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August 22, 2002

News for 8/22/2002

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Happy Co-existence in Portland, Oregon: Nigel Ballard reports from Portland on the T-Mobile/Personal Telco channel conflict: ...Personal Telco now has clear channel 1 usage at Pioneer Courthouse Square. The Oregonian spoke with T-Mobile today, and as a result of the co-channel usage issue, T-Mobile has done the right thing and moved their Pioneer Courthouse Square node to Channel 11.

Yes that's a victory for us, but it also shows that the big Telco's aren't unmovable, literally or otherwise. Of course the tremendous "David & Goliath" press coverage helped things along I'm sure...

If PTP ever moves into RF space that is already used by a T-Mobile or another user, I've stressed to the press that we will always endeavor to seek a vacant or non-interfering channel because we believe in the good RF neighbor policy.

Slack time not slackers: Yesterday's joint announcement by Starbucks and T-Mobile marked the end of a long, long beta cycle. I wrote an article for The Seattle Weekly in May 2001 when MobileStar had just started to light up Seattle-area outlets for testing, and Starbucks was a bit snippy with me about it.

I completely understood their problem with the article: the baristas and other employees weren't trained, the system wasn't tested, and they weren't even sure yet whether the whole thing would work out long-term. I sympathized, and I'm not an investigative reporter, but given that the network was live and reachable, it made sense to write about the early steps. (I would have been less sympathetic if they were just trying to manage PR, but it was more about operations than press.)

Ann Saunders, Starbucks vice president of interactive and new ventures, told me in an interview yesterday, "We have very quiet in the past about letting customers know about the stores." Starbucks now feels that they're ready to turn up the volume. Stores will have collateral materials and stickers that brand the star as a T-Mobile HotSpot, the new name for the service.

HP's involvement in the announcement was somewhat symbolic. I asked Saunders if the press event was a coming-out party for the partners who have taken over their original partners (MobileStar and Compaq), and she agreed that the real news was the increase in the number of stores with wireless access.

HP will have a more direct role in the future, potentially. In Seattle, during a brief time, there were Compaq iPaqs and freestanding kiosks. HP may be involved in bringing those back. "We have a test market in Denver where we have a handful of kiosks in stores," Saunders said. "We’re learning more about that. It’s definitely something we’re experimenting [with]."

T-Mobile will handle all technical support, as expected, with limited information available in the stores. "It’s a T-Mobile service, and they’re the folks that operate the network and can answer technical questions, and we think that’s the right way to talk about the service," Saunders said.

Saunders also helped explain a cryptic remark by Starbucks CEO Howard Schultz on Monday, when he said the new hotspots would make stores the "antitheses" of a cyber cafe. Saunders said, “hat we do is provide a terrific environment for people to come into, and either take a break and unplug, or, if they want to stay connected, they bring their own devices in and connect to the service that’s offered. If you say cyber cafe, you envision 15 monitors and computers lined up against the wall with uncomfortable chairs next to them." More specifically, she said, "We’re making a network available."

The new wireless users don't worry Starbucks. "We’re happy to have our customers in the stores, and what we learned in tests, is that most usage of our network happens outside peak hours and outside our capacity constraint time," Saunders said.

Who did the what to the who now? Starbucks partner in wireless networking is T-Mobile International's T-Mobile HotSpot service, according to the press release issued yesterday. The fine print says, "VoiceStream Wireless Corp. is one of the fastest growing wireless service providers in the United States. Its new T-Mobile brand debuted in the U.S. with the launch of service in California and Nevada in July and VoiceStream will transition its current VoiceStream brand to T-Mobile nationwide by the end of the year."

Various articles written about Wednesday's announcement called the company T-Mobile USA, VoiceStream, and other combinations.

Sarah Kim, a wireless analyst at The Yankee Group, said in an interview yesterday that this change in branding makes T-Mobile the clear winner in this partnership because of Starbucks better brand.

She cogently said, "The anchor point no matter what happens is Starbucks brand. Voicestream clearly has identity issues right now. They’re sort of the ugly duckling in this whole mess. It doesn’t really bode well for any real end of their business, especially something that’s new and really cutting edge. One of the things any big carrier could bring to this market is their brand name and their commitment as a brand name that there’s a consistent experience anywhere you go and the commitment that they’re continue to exist."

Needless to say, that consistency doesn't exist right at the moment.

Starbucks "is a pretty good logistically safe company to be rolling this out with. Not only is their brand strong, but they clearly have very good operations and customer service beyond everything else," Kim said.

Kim has some skepticism about the speed that revenue will come in from the venture. She noted that Wayport has raised over a $100 million in funding over its lifetime and is not yet close to breaking even. (Wayport recently said they hit 1 million connections, which could represent $7 to $10 million in revenue over the history of the company from single-day connections.)

Kim's response to Schultz's "antithesis of cyber cafes" remark focused on the image that a cyber cafe brings to mind. "The unfortunate part of the cybercafes that all went under in the early years is that they all focused on a business that was not core to coffee," she sad. "And unfortunately coffee tends to be a very very lucrative high-margin business, so I can see where he [Schultz] wants to make his shareholders and Wall Street confident in this idea that the coffee is not going to be an adjunct to connectivity. Connectivity is going to be complementary to a visitor—an enhancing technology or tool."

When you hear cyber cafe, she said, "You think of Linux programmers hanging out or gamers. Starbucks is all about trendy 20- to 30-year-old yuppies of the new cities, with high tech jobs. Coming in, coming out. It’s completely antithesis of the Linux programmer."

Despite the doubts about the current pricing and market, Kim said, "For Starbucks, it’s a no-brainer. It’s all part of their overall wireless strategic initiative, which includes wireless LANs but isn’t limited to it.”

Ding, Dong, T-Mobile Calling: The Rosai Group, a Macintosh reseller and network consulting company, just happens to be next door to a Starbucks in the Mission District of San Francisco. And that Starbucks just happened to be the anointed location for yesterday’s joint announcement by Starbucks, T-Mobile, and Hewlett-Packard of the expansion of T-Mobile’s service in Starbucks outlets, and HP’s new configuration software.

A few days before the press conference, Kyle Emerick, the co-founder and co-owner of The Rosai Group, received a visit from T-Mobile’s installers. "They came over and asked, you have this Apple AirPort network, and can you turn it off for a day or change the channel," Emerick said in an interview yesterday.

Originally, this account sounded like an aggressive move, but after talking with Emerick, it's clear that the T-Mobile installers were more concerned about PR than technical details.

"They were worried about the CEO of Starbucks being there and seeing these other locations. When they did their demonstration, our network showed up as one of the choices. They didn't like that.

"Maybe it’s my growing up in New York, but they probably could tell they were not going to get very far with asking me to do this. If they had come over with an envelope of money, okay, I’ll turn it off for the day."

Instead, Emerick changed the channel. Meanwhile, Surf and Sip's founder Rick Ehrlinspiel had heard of the demo and he knew the two owners of The Rosai Group, Emerick and Carlos Rosai. On Tuesday, Ehrlinspiel installed a Surf and Sip hotspot in their offices, and was on hand to give out coupons for 10 hours of free access as the press arrived on Wednesday morning.

The event itself disrupted The Rosai Group's business. "They had parked a convertible Mercedes in one of our parking spots, and the whole block roped off with the San Francisco Police Department," Emerick said. "They should have approach us with a little bit more finesse." He added, however, "The Starbucks people have been nothing but nice." He and his co-workers frequently use their private network while working at Starbucks.

Emerick noted an interesting phenomenon while T-Mobile predecessor MobileStar was bringing that Starbucks outlet online, and the network didn't require authentication to access. "We would have these old hippie relic campers parked in front of our office with about 14 dogs, and they had these brand-new Apple laptops with the glowing Apple," Emerick said. "I went up and asked what he was doing. He was hitting the Starbucks network."

"Here’s a guy who, I don’t even know how he got the money to buy the laptop, and here he is on the Internet surfing the Net. We had so many of those in the neighborhood it was unbelievable."

Word spreads fast.