Starbucks Switches to Free AT&T Wi-Fi

SEATTLE — Starbucks Corp. and AT&T Inc. will start offering a mix of free and paid wireless Internet service in most of the global coffee retailer's U.S. shops, beginning this spring.

The move announced Monday ends a six-year Starbucks partnership with T-Mobile, which did not include free Wi-Fi and charged higher fees than AT&T will.

Starbucks said it will give customers who use a Starbucks purchase card two hours of free wireless access per day. More time than that will cost $3.99 for a two-hour session. Monthly memberships will cost $19.99 and include access to any of AT&T's 70,000 hot spots worldwide.

Nearly all of AT&T's broadband Internet customers, about 12 million, will automatically have unlimited free Wi-Fi access at Starbucks, the companies said.

The deal boosts the number of AT&T hotspots in the U.S. to 17,000 — the most in the nation.

"We're very excited about what we're doing together to align ourselves with what consumers want," said Rick Welday, a chief marketing officer for AT&T's consumer business.

Starbucks' switch to AT&T is a big blow for T-Mobile, which has nearly 8,900 wireless hotspots in the U.S., most of them in the coffee company's stores. T-Mobile also offers its subscription wireless service in Borders Books and Music stores, FedEx Kinko's stores, various hotels, airports and airline clubs.

In a statement e-mailed Monday afternoon, Joe Sims, T-Mobile USA's vice president and general manager of broadband products and services, said the company's customers "will continue to benefit from our commitment to remain the innovation leader for consumer Wi-Fi."

Current T-Mobile HotSpot customers — who pay $6 per hour-long session, $9.99 for a day pass or up to $39.99 a month for unlimited access — will get Wi-Fi access at no extra charge under a roaming agreement between AT&T and T-Mobile. T-Mobile USA, based in Bellevue, Wash., said the roaming agreement would last at least five years.

Chris Bruzzo, Starbucks' chief technology officer, would not disclose how many customers use the T-Mobile service in Starbucks stores, but said he expects many more will use the new service. Starbucks will begin rolling it out this spring and aims to have it available in its more than 7,000 company-operated domestic stores by the end of the year.

Robert Toomey, an analyst with E.K. Riley Investments, called the move "a good first step" for a company that has seen its traffic into U.S. stores decline for two consecutive quarters.

It's smart for Starbucks to link the new Wi-Fi service to its purchase card, which tens of millions of people use to buy their mochas and lattes, he said.

"I think it's a double positive for both product sales and traffic," Toomey said.

Starbucks faced serious pressure to improve its Wi-Fi offering, since many of its competitors, from neighborhood coffee houses to fast-food chains like McDonald's Corp., already offer it for free or at lower cost than the T-Mobile service, noted Howard Penney, managing director of consumer research at Friedman, Billings, Ramsey & Co., Inc.

AT&T has powered the network service Starbucks uses to run its cash registers and other computer systems for years.

Asked if problems with quality and service reliability were factors in Starbucks' decision to part with T-Mobile, Bruzzo said no.

"We were evaluating who our right go-forward partners should be, and as we looked at who could provide that in the best possible way, AT&T continuously came back to the front," Bruzzo said.

Last month, AT&T, the nation's largest telecommunication company, announced plans to make its then-10,000 U.S. Wi-Fi hotspots free to nearly all of its broadband Internet customers.

The move expanded access to include subscribers who have a lower tier of high-speed Internet service, increasing to 12 million the number of broadband customers who can use the hotspots free of charge. Previously, only subscribers to AT&T's premium broadband service had free access.

"Here we are with the nation's largest Wi-Fi network," said AT&T's Welday. "Consumer trends are clearly pointing toward an increased need and desire to access broadband outside the home and office — what a terrific opportunity."

The companies did not disclose financial terms of their deal.

AT&T also is giving Starbucks' more than 100,000 U.S. employees free wireless accounts and said it will soon extend the Wi-Fi at Starbucks to its wireless phone customers. The company announced no details or time frame for that expansion.

Starbucks offers in-store wireless Internet access in some international markets, including China, the United Kingdom, Germany, Australia and Mexico. Bruzzo said the company is committed to expanding it, though it has no timetable. He also said Starbucks plans to work toward offering wireless Internet at stores its licensing partners run in airports, shopping malls and the like.

Starbucks shares rose 26 cents, or 1.4 percent, to $18.52 on Monday, while AT&T shares rose 50 cents, or 1.4 percent, to $36.87.

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AP Business Writer Elizabeth White contributed to this report from San Antonio.

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