What is the real reason Starbucks is closing for 3 hours later this
montWhy did they switch to AT&T?
Apple is readying something ineresting later this month.
There is a neat TV show called CONNECTIONS! Here is an article that
connects a series of recent news events which will provide more
insight into the actions of Apple, AT&T, Starbucks, Broadcom and more.
IMHO a really neat read. http://db.tidbits.com/article/9458
Starbucks Deal Brewed with AT&T Has Hints of Apple
by Glenn Fleishman
I'm not an oenophile, but I do like wine. I've never mastered the
vocabulary of oaky, brawny, full of tannins, and so forth. But I do
know a whiff of fruit when I smell it. Yesterday's announcement that
Starbucks would switch its in-store Wi-Fi provider from long-time
partner T-Mobile to AT&T had a strong smell of Apple about it. (You
can read my coverage of this at my site Wi-Fi Networking News, or the
article I filed for The Seattle Times.)
In fact, I think the putative 3G iPhone plays a part here as well, and
that we'll see the 3G iPhone rolled out as part of a larger play that
involves downloading movies in Starbucks over AT&T's new network; that
puts the launch between March and June 2008. Let me back up a minute
AT&T Brings Millions of Subscribers to Starbucks -- The deal yesterday
brings Wi-Fi at 7,000 U.S. company-owned Starbucks stores at no
additional cost to 7 million AT&T DSL and U-Verse fiber subscribers -
all DSL customers with 1.5 Mbps downstream or faster connections - and
5 million business customers who use a remote-access service from
AT&T. It also offers free Wi-Fi for two hours a day for a period of 30
days starting each time you make a purchase of any amount using a
Starbucks Card, their stored-value swipe card.
Pay-as-you-go service is $3.95 for two hours, down from $6.00 per hour
or $10.00 per day with T-Mobile.
Monthly unlimited service is also available, although that requires a
little explanation. AT&T splits its hotspot network into Basic and
Premier tiers. The Basic network currently includes McDonald's (8,500
stores), Barnes & Noble, and several airports; Starbucks will be added
to that tier. Qualifying DSL and all fiber customers get Basic service
The Premier tier adds roughly 1,000 locations in the U.S. like hotels,
airports run by other providers, and convention centers, as well as
53,000 international roaming locations. Premier cost $19.95 per month
for everyone except the qualifying DSL and all fiber customers, who
can upgrade to Premier by paying an extra $9.95 per month.
Subscribers to aggregator hotspot services like Boingo Wireless that
already have a roaming relationship with AT&T will get Starbucks
access at no additional cost, too. Boingo charges $21.95 for unlimited
U.S. access, which includes pretty much all domestic airports and tens
of thousands of other U.S. locations, making it the best bargain.
(Boingo hasn't updated their software client for Leopard, but a
company spokesperson told me some months ago that nearly all Boingo
partner locations allow a Web page login with Boingo credentials.)
The rollout starts in the second quarter of 2008 in major cities, and
will continue through the year. (This deal covers only U.S. company-
owned Starbucks, not the kiosks found in airports or licensed
purveyors in places like Barnes & Noble, and also doesn't affect T-
Mobile's arrangements with Starbucks outside the U.S.)
Starbucks has never expressed dissatisfaction publicly with T-Mobile,
which purchased a bankrupt firm's assets and took over the Starbucks
Wi-Fi buildout in early 2002. It's quite clear that the company made
sure that existing T-Mobile HotSpot subscribers wouldn't be
disconnected when AT&T takes over: anyone with a T-Mobile data
subscription that includes Wi-Fi or who uses their Wi-Fi/cell plan to
place calls using special handsets has unlimited, long-term access to
all Starbucks locations.
Rather, T-Mobile couldn't offer Starbucks anything particularly
special, and couldn't further its relationship with Apple. When Apple
announced that Starbucks would be a partner in a special branded
service available on the iPhone and iPod touch and within iTunes to
extend the iTunes Wi-Fi Music Store, T-Mobile's name wasn't anywhere
on that press release; nor was AT&T, Apple's multi-year exclusive
iPhone reseller in the U.S.
Overwhelming 3G -- AT&T operates a 3G (third generation) cellular
network, and last week announced that the telecom firm would be
expanding and upgrading that network this year. (See "More Mileposts
Along Road to 3G iPhone," 2008-02-06.). The company also owns a huge
amount of copper and fiber optic in its territory stretching - with a
southwestern gap - from California to Florida. (Qwest owns the
Northwest, mountain time zone, and Midwest; Verizon, the northeast
down to Virginia.)
The company is using Wi-Fi as a bridge between wired service, which
increasingly includes fiber-optic connections to neighborhoods, and
its wireless service. You can push a lot of data over copper and
glass, and have essentially as much of that as you want to build.
Wireless spectrum is finite, and there's never as much as you want.
The current set of auctions for retiring analog television frequency
shows how much interest there is: $20 billion and counting for an
excellent swath, that includes nearly $5 billion for a single set of
national licenses suitable for broadband wireless. AT&T just finalized
a separate purchase of about half the amount of national spectrum
currently up for bid from a firm that bought it in a previous auction.
The long debate over whether 3G or Wi-Fi is "better" disregards the
fact that Wi-Fi has a far higher carrying capacity. While most
hotspots backhaul no more than 3 to 6 Mbps downstream, and most are
closer to 768 Kbps to 1.5 Mbps downstream, an 802.11g Wi-Fi network
can push 20 Mbps across a single base station, and the new 802.11n
standard can top out at rates over 90 Mbps. (The raw data rates for G
and N are 54 Mbps and 300 Mbps, respectively; the rates I'm citing are
for access in close proximity to a base station but in typical
AT&T's current flavor of 3G, HSPA, can only carry 3.6 Mbps downstream
and about half that upstream; each phone or device in range is likely
to see the upper 100s of Kbps downstream and half that upstream, with
higher peak rates for sustained transfers. And the more people using
3G connections, the less likely peak speeds are achieved.
When the current iPhone models were released, reports state that usage
of EDGE - a moderate speed "2.5G" network standard that straddles
second- and third-generation standards - tripled in cities like San
Francisco. You can imagine that the release of a 3G iPhone might bring
AT&T's still-expanding 3G network to its knees.
Which is where Starbucks comes in. AT&T and Apple clearly cut a deal
where Starbucks benefits from becoming a digital media hub: It's going
to be the place where people congregate to use Wi-Fi as part of the
monthly service fee that they already pay AT&T - this wasn't announced
yesterday, but it's absolutely coming - and where they download media
It's Not about EDGE, It's about the Edge -- Here's where it all comes
together. Starbucks already has media servers in its stores. These
servers host the songs that Starbucks plays. But they aren't simply
jukeboxes. They also have magic that allows a customer in a Starbucks
cafe to purchase a song they just heard or that was recently played
and have that song downloaded locally - not downloaded over the
Internet from Apple's iTunes. That means that Apple is wrapping DRM
(digital rights management) on songs that require that protection in
each store. Neither Starbucks nor Apple had previously discussed this,
but I interviewed Starbucks's chief technical officer Chris Bruzzo
yesterday for The Seattle Times.
Even though there was no mention of Apple yesterday in this deal,
Bruzzo and I spoke about the iTunes Wi-Fi Music Store arrangement in
Starbucks. I asked him if there were any plans to stick media servers
in the stores, and he said, "Right now in our stores that have the
iTunes Wi-Fi Music Store, you go and buy the song that's playing
directly overhead, and see how fast it transfers."
He wasn't being coy; the company isn't talking explicitly about this.
But he said, compare the transfer speed between songs that were
recently played and those available through Apple's broader iTunes
catalog, and you can see the difference.
He noted of the iTunes Wi-Fi Music Store, "That's a great example of a
location-based service that's highly contextual. And the ability to
use the superior speeds of 802.11g to deliver a file that's relevant
to a particular environment." This isn't very subtle. They have
servers in the stores.
If you were to put, say, a server with a couple of terabytes (T
storage, which is now maybe a $2,000 to $3,000 expense, and load that
with the 100,000 most popular songs and the 500 most frequently rented
films and the few hundred most recent and popular TV shows episodes,
suddenly people can download those files at the local network's speed,
not at the speed of the Internet connection.
If I'm downloading a 1.3 GB movie file on my home network at 3 Mbps
downstream, it's going to take about an hour. Not bad. If I instead
purchase and download it over an otherwise non-busy 802.11g network,
it's suddenly more like nine minutes. If that network were upgraded by
AT&T, say, to use 802.11n, and I'm downloading it to my fancy MacBook,
MacBook Air, or MacBook Pro with 802.11n (Core 2 Duo versions), we're
now talking about...wait for it...perhaps two minutes.
Did I mention that a 3G iPhone is likely to include a new low-power
802.11n chip as well? No? That's almost certainly part of the delay in
producing it, as those chips are just hitting the market now.
The edge network, the network that feeds data locally at local network
speeds, becomes extremely important in this scenario.
Your New Living Room -- Starbucks has always cultivated an artificial
living room: a place probably more comfortable and convivial than most
of our actual living rooms (if we had them); it's also an extension
for Gen-X of the ranch house they might have grown up in that they
couldn't afford to rent.
It's not a leap at all that Starbucks, already a big music producer
and seller, and one interested in revitalizing its business after a
few years of drifting from its core coffee mission, would embrace the
idea of being the place people who don't even like their coffee come
to fill up on media, use the network, and hang out.
All Starbucks' stores in the U.S. are closing later this month for
three hours to retrain the staff on making coffee better. The baking
ovens for breakfast "sandwiches" have started to be ripped out. And
this deal is now in place. It's no coincidence.
Starbucks is poised to be the launch partner for the 3G iPhone, and
they're getting their living rooms cleaned up for the coming hordes.