Corporate Governance

Starbucks, Social Responsibility, and the Right to Free Internet

By J. Robert Brown

We have noted on this Blog that a greater dose of social responsibility (and better marketing) might help Starbucks compete against the baristas about to be inserted in the 14,000 McDonalds in the United States.  We also noted that, unlike many other coffee shops (not to mention commercial districts, sandwich shops, and the like), Internet was not free at Starbucks.  

The practice no doubt contributed to the phenomena that 80% of Startbuck's products are consumed off premises.  For those Internet users (including readers of this Blog), there's no need to stick around since the Internet isn't free.  When this Blog covered the trial of Joe Nacchio, students and faculty retreated after each session to Caribou Coffee, rather than a nearby Starbucks, because Caribou provided free Internet.  It was the location of choice to launch the daily posts. 

So we read with great interest Starbuck's plans to offer free Internet to "some" customers.  It seems that AT&T will apparently allow its 12 million broadband users unlimited Internet access in 7000 Starbucks.  According to the WSJ, AT&T users will get 2 hours of free usage, avoiding the $3.99 charge. 

It's a step in the right direction, but a pathetically small one.  For one thing, most coffee drinkers will still be charged.  Moreover, while the AT&T users will have the benefit of 7000 Starbucks, they apparently will be charged in the other 8000 or so Starbucks.  (At the end of 2007, there were15,756 Starbucks in the US).  For Starbucks to recover (and improve values for shareholders), it will have to do something far more significant to create customer loyalty than providing some customers with free internet sometimes in some stores.

Full post as published by The Race to the Bottom on February 18, 2008 (boomark / email).