Wi-Fi hotspots at Starbucks — a dream come true!

Well, it had to happen. Bigbucks (er … Starbucks) and T-Mobile (www.t-mobile.com) have come together to put Wi-Fi hotspots in dozens of select Starbucks locations in the San Francisco bay area — it seems like Wi-Fi developments just keeps coming.

I've been hot on this technology for a while now. For those of you who follow my rantings, you know I've got a good feeling that unlicensed, especially 802.1x technology could help stop, if not reverse the current doldrums the wireless industry is experiencing.

Something like this Starbucks/T-Mobile arrangement is good for the industry because of two reasons. The first being that it gives visibility to the technology. The second is that a highly visible retailer feels confident enough to get into bed with it.

Not that this is a first. Internet cafes have been all the rage for the techno-savvy, X and emerging Y generations for the last year or two. But they have been trendy and their success spotty. Now that Starbucks is behind this, it may well be the push that moves WiFi hotspots onto the fast track. After all, who wants to be behind on the Wi-Fi curve if major retailers are finding it attractive (Peet's Coffee and Schlotzsky's Deli are a couple of players also getting in on the hotspot game).

Now, just in case you think that this may be an anomaly, consider the fact that T-Mobile is already facing competition. Presently, a lot of T-Mobile's power in Wi-Fi Public Access is derived from the Starbucks deployment contract that it acquired out of the MobileStar bankruptcy. But consider that it is being pursued by other hotspot providers like Surf&Sip, which follows T-Mobile around like a hungry puppy, targeting the busiest Starbucks locations. Also not far behind are healthily funded startups like Cometa (www.cometanetworks.com), in which AT&T (www.att.com), IBM (www.ibm.com), and Intel (www.intel.com) have invested big bucks.

As an adjunct, and an unexpected bonus, I expect this to bode well for mobile phone industry too. Why? well consider that companies like T-Mobile and Cricket (www.cricketcommunications.com) are offering a unlimited minutes, local area wireless plan, that could add, for a small additional fee (or bundle, for free), unlimited Wi-Fi access as well. Hmmm … I certainly would be taking a long, hard look if I were a wireless industry player.

There are, of course, sticky wickets in this scenario (several actually, but right now only a couple are major blips on the radar screen). One is price, the other is infrastructure. On the price side, Wi-Fi access has to be cheap (or at least reasonable) to the end user. There already is talk about bundled services and Wi-Fi being value added. Some retailers are already picking up the cost of the service and look at it as part of the cost of doing business (read on).

The price points will be worked out. T-Mobile and the other mobile carriers will soon face tremendous Wi-Fi pricing pressure, if they don't bundle, since other providers such as Surf&Sip and additional smaller WISPs have much lower cost bases. This will them to charge far less. And, users won't care who the provider is as long as they don't notice any difference in service quality. Furthermore, Wi-Fi is being looked at, by some, as a retail amenity. For example, many of the Wyndham Hotels have started giving away Wayport's wired Ethernet service to every member of their Frequent Guest program. They are now looking at adding Wi-Fi under the same business model. A trend seems to be developing where hotels are offering free Wi-Fi access to win additional room reservations, restaurants to sell extra meals, and cafes to sell more coffee. For these retailers, they tend to view Wi-Fi as a value-added item.

As far as the infrastructure goes, there is already a business model for deployment out there — cellular. While WiFi is unlicensed and lower power, that just means it needs more POPs. But the basic deployment issues have already been addressed.

My guess is that greed will become the major impediment to rapid adoption. I can see it now … the next Internet make money quick scheme — sell your chimney as a Wi-Fi POP site.