Will McDonald's Free Wi-Fi Take a Bite Out of Starbucks?

The burger chain is already challenging the coffee giant in caffeinated beverages. How high does Wi-Fi raise the stakes?

Fast food and Web technology continue to converge. Mega fast food chain McDonald's amped up the threats on Starbucks territory this week, offering free AT&T wireless Internet beginning January 2010 (the chain currently charges $2.95 for 2 hours). McDonald's is increasingly  competing with the coffee giant, having launched its McCafé line of drinks earlier this year to poach straggling Starbucks lovers. Now, with the Seattle-based chain charging customers $3.99 for wireless, the burger behemoth is making an even bigger play for Starbucks's turf. Will Wi-Fi help McDonald's grow its mammoth business and steal net users? Bloggers are divided:

RECIPE FOR SUCCESS

• Does the Dollar Menu One Better At Daily Finance, Douglas McIntyre understands McDonald's motivation, but when he runs the numbers, he realizes the company is running the risk of losing the substantial revenue it gets from those who currently pay for its WiFi at $2.95 a visit. However, he thinks that free WiFi is in keeping with the company's overall low-cost strategy: "More important, it appears ready to break even or lose money on some items to increase market share in a slow economy -- it's hard to imagine that the company makes much money on $1 meals and $1 breakfast offerings. McDonald's can offer free Wi-Fi and $1 food because it can afford to. It has decided, to some extent, that taking traffic from competition trumps margins, at least for now."

• Satisfies Customers on Multiple Levels David Coursey at PC World says the move is "especially good for business users who depend on Internet connectivity in the field." Noting that the McDonald's Wi-Fi currently extends outside the store, he continues:

On more than one occasion, I've landed in a McDonald's parking lot just to use their Wi-Fi. Often with an icy Coke and a hot order of the world's best fries from the drive-thru, which I'm willing to bet is just what Mickey D's hoped I'd do.

It is also good news for iPhone users who need a faster-than-3G connection. I've done that a few times too, when I had a large download queued-up.

• Only Suckers Pay for Wi-Fi Anyway Seattle Post-Intelligencer blogger Monica Guzman notes that while the 'coffee wars' are currently waged by three major brands: Starbucks, Dunkin Donuts, and McDonalds, smaller coffee ships persist because they offer something else attractive besides their homespun charm: "Non-card-holding Starbucks customers pay $3.99 for the same service. Starbucks calls that a 'competitive' price. But if you ask most Seattle coffee shop dwellers, the only competitive price for 'hangout' Wi-Fi is free."

QUESTIONABLE TASTE

• Fast Internet Is Diametrically Opposed to Fast Food Brenna Ehrlich at the social media blog Mashable wonders if McDonald's can really transform itself into a "hang-out spot of the coffee shop variety," given the very nature of its core business: " Of course, the question becomes this: Doesn't the concept of people lingering at McDonald's to troll Facebook negate the very concept of a 'fast food' restaurant, a concept that aims to get as many people fed and out the door as possible? What do you think? Would you plug in at McDonalds? Or are you sticking to your local coffee shop?"

• When Did McDonald's Become Tasteful? Along the same lines, Engadget's Thomas Ricker explains why McDonald's is already a hangout for many of America's coveted demographic, but for all the wrong reasons: "If you live in small-town America then you're already familiar with the hippest hangout around: McDonald's...The idea is to hook the nation's loitering youth into purchasing additional items in between Facebook updates capturing late-night brawls with local rent-a-cops. Thank gawd there's a middle-aged man-clown out there who likes to babysit children."

• Conflict of Interest? As Electronista points out, AT&T is putting itself in an interesting position by offering wireless for free through McDonald's while it provides the same service at Starbucks for a charge:"The free access steps up competition with Starbucks and other coffee chains, many of which either already offer access for free or else have charged similar amounts to attract customers to their own locations. It may also impact AT&T, as it provides Internet access to both of the food vendors and has potentially stood to profit from frequent visitors.