Monday, April 30, 2007
Fonbucks Undercuts Starbucks
Wireless community builder, Fonbucks, is becoming a big problem for Starbucks. It is giving away Wi-Fi routers to Starbucks' neighbors around the country. The idea was to get Fon routers close to Starbucks customers trying to connect to a wireless network, giving them a choice between $2-a-day Fon Wi-Fi access or $10 Starbucks T-Mobile access.
A deal with Time Warner Cable will allow any Time Warner customer to set up a Wi-Fi hot spot. That means coffee shops and small businesses, as well as enterprising neighbors, can easily offer low-cost Wi-Fi to customers and friends and make money doing it. "I had gotten e-mails from Foneros saying, 'I wish I lived near a Starbucks; I could make a killing,'" said Joanna Rees, CEO of Fon U.S. Fon's data showed a high correlation between Fon usage and Starbucks locations, hence the "Fonbucks" campaign. "In New York or San Francisco, yes, there are a lot of restaurants and cafes that are Wi-Fi-enabled, but that's not the case in the rest of the country," she said.
T-Mobile's Starbucks contract runs out in 2009, and Fon execs are talking to Starbucks about moving inside. And while I like the ideal of Fonbucks driving the cost of Wi-Fi down, I don't think they should partner up with Starbucks. That would go against everything it stands for up to this point. Fonbucks is currently viewed as the Robinhood of Wi-Fi. It is helping the poor (i.e. smaller businesses) by taking away from the rich (i.e. $10 cost to get Wi-Fi through T-Mobile and Starbucks compared to $2 through Fonbucks). I feel partnering with Starbucks may take away some of its "edge."
T-Mobile and Starbucks will need to lower their Wi-Fi prices to remain competitive. I already feel guilty for paying $3.50 for a cup of coffee. I shouldn't have the same feeling when connecting to the internet.
Source: Ad Age