T-Mobile sues Starbucks over Wi-Fi

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T-Mobile is suing Starbucks for marketing a new Wi-Fi service with AT&T, charging the coffee giant with breach of contract.

T-Mobile claims that Starbucks agreed not to advertise Wi-Fi services from AT&T in its stores in any given market until the entire market had switched its stores from T-Mobile to AT&T. T-Mobile had an exclusive deal to provide Wi-Fi in Starbucks stores, dating back to 2002, but earlier this year Starbucks signed a deal with AT&T to take over the Wi-Fi service in the coffee shops.

However, Starbucks and AT&T have begun marketing a new Wi-Fi service in all Starbucks stores, even though so far stores in only two markets, Bakersfield, California, and San Antonio, Texas, have fully switched to AT&T, the lawsuit alleges.

On June 3, when Starbucks launched the promotion that offered two hours of free Wi-Fi access from AT&T in its stores to users of a new affinity card, so many people tried to sign up that they overwhelmed Starbucks’ Web site, the coffee company said.

As part of a transition agreement, T-Mobile and AT&T also agreed to provide Wi-Fi services to each others’ existing customers in coffee shops, without charging each other for the access, the lawsuit says. But Starbucks started advertising the new Wi-Fi service through AT&T on a nationwide basis, and since T-Mobile still operates the bulk of the coffee shops, T-Mobile is currently offering access to users of the new promotion without compensation, it said. “Since T-Mobile provides the resources and equipment to support Wi-Fi services in non-transitioned stores, it is T-Mobile alone that is bearing the cost and burden associated with this ‘free’ Wi-Fi offer,” it said in the filing.

T-Mobile is claiming loss of revenue and reputation due to the new promotion, and is looking for damages and for Starbucks to comply with its agreements with T-Mobile.

Neither Starbucks nor AT&T addressed questions about the allegations in the suit, but they both issued similar statements. “Our goal is to ensure Wi-Fi access at all Starbucks locations,” Starbucks said. AT&T added that its goal was to ensure Starbucks Wi-Fi access for its qualified high-speed Internet customers, as well as Starbucks Loyalty Card customers. Both said they have taken steps to ensure that the access will continue.

The lawsuit was filed in the Supreme Court of the State of New York.

Updated at 1:25 p.m. PT to include comments from AT&T.

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