Subject: [NEXTEL-1] Eleven Wireless brews up plan to take on Starbucks

From: [email-masked]
Date: Mon, 23 Jun 2003 16:49:51 -0400

Eleven Wireless brews up plan to take on Starbucks

By Aliza Earnshaw
The Business Journal of Portland

Jun. 23 - With an eye on the growing popularity of wireless internet use, two
small local companies are teaming up to take aim at coffee giant Starbucks.

Startup Eleven Wireless and coffee roaster Portland Roasting are working together
to equip more than 200 coffee shops supplied by Portland Roasting with wireless
"hot spots" so that coffee lovers can get access to the internet while patronizing
a locally owned coffee shop instead of the corporate giant. Rather than setting up
a subscription service like that offered by T-Mobile, which provides service for
some Starbucks locations, Portland Roasting is distributing wireless-access cards
to its customers, to sell to their own coffee-drinking, laptop-toting customers.

"We'd been looking for a way to offer wireless to our customers as a way to
compete with Starbucks," said Todd Plummer, co-owner and vice president of sales
and marketing for 10-employee Portland Roasting. "I didn't think about a cafe
network, though, until we met Eleven."

Eleven, for its part, was happy to work with coffee shops. "This provides us a new
avenue to deliver Wi-Fi (wireless internet services) and expand our customer
base," said Andrew Yorra, vice president for sales and marketing for the
six-employee wireless services company. Eleven already supplies its "back-end"
systems for authentication, billing, customer and network management to several
hotels, and hopes to expand into multi-unit dwellings and other areas of retail
where people gather.

Eleven hopes that the Portland Roasting network will be so successful, that other
restaurant or coffee chains will take notice, and sign up for Eleven's services.
"We see a real niche in the marketplace for an engine to power Wi-Fi networks
wherever people congregate," Yorra said.

Coffee shops are certainly a logical place to find people who want to settle down
with their laptops away from the distractions of home or office, and get some work
done. So far, two local coffee shops have installed wireless equipment, and are
offering wireless-access cards for sale. The cards are priced at $5 for 60
minutes, $20 for 300 minutes, or $30 for an unlimited-use monthly pass.

These rates are quite competitive with Starbucks' T-Mobile service. One T-Mobile
prepaid plan published on the company's web site offers 300 minutes for $50, and a
month-to-month subscription plan for unlimited national use costs $39.99 per
month. A rate of $29.99 per month for unlimited use is available only on a
12-month contract. However, T-Mobile's plan is for 2,400 locations nationally,
while the Eleven-Portland Roasting cards will cover only the local coffee shops
that choose to supply them--at least until Eleven finds other retail businesses
that want to provide cards, too.

Another local company is joining in with the effort to create a local network
large enough to attract card-buyers. EasyStreet Online Services is providing free
DSL installation and one month of free service to any Portland Roasting customer
who decides to participate in the wireless network.

Eleven wants to make it as economical as possible for the independent coffee shops
to set up a hot spot. "Our business model is to start with less expensive
capacity," said Yorra. "Our software will track growing demand, and help the
coffee shops determine when they need to expand their capacity."

Wireless analyst Andrew Seybold thinks it's a good thing for Eleven that the
startup isn't the supplier of "backhaul," or actual telecom lines, underpinning
the wireless network. "There is no financial model if you have to supply the
backhaul," he said. So far, the technology has been slow to catch on, Seybold
said. "Starbucks said at a conference about a month ago that it's averaging one
[wireless] user per store per day."

Starbucks spokesman Nick Davis said the coffee giant is happy with the program.
The coffee chain decided to put in wireless access capability because it was one
of the top three requests from customers, he said, and "the feedback from
customers is great." Whether wireless is increasing sales or not is difficult to
track, but "on average, hot-spot users spend an average of 45 minutes in our
stores," Davis said. "We think they're buying another cup of coffee."

As for number of users, Starbucks has wireless access in more than 2,100 stores
now, and "there are tens of thousands of users accessing this service more than
100,000 times per month," said Davis. "Those numbers are growing."
Toby Christensen is certainly seeing more than one wireless user per day in his
Thurman Cafe since he installed his hot spot and began offering Eleven-Portland
Roasting access cards. And the results show in his revenue.

Christensen says that Portlanders and others prefer to patronize an independently
owned shop, if they can get the service they want. "I had one customer visiting
from Switzerland who asked, 'Do you know where I can find a wireless cafe that
isn't Starbucks?'"

That customer bought a wireless-service card, said Christensen, and "he came in
every morning for breakfast, and every afternoon either for lunch or coffee and a
cookie, and he worked on his laptop."

Thurman Cafe's regular customers are coming in more often too. Christensen says
he's not even counting on the revenue from the wireless cards themselves, and
would even be willing to give them away to his customers. But Portland Roasting's
customers are getting 50 percent of the face value of the cards, while Portland
Roasting itself retains 10 percent, and Eleven gets the remaining 40 percent.

For Plummer, the cards don't represent extra revenue in themselves so much as they
represent bigger product sales. He hopes that wireless access will help his
customers extend their productive business hours.

"The majority of the business is from 6 a.m. to 10 a.m.--about 85 percent of the
business is then," he said. "We're hoping that this will extend business into
non-peak times, that our customers will [buy] scones and sandwiches in the
afternoons, and hopefully, more coffee, chai or smoothies, too."

http://famulus.msnbc.com/famuluscom/bizjournal06-23-010344.asp?bizj=POR#body

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