Who Makes Money Here?

by francine Hardaway on August 28, 2002

It was difficult to come off a month of sitting in Starbucks with my laptop and my wireless broadband connection, working as efficiently as if I were in my home office. Wi-Fi networks are fast, efficient, and ‘best of all’convenient, and I wish more public places had them.

That’s one of the joys of having spent July at the beach only 30 minutes from either San Francisco or the Bay Area.. While I was comfortably away from the Arizona heat, I was able to work with very little loss of productivity. Perhaps one of our clients would have liked to see my face, but I suspect they were just as glad to be rid of me for a while.

I’ve had a wireless network in my home ever since my friend Louis Couto put it in for me (for about six months now), enabling shared Internet connectivity and file-sharing among my three machines. While I like wireless in the house, I *love* it on the road. At home it’s just a way to avoid pulling cable through walls and under carpeting, but in Starbucks it’s a way to liberate one’s self from associating work with any sense of a specific place. To me, that liberation from a place makes the concept of knowledge workers in an information society real.

The wireless service in the Bay Area Starbucks is provided by a company called T-Mobile.T-Mobile, which is actually the Voice Stream network and is owned by Deutsche Telecom, had a press conference last week to announce its rollout. Once again, I guess I was a beta customer, because the launch was August 29th, and I was on the service in July. As of now, there are 1200 wireless ‘Hotspots’ on the T-mobile network, slated to be 2000 by the end of the year, all in Starbucks.

To take advantage of the Starbucks service, I had to become a T-mobile Broadband subscriber. You can pay as you go, for $2.99 a session, or enjoy an unlimited access for $29.99 a month. T-mobile has only deployed in a few cities, including Austin and Boston, rolling out its products in what are generally considered the tech centers. I wonder whether Phoenix or Miami will be last on the list to get broadband in Starbucks’behind, say, Boise.

As convenient as it is, I don’t want to get hooked on this service, because I am afraid ‘they’ (the business model fairies) will take it away from me. I don’t know if they can make any money on these Hotspots as they are now set up, and I remember Ricochet, the wireless modem that attached to your laptop about five years ago. Everyone who used it loved it. But not enough people though it was worthwhile, and the company went under. Although Ricochet never got started in Phoenix, and thus I was never able to get addicted, all my Bay Area friends suffered withdrawal when the network went down for the last time.

Each T-Mobile Hotspot requires a T-1 line into a Starbucks. While this makes the network fast, it also makes it expensive. Doing the math isn’t my strong point, but even a rank amateur can figure this out. Given the current cost of a T-1, each Starbucks would have to have a couple of dozen regular users of the network to make it cost effective. Over 2000 Hotspots: this means you would have to have 50,000 users. The problem is that the same people are on their laptops in Starbucks all the time. I, for instance, would go from a Starbucks in San Jose to one in Pacifica to one in San Francisco all in one day. For my $29.99, I’d get my money’s worth. But I wouldn’t be a new user at each different store.

It will take a long time to get people to pay for wireless access on their laptops, as well as on their cell phones. That’s why HP is also part of the rollout; their PDAs are, theoretically, the device of choice. This is going to be a tricky ‘convergence’ issue, because the cell phone providers are trying to put data on phones while the wireless ISPs are trying to connect your laptop or PDA. It’s a race to capture the customer, because very few are as foolish as I am: I’ve got cable modem, dial up, cellular, and T-mobile. (That’s why you hear from me when I’m in Costa Rica, in mid-air, in Starbucks, and even in the hot tub.)


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