The New York Times The New York Times Technology May 8, 2003

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Mark Matson for The New York Times
LURE - Joan Griffith, owner of the Wild Wood cafe in Austin, Tex., says that providing free wireless access builds customer loyalty.

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Internet Access for the Cost of a Cup of Coffee

By KATIE HAFNER

AUSTIN, Tex. -- As the Wi-Fi trend sweeps through the air, one question appears to be cropping up with increasing frequency: to charge or not to charge?

Wi-Fi, for "wireless fidelity," allows fast wireless connections with the Internet using a protocol called 802.11. Wi-Fi is finding its way into airports, hotels, universities, truck stops and cafes, especially Starbucks, which charges for connections through T-Mobile, a wireless carrier. Even McDonald's is experimenting with Wi-Fi in Manhattan. All that is needed is a laptop or mobile device equipped for Wi-Fi or retrofitted with a Wi-Fi card, and proximity to a Wi-Fi beacon known as a hot spot.

But it remains to be seen how many users will be willing to pay the $30 a month being charged for Wi-Fi access at places like Starbucks, given the monthly communications fees many people already shoulder.

In a growing number of places, an alternative is available - at no charge. And not surprisingly, several are in Austin, one of the most wired places in the nation and now one of the most wireless, boasting a profusion of hot spots.

One of them is Wild Wood, a small store that sells hand-carved animals from Oaxaca, Mexico.

Wild Wood, which bills itself as an "art cafe," serves not just coffee and desserts but full meals, all of them prepared in the store's small kitchen. The owner, Joan Griffith, said she offered free Wi-Fi access because it was far more important to her to increase the number of customers than to make a little bit of money from an access surcharge. Besides, she said, free access breeds good will, which in turn breeds loyalty.

Ms. Griffith's initial capital outlay for her wireless setup was $700, counting a refund of $425 from the Internet service provider she used. She pays another $120 a month for the Wi-Fi access. She pointed out that she would be paying $80 a month anyway for her own access; adding the capacity for more computers was not much more expensive.

"I'm going to make my money because people are going to buy coffee and soup, and because it's going to smell good in here," she said. "Anything that's going to get them parked in here for a while is worth the extra $40 I'm paying for an extra hookup."

The argument in favor of free access goes roughly like this: cafes, hotels and other venues that strike up revenue-sharing partnerships with wireless carriers are perhaps taking in a nice sum now, but as competition increases, prices will fall, and the margins will narrow to the point where it makes little or no point to charge for the access. Far greater, in the long run, will be the higher revenue from increased traffic into a store like Wild Wood, where customers might supplement a cup of coffee and an hour online with the purchase of a $100 hand-carved anteater. Even if the anteater goes unbought, the coffee alone is a high-margin item.

John Yunker, an analyst at Pyramid Research, a communications consulting firm in Cambridge, Mass., contends that a fee-based system cannot last in the long run. "It's wishful thinking on the part of the mobile operators," he said.

Schlotzsky's Deli, an Austin fixture, is another mecca for free Wi-Fi. Schlotzsky's, a nationwide chain of sandwich stores that got its start in Austin, offers free Wi-Fi at 10 of its Austin restaurants, one in Houston and one in Atlanta.

John C. Wooley, the chief executive of Schlotzsky's, said he briefly considered charging customers for Wi-Fi access but quickly changed his mind.

Mr. Wooley said each restaurant spent about $2,000 to get its Wi-Fi up and running, and another $300 to $500 a month for the high-speed communications line that provides the wireless access network to the Internet.

His reasoning is similar to Ms. Griffith's, but on a larger scale. Schlotzsky's surveys over the past few months have shown that 6 percent of customers go to Schlotzsky's for the free Wi-Fi. That translates to 15,000 customers per store per year. If each pays, on average, $7 for a sandwich and drink, that adds up to about $100,000 in sales per year.

"That's a really good return on investment," Mr. Wooley said.

Free Wi-Fi access, he said, is similar to other features he has adopted to make his restaurant more appealing. "It's like the wood furniture, and the tile in the restrooms, and the art on the wall," he said. "You're doing all these things so people will select your restaurant."

For the life of him, he said, he cannot see a disadvantage to his business model. Besides the good will he generates, Mr. Wooley said, he gets a bit of low-cost advertising. When Schlotzsky's customers get their Wi-Fi signal, their browsers are directed to a Schlotzsky's page and they are asked to register before being given free rein on the Web.

"Think about how much money you'd spend on a TV spot," Mr. Wooley said. "Unlike a pop-up ad that annoys us all to no end, here you have a way to get on someone's computer and make them happy."

But whatever the arrangement, Starbucks maintains its resolve to charge. "We think people will pay," said Nick Davis, a Starbucks spokesman. "They get a great customer experience and really high access speed."

Sometimes the Starbucks customers can get those two things for nothing.

Mr. Wooley pointed out that customers at a Starbucks in downtown Austin can get a free signal from the Schlotzsky's in the same building, well within the 300-foot range typically needed for a signal.

But not every place in Austin is so endowed. A traveler who has time to kill at the airport but no Wi-Fi contract can sign on with Wayport for 24 hours of access for $6.95, or opt for T-Mobile's pay-as-you-go plan.

Mr. Wooley has a liberation plan for the Austin airport: install an antenna at the airport Schlotzsky's, which is adjacent to many of the departure gates.


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