AT&T's WiFi Fake-Outs Leave iPhone Users Nonplussed

Then AT&T mysteriously cut off the access. Of course, it wasn't as if the free access had been promoted -- it was more like a pleasant surprise. But then, if only briefly, AT&T did promote free WiFi access. The company's iPhone Web page stated that iPhone owners would get free WiFi at 17,000 hotspots across the U.S.

However, shortly after the news started making its way around the Web, AT&T yanked the information from its site with no explanation.

The Backstory

AT&T and Starbucks have inked an agreement for AT&T to provide WiFi access to 7,000 Starbucks locations in the U.S., beginning with roll-outs starting April 25. As of May 1, qualifying AT&T broadband Internet and WiFi customers -- those who have the service in their homes, for instance -- have had free wireless Internet access at all WiFi-enabled Starbucks across the nation. AT&T said it will continue to roll out access services to Starbucks locations throughout 2008.

So, is AT&T going to offer its hotspots up for free to iPhone users as well? It's possible that some marketing or Web guys jumped the gun and published the iPhone pages too early -- or maybe AT&T realized they could create an add-on charge for this access.

Either way, AT&T Mobility spokesperson Mark Siegel told MacNewsWorld that AT&T had no comment on the matter.

Still, from a business perspective, might offering free WiFi to iPhone customers make good business sense?

"The customers would like it, of course. It offloads users from the cellular network onto one with more capacity, and it promotes the use of AT&T in more places," Ken Dulaney, a mobile and wireless analyst for Gartner (NYSE: IT) , told MacNewsWorld.

"But the real rationale for doing something is often hidden in a complex set of financial and marketing issues which are increasingly used to drive customer loyalty and long-term profit," he added, noting that combining services can help the overall business.

David Chamberlain, a principal wireless analyst for In-Stat, has a different take: "Does it make business sense? Absolutely not," he told MacNewsWorld.

"If past behavior predicts future behavior, and it generally does, you'll see that very popular applications cost more," he explained.

Access Widespread Anyway?

Would an iPhone customer pay more for AT&T WiFi when there are many open and free -- if more or less unsecured -- WiFi networks already available almost everywhere you can find concrete and buildings? Though it's slower, AT&T's EDGE network, on which the iPhone runs, already provides a reasonably secure alternative for Web access.

"I just spent a week with my son who does have an iPod touch, and his access to free WiFi was so widespread and so useful that he never really had a complaint about coverage or having problems. It wasn't ever, 'Oh, I want to show you this YouTube clip, let's wait until we get back to the hotel,'" Chamberlain said.

So the question of AT&T WiFi popularity and demand is still up in the air.

Simply offering free WiFi can give AT&T an advantage, according to Gartner's Dulaney -- the company can claim that their packages can offer a greater value to the customer. "Verizon doesn't have WiFi," he noted.

3G on the Way

With a 3G-based iPhone widely expected to launch this summer, might AT&T's WiFi tinkering be a way to offer more value to existing EDGE-based iPhone owners? After all, these iPhone owners will be left out of the much faster 3G Web-browsing experience.

Apple (Nasdaq: AAPL) and AT&T may continue to sell the existing EDGE iPhone, mostly likely at a lower price than the new 3G iPhone. Free WiFi may be a way to enhance the perception of its value over a higher-priced model.

Of course, Apple and AT&T might simply prefer existing customers to buy the new iPhone and tack on another two years to their service contracts.

While the next-generation iPhone might have some great upgrades, 3G alone might not be enough to warrant paying a much higher price, Chamberlain said. He's currently using a 3G-based Sony Ericsson phone, and the extra speed is good, but it's not incredible.

"Were I to put the money into another phone, I'd look at how well someone else's worked on 3G first," he recommended.