Subject: [NEXTEL-1] Free Wi-Fi Keeps Customers Coming Back

From: Marcel <[email-masked]>
Date: Fri, 09 May 2003 02:12:44 -0400

Free Wi-Fi Keeps Customers Coming Back

Wireless fidelity or “Wi-Fi” continues to pop up in coffee shops, airports, hotels
and more across the country. Many of these venues find it is worthwhile to offer
the wireless connection for free. Owners contend that offering free Wi-Fi access
and possibly increasing the number of steady customers and sales is more
important that making a bit of money from an access surcharge. Austin-based
Schlotzsky’s Deli has found that free Wi-Fi access in its shops has attracted
customers and kept them coming back.

==========================================================================================================

May 8, 2003

Internet Access for the Cost of a Cup of Coffee

By KATIE HAFNER

USTIN, Tex. -- AS the Wi-Fi trend sweeps through the air, one question appears to be
cropping up with increasing
frequency: to charge or not to charge?

Wi-Fi, for "wireless fidelity," allows fast wireless connections with the Internet using a
protocol called 802.11. Wi-Fi is finding its
way into airports, hotels, universities, truck stops and cafes, especially Starbucks,
which charges for connections through
T-Mobile, a wireless carrier. Even McDonald's is experimenting with Wi-Fi in Manhattan.
All that is needed is a laptop or
mobile device equipped for Wi-Fi or retrofitted with a Wi-Fi card, and proximity to a
Wi-Fi beacon known as a hot spot.

But it remains to be seen how many users will be willing to pay the $30 a month being
charged for Wi-Fi access at places like
Starbucks, given the monthly communications fees many people already shoulder.

In a growing number of places, an alternative is available - at no charge. And not
surprisingly, several are in Austin, one of the
most wired places in the nation and now one of the most wireless, boasting a profusion of
hot spots.

One of them is Wild Wood, a small store that sells hand-carved animals from Oaxaca,
Mexico.

Wild Wood, which bills itself as an "art cafe," serves not just coffee and desserts but
full meals, all of them prepared in the store's
small kitchen. The owner, Joan Griffith, said she offered free Wi-Fi access because it was
far more important to her to increase
the number of customers than to make a little bit of money from an access surcharge.
Besides, she said, free access breeds good
will, which in turn breeds loyalty.

Ms. Griffith's initial capital outlay for her wireless setup was $700, counting a refund
of $425 from the Internet service provider
she used. She pays another $120 a month for the Wi-Fi access. She pointed out that she
would be paying $80 a month anyway
for her own access; adding the capacity for more computers was not much more expensive.

"I'm going to make my money because people are going to buy coffee and soup, and because
it's going to smell good in here,"
she said. "Anything that's going to get them parked in here for a while is worth the extra
$40 I'm paying for an extra hookup."

The argument in favor of free access goes roughly like this: cafes, hotels and other
venues that strike up revenue-sharing
partnerships with wireless carriers are perhaps taking in a nice sum now, but as
competition increases, prices will fall, and the
margins will narrow to the point where it makes little or no point to charge for the
access. Far greater, in the long run, will be the
higher revenue from increased traffic into a store like Wild Wood, where customers might
supplement a cup of coffee and an
hour online with the purchase of a $100 hand-carved anteater. Even if the anteater goes
unbought, the coffee alone is a
high-margin item.

John Yunker, an analyst at Pyramid Research, a communications consulting firm in
Cambridge, Mass., contends that a fee-based
system cannot last in the long run. "It's wishful thinking on the part of the mobile
operators," he said.

Schlotzsky's Deli, an Austin fixture, is another mecca for free Wi-Fi. Schlotzsky's, a
nationwide chain of sandwich stores that got
its start in Austin, offers free Wi-Fi at 10 of its Austin restaurants, one in Houston and
one in Atlanta.

John C. Wooley, the chief executive of Schlotzsky's, said he briefly considered charging
customers for Wi-Fi access but quickly
changed his mind.

Mr. Wooley said each restaurant spent about $2,000 to get its Wi-Fi up and running, and
another $300 to $500 a month for the
high-speed communications line that provides the wireless access network to the Internet.
His reasoning is similar to Ms.
Griffith's, but on a larger scale. Schlotzsky's surveys over the past few months have
shown that 6 percent of customers go to
Schlotzsky's for the free Wi-Fi. That translates to 15,000 customers per store per year.
If each pays, on average, $7 for a
sandwich and drink, that adds up to about $100,000 in sales per year.

"That's a really good return on investment," Mr. Wooley said.

Free Wi-Fi access, he said, is similar to other features he has adopted to make his
restaurant more appealing. "It's like the wood
furniture, and the tile in the restrooms, and the art on the wall," he said. "You're doing
all these things so people will select your
restaurant."

For the life of him, he said, he cannot see a disadvantage to his business model. Besides
the good will he generates, Mr. Wooley
said, he gets a bit of low-cost advertising. When Schlotzsky's customers get their Wi-Fi
signal, their browsers are directed to a
Schlotzsky's page and they are asked to register before being given free rein on the Web.

"Think about how much money you'd spend on a TV spot," Mr. Wooley said. "Unlike a pop-up
ad that annoys us all to no end,
here you have a way to get on someone's computer and make them happy."

In the opposite corner in philosophy and business model is Starbucks, which now has
roughly 2,100 Wi-Fi-equipped locations
providing access through a subscription arrangement with T-Mobile. Users can sign up on
the spot, with four options: a
month-to-month subscription for $39.99 a month; an annual subscription for $29.99 a month;
300 minutes for a flat $50; or a
pay-as-you-go plan at 10 cents per minute with a 60-minute minimum per session. Existing
T-Mobile customers can subscribe to
the Wi-Fi service for $19.99 a month, with no contract restraints.

T-Mobile's Wi-Fi service plans are similar to those offered by other carriers, like
Wayport, which supplies the signal to many
airports, and Boingo, which is popular in hotels. Surf and Sip, which caters primarily to
cafes, charges $20 a month, but users
must agree to a year's contract.

Comparing what it costs Schlotzsky's and Starbucks is difficult. Bryan Zidar, a spokesman
for T-Mobile, said his company did
not discuss the details of his company's revenue-sharing with retail partners like
Starbucks, which also would not comment.

But whatever the arrangement, Starbucks maintains its resolve to charge. "We think people
will pay," said Nick Davis, a
Starbucks spokesman. "They get a great customer experience and really high access speed."

Sometimes the Starbucks customers can get those two things for nothing.

Mr. Wooley pointed out that customers at a Starbucks in downtown Austin can get a free
signal from the Schlotzsky's in the
same building, well within the 300-foot range typically needed for a signal.

But not every place in Austin is so endowed. A traveler who has time to kill at the
airport but no Wi-Fi contract can sign on with
Wayport for 24 hours of access for $6.95, or opt for T-Mobile's pay-as-you-go plan.

Mr. Wooley has a liberation plan for the Austin airport: install an antenna at the airport
Schlotzsky's, which is adjacent to many
of the departure gates.

http://www.nytimes.com/2003/05/08/technology/circuits/08wifi.html