Everybody wants free Wi-Fi, and McDonald’s is responding to that demand with Wednesday’s announcement that more than 11,000 of its U.S. restaurants will have free Wi-Fi in January.
“We’ve had Wi-Fi working in our restaurants for five years under the pay-to-play model, but now is the time, with the ubiquity of Wi-Fi devices — including handhelds and laptops — to extend that offer,” McDonald’s USA CIO David Grooms said in an interview today.
“We said, let’s go with free Wi-Fi…. We talked to customers and asked what they wanted to see, and they really wanted us to go free. You don’t need a lot of focus groups to find that out, and we take what customers say seriously.”
Asked whether McDonald’s sees free Wi-Fi as a draw for new or infrequent customers, Grooms said, “We’ll appeal to customers who visit us already, the folks with a [Wi-Fi] device …who want a cup of coffee and to visit.”
The chain plans to expand the free Wi-Fi service to all 14,000 U.S. restaurants over time, he said.
Grooms wouldn’t discuss the financial terms of the free Wi-Fi model, but said it’s “one way to extend the McDonald’s brand.” AT&T provides the Wi-Fi hot spots inside the restaurants and cooperated fully in the decision to offer the service for free, having “been a partner from the beginning,” Grooms said.
The McDonald’s move is part of a growing trend that includes several smaller restaurant chains that already offer free Wi-Fi, including the 1,362-store Panera Bread chain and Bruegger’s Bakery Cafe, which has 292 outlets.
Free Wi-Fi at Bruegger’s has been in place for two years, and was a “natural extension” for cafes that are viewed as “neighborhood gathering spots,” said Tom Piper, director of marketing for the chain. He called free Wi-Fi a “small, but still very important part of being guest-focused in everything we do. Taken with all our other efforts, it definitely helps the bottom line.”
Starbucks, which has 11,000 locations in the U.S., charges $3.99 for two hours of Internet access, but does have a rewards program for frequent customers who can get two hours for free. McDonald’s free Wi-Fi, which is going to provide unlimited hours of access, will surely place pressure on Starbucks to lower its costs, several analysts said.
Analysts also predict free or nearly-free Wi-Fi will grow in other venues, such as in-flight. That service today can cost $5 to $15 for a wireless connection on a flight. Google teamed up with Virgin America in October to offer free in-flight Wi-Fi during the holidays, a sponsorship deal that could catch on with other major corporations hoping to sow goodwill and brand recognition, experts said. (Virgin America uses an in-flight service called Gogo, from Aircell, which has already provisioned Wi-Fi on the planes of eight airlines and added a ninth, Continental Airlines, yesterday.)
Advertising will be another way free Wi-Fi is financed, experts predicted. With an ad-based model, customers would agree to accept a certain number of ads in return for so many free minutes, an approach promoted by mobile media company JiWire. It’s already conducted campaigns for Hyatt Place Hotels and the search tool Bing, using over 30,000 Wi-Fi hot spots in airports and other locations.
“Everybody wants free Wi-Fi, but it’s just a question of how you pay for it,” said Kevin McKenzie, founder of JiWire. He predicted McDonald’s is likely to seek advertising to subsidize its service, but said he had “nothing to announce publicly” regarding whether JiWire plans to work with McDonald’s on an advertising approach.
“Free Wi-Fi will help retain customers and give them a reason to come back, so indirectly there’s a value for companies offering it,” McKenzie said. “Starbucks will have do something to respond to McDonald’s, and with Panera and [others] already free, I don’t know how you couldn’t respond.”
Even though a proliferation of Wi-Fi hotspots—as well as the prospect of municipal Wi-Fi—have been around for many years, McKenzie argued that Wi-Fi “really hasn’t become mainstream until now.” That’s partly because hotspots are commonplace and because every laptop has embedded Wi-Fi. In addition, handheld devices like the iPod Touch offer Wi-Fi for access to an array of applications wirelessly, without the burden of paying a monthly cellular fee.
Analyst Jack Gold, of J. Gold Associates, said that McDonald’s and AT&T have already spent money on the Wi-Fi infrastructure and “are probably not recouping the investment” which will be helped by offering the service for free. He predicted a significant growth in free hotspots beyond restaurants.
Likewise, Craig Mathias, an analyst at Farpoint Group, predicted users will increasingly find more free Wi-Fi. “The reports of the death of municipal Wi-Fi are greatly exaggerated,” Mathias said.
Several models for financing free wireless access will emerge, and Wi-Fi will be increasingly offered for free, Mathias predicted. “Paying $8 to $10 a day at a hotel is nonsense,” he said.
One reason AT&T has cooperated with McDonald’s on free Wi-Fi is that 3G cellular networks are becoming saturated, Mathias said. It is a reality that Verizon Wireless also recognizes, he added.
“Wi-Fi is essential to the success of the cell carriers,” Mathias said.