans Starbucks customers could purchase from T-Mobile to use the service -- when wireless Internet access is readily available for free.
Many gear heads in the technology hub that is the San Francisco Bay Area have set up 802.11b Wi-Fi hot spots that give passersby free wireless Internet access. Users simply need a laptop with the capability built in, or a Wi-Fi PC card. The Wi-Fi Internet hubs have been marked by "warchalking" on storefront windows and on sidewalks.
Also, Wi-Fi technology, which is now in 1,200 Starbucks in the country, uses an unlicensed band of public airwaves, meaning it is available to anyone and includes other uses that may lead to interference.
"My question is whether the number of users will support the investment Starbucks has made to offer the service," said Shane Kehoe, an engineer who is also a member of the Bay Area Wireless Users Group.
Starbucks' plan is no doubt ambitious. In what is considered by the industry to be a watershed event and a coming-out party for Wi-Fi, Starbucks plans eventually to connect 70 percent of its coffee shops with the service. The service, called "T-Mobile HotSpot," is now in 1,200 of its 4,200 coffee shops in the United States. Abroad, the service is available in London and Berlin.
T-Mobile, the cellular phone company that purchased MobileStar -- the bankrupt company that ran Starbucks' wireless Internet service until eight months ago -- offers $30 and $50 payment plans for monthly service. It also offers customers a $20 and $50 plan in the form of a prepaid calling card.
Both $50 plans allow customers to use T-Mobile's service in Starbucks across the country.
Customers who prefer to pay as they use the service would pay $3 for the first 15 minutes of surfing the Web and 25 cents for each additional minute of use.
Starbucks, T-Mobile and Hewlett-Packard, which is providing some software for Starbucks' service, would not disclose how the revenue from the service would be divvied up.
But industry analysts questioned whether the fees would compensate the companies for maintaining the service. They gasped when they learned that a high-speed T1 line was powering Starbucks' service. T1 lines, which are the pipes through which information flow, start at around $500, not including technical support and other maintenance fees, analysts said.
"As a stand-alone business, it is hard to justify those costs," said Zelos Group analyst Seamus McAteer.
Starbucks officials say customer demand has forced them to offer the service and it isn't something they made up out of thin air.
"Our customers told us they want this," said Anne Saunders, vice president of Starbucks Interactive. "A lot of people come here to work. They hold business meetings here."
One place on-the-go professionals won't be pecking away on their laptops as they get their caffeine fix is independent "mom and pop" coffee shops and local restaurants. While wireless Internet service providers are working furiously to connect Starbucks' competitors with the service, many of these cafes couldn't care less whether the service is in place.
"I have wireless Internet access but I don't promote it," said David Simonsmeier, owner of the Brick House Cafe on Brannan Street in San Francisco. "I don't consider this a coffee shop anymore.... I don't want them (customers) sitting here all day and taking up the tables."
Simonsmeier, though, plans to re-post a bumper sticker he had in place when Brick House opened its doors for business: "Friends Don't Let Friends Go to Starbucks."
Karen Marek, a fundraiser for an independent radio station, was recently purchasing a cup of coffee at the Slow Club cafe on Mariposa Street, even though a Starbucks two blocks away was giving out free coffee and pastries. She said Starbucks' wireless Internet service was not likely to be as popular now as, say, two years ago when dot-com workers flooded the area.
"There are a lot of artists and poor working-class people here," she said. "Starbucks represents commercialism, development and change."
Despite the ballyhoo surrounding its latest offering, Starbucks (SBUX) shares were down 18 cents to $20.87 on Wednesday.
