The window for commercial wireless Internet

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Anecdotally, it's starting to seem like a pretty good algorithm for getting Internet service on the road is to look for a neighborhood coffee shop. A large fraction of the one's I've been in lately seem to have wireless Internet service, often of the "buy something and we'll give you the WEP password" variety. Given that it's pretty hard to sit in a Starbucks and not buy some drink, this seems to dominate the T-Mobile/Starbucks commercial offering—assuming you can find a suitable coffee shop. Even if you weren't planning to buy anything, $3-5 for a latte dominates T-Mobile's $10 daily fee (the economics change a bit if you travel enough to actually subscribe to a data plan).

As this gets more and more common, it seems like the lifespan of the Starbucks offering is likely to be kind of limited. Remember that for Starbucks it's not just a matter of people substituting their wireless provider but also of them substituting their coffee provider. And since the actual marginal cost of providing this service is so cheap...


Starbucks may be bound by a long term contract. Changing their contract might require an expensive buyout.

Remember the idiotic GTE airphone service at $5/minute? Back in the 1990s it was quite popular and did not seem that exhorbitant at only five times the cost of regular mobile calls. Today its considered ridiculous and the service is discontinued.

If the price was $0.50/min a lot of people might use them. Certainly revenues would have been dramatically higher. But $5 is simply too much for a service that is only required because the wireless carriers lobbied the FCC to ban use of cellphones on planes in the 1980s when 600mph jets were exposing the limitations of their technology.

A sane solution would have been to renegotiate the contracts, reduce the rates. But that never happened. I don't expect T-Mobile to be any more accomodating than GTE.

The same applies in many hotels. Wireless is free at Hilton Garden Inn and at Marriott Courtyard but an extra $15 a day at full service Hiltons and Mariotts where the contracts were signed much earlier.

I think the cost of wireless at full-service hotels has a lot more to do with price discrimination than it does with wireless provider contracts. At an Hilton Garden Inn or a Courtyard, the target customer is someone looking for a mid-range, high-value experience, so free wireless helps attract them. At a full-service Hilton or Marriott, the target customer is less price sensitive and is looking for a high-end experience, so charging for the wireless is a good way to extract more money from visitors who want Internet access. Or, to put it another way: few people looking for a full-service Hilton or Marriott are going to switch hotels because of the cost of the wireless, so why leave money on the table?

I just got my EVDO Rev. A Novatel Ovation USB adaptor, and the service rocks, so far. I get about 1.5mb/sec down and 560kb/sec up, which is more than enough for normal business connectivity uses (the Slingbox Pro streams across it pretty well, too, heh).

In Santa Cruz, most of the coffee places offer wireless free, even if you don't buy something first. Part of this is due to us having a sensible local ISP who didn't make the shops do anything special for sharing a DSL connection with randoms, and part of it is due to a geek company beaming free wireless from their office so their folks could work at the coffee shops on the block.

As Jamis MacNiven (owner of Bucks in Woodside) said when asked why he has free wifi there:

"Well, I don't charge for the salt either".

Wifi in a coffee/breakfast place is like salt or the stack of newspapers inside the door. If you don't get it free, you'll eat elsewhere where you can salt your eggs/read your paper/catch up on blogs for free.

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