Starbucks' decision to switch its free customer Wi-Fi service to Google (NASDAQ:GOOG) from AT&T (NYSE:T) was predicated on two superior offers from Google: a data speed increase of 100 times in certain locations and innovative content for Starbucks' landing page.
(Image source: Starbucks)
The coffee chain announced Google will provide upgraded Wi-Fi service to more than 7,000 company-owned stores in the United States. There will be an 18-month transition period from AT&T to Google, though some Starbucks stores are expected to start getting service via the Google agreement this month.
Starbucks recently conducted a request for proposal (RFP) process for improving the Wi-Fi experience, said company spokeswoman Linda Mills. She told FierceBroadbandWireless that the switch from AT&T to Google was "a very thoughtful and considered decision made over many months."
She declined to disclose financial terms.
An AT&T spokesman said the company was willing to satisfy Starbucks' updated in-store Wi-Fi conditions. "We offered to meet their requirements of a 10 times increase in speed on the network for Wi-Fi, which suggests that the decision was based on criteria other than speeds."
Indeed, Mills said Google offered much more than a 10 times speed increase.
"Google brought a faster Wi-Fi experience to the table. It is up to 10 times faster in all of our stores and up to 100 times faster in Google Fiber cities, which was very exciting to us because we know our customers' connectivity needs in the future are going to continue to grow," said Mills.
Kansas City is the first Google Fiber city, where the company has deployed fiber to deliver data speeds at up to 1 Gbps for downloads and uploads. Numerous other locations in Kansas and Missouri are slated to get the service, as are Austin, Texas, and Provo, Utah.
In addition, Mills said Google offered "a unique opportunity to co-develop the next generation of the Starbucks Digital Network," which refers to the landing page customers reach when they log onto Starbucks' Wi-Fi service. The page provides a curated content experience that includes items such as music, news and local events.
Google brought "unique ideas and proposals for making that even bigger," Mills said.
Google will use its Starbucks partnership as a new channel through which it can sell advertising and promotions, said Level 3 CEO and President Jeff Storey, according to the Wall Street Journal. "Google will do what it does best in that relationship," Storey told analysts during a call to discuss Level 3's second-quarter financial results. "We will do the network stuff."
A Boingo Wireless spokeswoman later addressed that report, saying that Boingo's exclusive advertising partnership with Starbucks will not change as a result of the new Google-Starbucks Wi-Fi partnership. "Google will not be selling advertising as part of this partnership," she said in a email to FierceBroadbandWireless. "Boingo Wireless is Starbucks' exclusive advertising and sponsorship partner for in-store Wi-Fi and the Starbucks Digital Network at more than 7,000 Starbucks company owned stores in the U.S. and Canada."
Level 3 will install and activate the high-bandwidth connectivity and in-store switching and routing equipment. "Level 3 will be working with Google to configure, monitor, and maintain the Starbucks Wi-Fi ecosystem, which will serve Starbucks' retail customers and support its store operations," Level 3 spokeswoman Francie Dudrey told FierceBroadbandWireless.
Dudrey did not say whether the new Wi-Fi routers will include 802.11ac connectivity--which theoretically enables data speeds up to 1 Gbps--but that is likely given that the equipment has started rolling out.
Improved backhaul, beyond the 1.5 Mbps T1 lines currently supporting Starbucks Wi-Fi, will be key to improving data speeds. Level 3 has an extensive fiber-optic backbone, but Dudrey said the company will use a variety of broadband connectivity technologies to bring more bandwidth to Starbucks locations.
AT&T was stoic despite losing Starbucks' Wi-Fi business. "Once this 18-month period is over, we will still have 25,000 Wi-Fi hotspots," said AT&T's spokesman.
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Article updated Aug. 5, 2013, to include information from Boingo Wireless.