Print 13 comment(s) - last by CubicleDilbert.. on Jun 11 at 12:33 PM

  (Source: FreeFoto)
Starbucks and AT&T profiting merrily from deal, T-Mobile incensed.

AT&T and Starbucks are very close these days.  Starbucks buys WiFi internet from AT&T for its cafes and offers users of Apple's iPhone special offers like in-store downloads and free WiFi as well.  T-Mobile isn’t so happy with these arrangements and claims that it had an exclusive arrangement with Starbucks, which the company violated through secret collusion with rival AT&T.

T-Mobile filed the suit last Thursday in New York State Court.  The suit references an agreement that had been reached between AT&T, T-Mobile, and Starbucks of how to handle the transition of some stores from the old T-Mobile contract to the new AT&T contract.  The agreement, reached in February, promised that T-Mobile would stay in operation in the stores and have the exclusive rights to "sell, market and promote its services" until AT&T had fully set up its systems at the store.

The new suit alleges that Starbucks and AT&T conspired to sneak out of this agreement.  It seeks unspecified damages against the coffeehouse giant for breach of its contract and unfair competition.

According to the agreement, the stores would be converted on a "on a market-to-market basis", likely by region.  Until the conversion of a market, T-Mobile states, it would have exclusive sales rights.  T-Mobile's lawyers write, "T-Mobile had made a very significant investment in the technology and equipment necessary to provide Wi-Fi service in the many thousands of Starbucks stores in the United States."

According to the law team, "Starbucks and AT&T ... secretly developed a promotional plan under which they would offer 'free' AT&T/Starbucks Wi-Fi even in stores" which were supposed to still be T-Mobile supported.  The suit details, "To date, only two markets -- the San Antonio, Texas, and Bakersfield, California, markets -- have been transitioned from T-Mobile to AT&T."

Starbucks spokeswoman Stacey Krum issued a statement taking issue to T-Mobile's claims.  She says, "Our goal is to ensure Wi-Fi access at all Starbucks locations. This is a benefit offered to our Starbucks Card Rewards members as well as AT&T subscribers and steps are being taken to ensure that this access continues."

The competition between AT&T and German-owned T-Mobile is typically fierce.  T-Mobile is the fourth largest mobile phone company in the United States, while AT&T is currently the largest (though it will likely be passed by Verizon once the sale of Alltel Wireless is complete). 

The pair clash frequently in the WiFi market.  In recent years coffeehouse WiFi has become an increasingly promising customer draw and source of income.

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Remember when...
By amanojaku on 6/9/2008 11:48:30 AM , Rating: 5
in-store Internet access was free? At Starbuck's prices they should be paying us to use the Internet.

RE: Remember when...
By aharris on 6/9/2008 12:01:29 PM , Rating: 2

RE: Remember when...
By FITCamaro on 6/9/2008 1:01:49 PM , Rating: 2
Yeah I think its ridiculous that they want $5 for coffee and can't throw in free internet. I mean a business internet connection is $100 or so a month. You're telling me they can't eat that cost with the money they make?

RE: Remember when...
By Polynikes on 6/9/2008 1:28:39 PM , Rating: 3
No, they definitely can. But why leave that revenue stream untapped? It's not like the morons that go to Starbucks really care, they're already paying out the nose for a cup of "coffee."

RE: Remember when...
By amanojaku on 6/9/2008 1:42:16 PM , Rating: 2
Good thing I have iPass through my job. I see they have a consumer product, as well. Hey, Starbucks. What's that smell? C-c-c-competition!

RE: Remember when...
By Smartless on 6/9/2008 2:36:48 PM , Rating: 2
Not that I think they're doing bad but they could also be a victim of their own business plan. I mean a Starbucks next to a Starbucks means high overhead costs as well. Their stocks dropped a bit but I think profits stayed the same and no I don't think McDonald's was a huge factor.
I think charging for internet was a way to start covering some of their huge overhead. No argument on overpriced coffee though, heck I can actually get Kona coffee for free.

RE: Remember when...
By ColossusX on 6/9/2008 1:39:15 PM , Rating: 3
In all honesty, why shouldn't they charge? I know its a benefit for us, but they're in business to make money, and charging for access makes them money. Imagine if they pay $100 for business class access, and they make $1000 on access charges...that kind of markup is great for a business that wants to stay in business. Besides, Starbucks is closing about 1% of its under performing stores and sales were down from a year ago in the last quarter for 2007. I would love free access just because they charge so much for other services, I wish Comcast would give me free access since I pay $100/month in cable, but I still have to pay an extra $45 for my high speed. Most companies could "eat the cost with the money they make" on various services, but then they wouldn't be making their shareholders any money and would probably go out of business. I have my own construction business and sure, I could cover the cost of some materials, say deck screws, but then I would lose about $50-100 per deck alone, and my shareholders (wife) would not be happy about the lost income. Or if they want free deck screws or free internet access, I could just charge more for my other services or in this case, pay even more for a cup of coffee.

RE: Remember when...
By Bonesdad on 6/9/2008 6:34:01 PM , Rating: 2
you think you're paying for coffee with that $5? It pays for overhead...lots of it is healthcare.

RE: Remember when...
By sprockkets on 6/9/2008 8:50:33 PM , Rating: 2
yeah, getting health care at a job like starbucks is cool.

That, and since people there are so damn picky about their coffee, you can't suck at making a latte either.

RE: Remember when...
By cmdrdredd on 6/9/2008 9:51:26 PM , Rating: 2
Too bad the coffee sucks too. Used to be good, now it's terrible.

RE: Remember when...
By Jedi2155 on 6/9/2008 10:41:39 PM , Rating: 2
I still love it, but I only go about 3-5 times a year since its so damn expensive.

By Cullinaire on 6/10/2008 2:15:34 AM , Rating: 2
I love the muffin!!!

By CubicleDilbert on 6/11/2008 12:33:48 PM , Rating: 2
Last week I went to Starbucks on a business trip in Germany. They have quite unreal prices for their latte, but it got right ridiculous when I wanted to use internet while sipping my expensive coffee.
T-Mobile charges EUR 10,- per hour (in words ten euros per hour), that is about $16,- per hour and the connection would sometimes be shaky because of bandwidth limits.
I can understand now, that nobody was happy. Not even the Starbucks staff, who whispered to me a better WLAN hotspot across the street.
Yeah, T-Mobile is the exclusive iPhone provider in Germany. They charge EUR 299,- for the phone and another EUR 2500,- for the 24 months contract.
I can understand now, that about 80.000 iPhones were smuggled as gifts from US tourists returning to Germany. 80.000 iPhones are the actual estimation.

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