T-Mobile Sues Starbucks Over Free Wi-Fi Deal

Glenn Fleishman writes "T-Mobile sent me the text of a lawsuit they filed yesterday against Starbucks. The telecom firm alleges that Starbucks didn't involve it in any discussions to launch their free loyalty program Wi-Fi service this week with AT&T. AT&T is gradually taking over hot-spot operation from T-Mobile, market by market over the course of 2008. T-Mobile told me Starbucks is essentially giving away something that isn't theirs. T-Mobile has sued to halt the two-hours-a-day of free service, and is asking for money to cover losses. This might sound like sour grapes, but T-Mobile still operates most of the network, and says that the terms to which they agreed with Starbucks and AT&T for the transition and with AT&T for bilateral roaming don't cover this situation at all. Maybe free access in exchange for buying a cup of joe every 30 days was too good to be true (this soon)."

Comments

Hmmm

[Thyamine]

Maybe I don't understand, but if Starbucks is already paying them for having the wifi service, why can't Starbucks give it away/charge for it as they like? Did the original agreement require Starbucks to charge each user on behalf of TMobile or something?

Re:Hmmm

[kesuki]

the problem, is that starbucks rolled out this wifi thing in 2002, and instead of putting in highspeed internet in each and every starbucks, they put in a wi-fi access point that relayed the data over a cellular network.

much cheaper than paying $40 a month per location for dsl/cable, assuming each store could even realistically get broadband service.

every place that has 'free' wifi, is a place where they put in high speed internet for their 'inventory' system, and the 'free wifi' piggybacks on that internet connection. in some cases, they use satelite for the inventory system ugh.

Re:Hmmm

[austexmonkey]

'Thanks' for the 'explanation'. I've often 'wondered' how 'free wifi' 'worked' in 'restaurants' and the 'like'. I 'find' it surprising that 'satellite' is still used for 'inventory' 'systems'.

Re:Hmmm

[Zero__Kelvin]

"Maybe I don't understand, but if Starbucks is already paying them for having the wifi service, why can't Starbucks give it away/charge for it as they like? Did the original agreement require Starbucks to charge each user on behalf of TMobile or something?"

Wi-Fi through T-Mobile is known as Wireless Hot Spots, and users do not pay Starbucks, they pay T-Mobile. Presumably Starbucks pays T-Mobile something under the theory that the access brings more customers. (Actually, that theory is true, as I have bought numerous Grande Cafe Mochas that I would not have otherwise purchased, because I decided to go to Starbucks instead of some other CSP (Caffeine and Sugar Provider) for the T-Mobile Hot Spot access.)

They can't give it away or charge for it as they like because they didn't purchase the infrastructure; they have a contract. ObCarAnalogy : If I buy a car from a rental company I can do with it what I wish within the bounds of the law (and optionally physics.) If I rent a car I cannot let whomever I wish use it and charge them as I like.

Disclaimer: I may have the law and physics part mixed up a bit. I forget which one is real and which is imaginary. Teh Maths are not my strong point :-)

Re:Hmmm

[Zero__Kelvin]

So what you are saying is that Starbucks partnered with T-Mobile to provide the access in 2002, rather than doing it themselves. You further imply that if Starbucks had not entered into a deal with T-Mobile, they would not be sued for violating it. Somebody mod the parent insightful! (I do consider it informative, but it has absolutely nothing to do with "the problem", which is contractual violation not technical implementation.)

There should be a -1: Unable or unwilling to capitalize option though.

Re:Hmmm

[maxume]

I'm normally all for the tiresome parsing of other people's statements in ways that they clearly did not intend, but you are really pushing it here.

Re:Hmmm

[Zero__Kelvin]

I have no idea what you are doing here. You should be off having sex with animals, which - by your argument - the law has been allowing you to do for years now. (See parents SlashID and E-Mail address if this sounds like it comes from the ether.)

Re:Hmmm

[menace3society]

My understanding, having glanced at TFA and knowing someone who uses wifi in Starbucks, is that Starbucks doesn't pay them for the wifi service. You get an account with T-Mobile to use their service, which is based in Starbucks locations. T-Mobile probably pays Starbucks for the privilege.

The contract with T-Mobile is set to expire soon, so Starbucks has now gotten a better deal with AT&T to provide free service for Starbucks-card-holding customers, and better rates for irregular ones. This is all fine and dandy, but the deal is that until the AT&T roll-out is complete, the existing T-Mobile deal is to stand. However, it appears that Starbucks has somehow disabled the authentication for the T-Mobile access points, so that all their locations can have free wifi.

Someone correct me if I'm wrong, though.

Re:Hmmm

[Anonymous Coward]

the problem, is that starbucks rolled out this wifi thing in 2002, and instead of putting in highspeed internet in each and every starbucks, they put in a wi-fi access point that relayed the data over a cellular network. Incorrect. TMO pulled T1's into virtually SBUX for backhaul. This is one of the reasons TMO could charge a premium. Not sure where you got the cellular idea.

Re:Hmmm

[Ugliarch]

I'm not sure that's quite true. As a technician for tmobile, I have been involved in setting up many tmobile hotspots and each one has been some sort of T1 connection to the site.

Re:Hmmm

[Anonymous Coward]

Yup, you are correct, I consulted for initial deployments in some markets. TMO is footing the bill for the free AT&T/Starbucks usage.

If Starbucks so choose to have free access then the terms of the agreement require them to pay for the service out of their marketing or operating budget. Right now the free service with a drink/starbucks card is NOT being payed for to the provider, T-Mobile. That is what the beef is about.

TMO agreed to a proper transition with free services to be handled by AT&T once the full equipment handover occurred.

If Starbucks wants to offer free service before the full cut over, then AT&T needs to be paying T-Mobile for the usage.

Remember there is a revenue agreement in place through 2009 where T-Mobile is the CURRENT provider until all the hw is moved over to AT&T.

Make sense folks?

Re:Hmmm

[Achromatic1978]

In some ways AT&T is contract-jumping on TMO, encouraging Starbucks not to fulfill their obligations and courts really don't like that between businesses.

The phrase you are looking for is tortious interference, where someone influences a party in a contract to breach that contract, or otherwise works to prevent a contract being established by two other parties.

Re:Hmmm

[rt793]

The deal is exactly like you have described. There are still approx. 6000 Starbucks sites that T-Mobile is required to support until the migration to the ATT network is complete. Starbucks was a major high maintenance customer for the T-Mobile HotSpot service - to the tune of 85%. When Starbucks spoke, T-Mobile jumped. One could never say "No" to Starbucks no matter how insane the request was for fear that they would take their business. In the long run, they did took their business to ATT. Some say it was T-Mobile's pass on the iPhone the motivated Starbucks to seek another provider. Even T-Mobile's gallant efforts to deploy the iTunes music service was not enough. Let the games begin.

sent text?

[Anonymous Coward]

T-Mobile sent me the text of a lawsuit they filed yesterday

Just wait, they'll charge you 50 cents for that too.

Poor T-Mobile...

[Anonymous Coward]

T-mobile is one of those companies that have been charging exorbitant fees for basic Wifi service.

Why would one feel sorry for t-mobile?

The least one can do is investigate for possible price-fixing between operators of paid Wifi services.

The costs to run a public WiFi service are pretty low (considering that all software is available as open-source, so no licensing fees).

Re:Poor T-Mobile...

[torkus]

As someone else mentioned, TMO is generally cheaper than their competetion. I'd love to see where the 'exorbitant fees' are.

Ignoring that, the cost to run a public WiFi service isn't all that low if you want the ability to actively montior, track, and maintain the network. Yes, there's open source software available. How much of it is designed for centralized management of a 10,000 node public wifi network?

Even more than that, you've got the cost of the internet service (e.g. T1 lines to each hotspot). Even if you went DSL, the cost for DSL/Cable to a *business* is far higher than the $20/month promo-deal you found on fatwallet.

Could i run a single hotspot in a local coffee shop for low enough cost to give it away? Sure. Can you run one in every starbucks with 24/7 monitoring, status, and low down time for free? No. There's cost in there somewhere that has to be made up.

In case you haven't noticed, ATT is throwing money at ever opportunity they can to build customer base. The iPhone and Blackberry Bold are good examples. I doubt they'll ever disclose how much they paid for those contracts, but it's huge. How long this game will last is anyone's guess.

Re:Does anyone actually Care

[Anonymous Coward]

I do not do T-Mobile or Starbucks. How is this even close to Nerd News?

It involves caffeine and computers, how would it not be interesting to nerds? What we have here is a Pringles can full of burnt coffee causing a failure to communicate.

Free wifi should be universal

[teslatug]

I still don't get why every coffe place doesn't have free, unencumbered wifi access to everyone. It's a great way to get more customers. I always check if there is a free wifi before getting coffee some place. It won't cost them more than a few cents per coffee, which they could easily hide in their 3,4,5 dollar beverages. It boggles the mind.

Re:Free wifi should be universal

[stickystyle]

Freeloaders that never will buy coffee.

Don't tell me that's not obvious to you.

Re:Free wifi should be universal

[falcon5768]

a lot of coffee places I know DO give it away free, both local shops and some larger chains like Panara Bread and Atlanta Bread Comp. The whole reason I DONT go to Starsucks is because the coffee is not that great and having to PAY for crappy coffee and wifi service is too much for me when I can go down the street to someplace with a decent cup and free wifi.

Re:Free wifi should be universal

[ScentCone]

I still don't get why every coffe place doesn't have free, unencumbered wifi access to everyone

For the same reason that the people who DO provide it without any connection to a transaction end up having all of their seats taken up by non-customers, and have to put up notices begging people to limit their use of the system during their peak business hours.

I've had reason to pick sit-down-for-coffee-and-a-pastry places several mornings in the last couple of weeks. Within a couple hundred meters from each other: a Barnes & Noble, which uses AT&T for their $3.99/two-hours deal, Starbucks (which uses the above-mentioned, much more expensive T-Mobile deal), and a Corner Bakery Cafe, which loudly proclaims via storefront window stickers that all of their cafes now have free WiFi. Yes it's free, but it's intermittently wonkly, slow slow slow, and clearly wanders through a laborious proxy (just like the free service at Panera).

There's outside seating at the Corner Bakery. Every morning and lunchtime it all fills up with people from the local office buildings. They walk in to Starbucks for the better cup of coffee, and then walk over to the Corner Bakery and sit down to use the free wifi. If I were managing that store, it would piss me off. As a customer with the decengy to give the Corner Bakera $3 and change for some eggs on toast, it pisses me off to have less use of the pipe because other people are hammering it (this morning, five people sitting outside onlone: one was streaming YouTube, and one was video chatting (badly). But what are they going to do, burn good will with people who might, one day, actually buy a sandwich from them, by running them off? So, the leeches win, and the actual customers they're hoping to attract lose. I guess they could put in six nodes and an OC48.

The same local Starbucks couldn't possibly seat the number of camp-out road warriors who would hog their pipe if it were free to all. At least if you couple the use of the wifi service to the purchase of their served products, there's something redeeming in offering the service... and less of a need to run of the leeches.

Re:Free wifi should be universal

[klapaucjusz]

I still don't get why every coffe place doesn't have free, unencumbered wifi access to everyone. It's a great way to get more customers. I always check if there is a free wifi before getting coffee some place.

You're assuming that they have their own ADSL link to every shop. They don't. They decided to let T-Mobile and AT&T control their networking infrastructure, and the operators are understandably less than thrilled by the free competition.

In other words, they decided to give control of their network to a potentially hostile company, and they're getting what they bargained for.

Re:Free wifi should be universal

[Lumpy]

2 of the smaller coffee shops around here with free wifi solved that.

you have a code on your recipt. that code is entered into the nocatauth screen to give you access.

It's brain dead easy to do with IT people that know what they are doing. Maybe starbucks needs to hire competent IT people?

Re:Free wifi should be universal

[Savior_on_a_Stick]

The problem is that your local Mom & Pop cafe isn't managing their wifi properly.

Our cafes all offer free wifi, and it will always be free, and not tied to transactions.

I was dragged into a Starbucks once a couple of years ago.
Annoyed the crap out of me that I would have had to pay for wifi.

I just upgraded one of our locations to 16/2, and another will get upgraded next week.

I monitor usage to weed out activities that that can cause us liability - but that's about it.

We've received two dmca letters to date, which caused me to go OpenDNS to block the p2p websites and I block unencrypted p2p at the router. The only dns block categories I use are p2p and phishing sites.

Am I blocking the ability of someone to download the latest Ubuntu distro?
Only if they are running unencrypted. And if they do hit a blocked site, customers are given a page telling them why and email and phone number are listed if they have any questions or concerns.

I've had zero calls/emails so far.

Our strategy may not work for everyone, but I like to think we have a better class of customer than most cafes.
Certainly much higher than the mouth breathing foofoo coffee denizens of Starbucks.

$95 a month is cheap to ensure a fast, reliable connection.

Re:Free wifi should be universal

[Savior_on_a_Stick]

You would think so, but there are market oddities that I've never been able to grok.

Seattle is one of the more unwired cities, yet charging for wifi is the semi-accepted norm there.

Portland, while arguably the most unwired, has an environment where charging for cafe wifi is culturally unacceptable. Starbucks still charges for it here, but being a corp controlled entity that receives marching orders from distant overlords, they really don't count.

So, in some markets, charging for wifi may make business sense.

A lot depends on the ethic your company has and what drives it.

We're coffee driven - best beans our buyer can find, roasted by the best roasters in the world, prepared by baristas who have been selected for their passion for coffee.

That's not meant as an advertisement or anything.

It's just that we have one focus, and selling wifi, or panini, or anything else that detracts from serving the best cup possible just isn't going to happen.

So our free wifi is in place because of both who we are and where we are.

Re:Free wifi should be universal

[houghi]

That would be the way I would do it as well. Advathage is that you can give more time at moments there are lesser people. You can even link it to a customer card, so people who come more often get more bandwith and/or more time.

I would expect this to be standard. Just a code and a timelimit connected to it.

Re:Free wifi should be universal

[Savior_on_a_Stick]

I was explaining what I do - not offering a solution.

If I had a problem with a couple of bandwidth pigs, I'd first try publically disallowing high bandwidth activities that I truly don't want - ie: unencrypted Bittorrent.

Next would be to use proto based qos and drop high bw protos to the bottom of the heap.

Following that would be to isolate any individual troublemakers and use mac based qos to slow their connection to unusability.

There are *lot* of things that can be done to discourage certain types of usage.

Again, I likely have a better class of user than most cafes, so it was a trivial matter to trim out the unwanted usage.

If this is beyond the means of an individual cafe owner, it is easy to get help.

Most localities of any size have some sort of volunteer group dedicated to ubiquitous free wifi.

We have a group here that will go so far as providing the ap and supporting it as long as the owner springs for the internet connection. I've even seen them arrange a sponsor to pay for the connection in key areas where there are no existing free ap's.

If the issue is one of simply too many freeloaders physically crowding out the paying customers, then, yes - you have a thorny problem if the cafe operators are technically challenged.

We have a pretty tightly knit community and this has never been an issue, other than the cars in the lot sucking up free wifi in the wee hours of the morning. And even those are merely a curiosity. They don't displace paying customers. I suspect they are too embarrassed to occupy a seat without making a purchase.

I'm glad we have such a community. I can walk into the cafe - announce that I need to reboot the router, and my customers have no problem asking me to wait a few minutes while they finish a quiz for their distance learning class. They have no problem approaching me about issues connecting, etc.

And I'm not even in the cafes that much, other than to grab some nice french pressed single origin to start my day.

Maybe I'm just lucky that my employer knows what he's doing, and our customers are generally fiercely loyal and wouldn't do anything to damage the community we enjoy.

Every day I wake up happy to go to work, and consider myself fortunate to be well paid to do what I would be willing to do for free.

Re:Free wifi should be universal

[garett_spencley]

I have to wonder, as I've never used Wifi at a coffee shop, are these networks secured at all ?

I admit that I don't really know the exact problems faced by these coffee shops, but assuming it's as simple as non-customers using up tons of bandwidth then why not print the WPA key on the receipts and change it each morning ? If you don't want to tie Wifi to a transaction then write it on the menu and make it so it's not visible from outside the coffee shop. That way you at least get people inside of your store, and business 101 says that getting people in the door is the first step towards making a sale. And lets face it, coffee shops are there to make money. If people are physically entering the store and sitting down at a table to use Wifi and not paying for anything then there's no reason not to ask them to leave. I mean restaurants and strip clubs don't have a problem asking non-paying customers to GTFO. Why is it different for coffee shops ?

As for bandwidth hogging activities I don't really see any reason NOT to block bit torrent and p2p etc. Letting people surf the net and check their e-mail over a coffee seems, to me, to be the real reason to offer Wifi. Torrents and p2p don't just hog bandwidth they can create potential liability for the business. So while the GP didn't necessarily offer any solutions to big chains I have to agree with him that any coffee shop running into problems isn't managing their network properly.

Re:Free wifi should be universal

[rshimizu12]

I think this is a great idea as well. Personally I don't understand why the coffee houses did not adopt this type of demand pull marketing years ago. it's ridiculous to think that people are going to pay another $30 a month for wifi. For Starbucks ATT service makes a lot of sense because they cater to a wide range of customers. For ATT it makes a lot of sense, because it gives users incentive to sign up DSL/U-verse service since it is provided free with the service. The Starbucks model is supplanting city wide wifi, because they have so many locations.

Re:Free wifi should be universal

[kidgenius]

Fine.... you create a set of randomized passwords. in order to use the service, you use the username of "starbucks" and one of the random passwords that is only good for one hour. You can tell your blackberry, phone, pda to use a certain login for the network, and that should do it. Same idea really.

Re:Free wifi should be universal

[newsdee]

I live in a city where every coffee house offers free open wifi to everybody. You don't even need to buy to get on it. And my town's neighborhood management council offers free wifi in the largest public areas (where most of the shops are). And they still manage to make money. If you're outside using the net and get thirsty, you're most likely to get into the coffeehouse and get a cup of something.

The thing is that once most places offer free wifi, not having it is a disadvantage.

Lawsuit happy..

[WhatAmIDoingHere]

These are also the people who tried to copyright the color magenta. They also have sued at least two companies that I know of over 'their' color.

Maybe these lawsuits are the last flailing movements of a dying beast.

Re:Lawsuit happy..

[TheoMurpse]

Trademark, not copyright. Here. I don't really care about the merits of T-Mobile's claims, but there is Supreme Court precedent saying that a color can be trademarked in certain narrow circumstances (the alleged holder must show "secondary meaning"--basically, that customers associate the color with the brand). Recall that trademark traditionally (and arguably still mostly) is geared towards alleviating customer confusion. In that light, such a trademark might make sense (again, not saying it does in T-Mobile's case, as I don't know anything about it).

See Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159 (1994) for illumination. I disagreed with the concept until I studied the case in IP Law. Now I'm neutral.

Re:hmm

[WhatAmIDoingHere]

Because AT&T threw money at them. The iPhone and Starbucks target demographics overlap heavily.

Huh?

[JustNiz]

How is it comapnies can sue for _NOT_ doing buisness with them?

Maybe I'm missing something but this sounds like the equivalent of getting a lawsuit from Dominos because I ordered a pizza from Papa Johns instead.

Re:Huh?

[maxume]

The original agreement with T-Mobile is probably exclusive in some way. It isn't like Domino's suing you because you ordered from Papa John's, It's like Domino's suing you because you let Papa John's use the pizza booth in your living room, when you had agreed to only allow Domino's to use the booth.

Contracts

[digitalderbs]

FTA :

The suit notes, "If AT&T or Starbucks wanted to offer 'free' Wi-Fi in non-transitioned stores for Starbucks customers, as they are now doing, they should have - and, indeed, were contractually required to - negotiate such an arrangement with T-Mobile."

Re:hmm

[iknowcss]

LOL what's a demographic?

Sent from my iPhone

But does their contract guarantee exclusivity?

[brundlefly]

There's nothing about Wi-Fi technology which would prevent AT&T and T-Mobile from both being offered in the same stores. Choose the provider whose price suits you best. (Per-hour for T-Mobile, or mandatory occasional coffee purchase for AT&T.)

If T-Mobile has no exclusivity contract, then my ruling would be that they are up the creek.

Then again, IANAJ.