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AT&T, Starbucks Brew New Wi-Fi Perks

AT&T is building on its existing in-store Wi-Fi access deal for subscribers with a new move to lure new users who are fans of the coffee chain.

The company's new effort, which expands on its existing deal to deploy Wi-Fi hotspots in Starbucks locations, will give users of Starbucks' prepaid card two free, consecutive hours of Wi-Fi access daily at each of the chain's 7,000 participating U.S. location.

The promotional plan will work for new card holders as well as those already participating in the Starbucks (NASDAQ: SBUX) Card Rewards program.

To participate, Starbucks customers must first either add at least $5 to a new Starbucks Card or register an existing card online by July 14. They also must use the Starbucks Card for a purchase each month to remain eligible.

The Seattle coffee giant said the effort is a way to thank customers who are using reward cards.

But for AT&T (NYSE: T), it's a play to grab more subscribers for its broadband services -- participating in the program requires a user to agree to receive marketing messages from the carrier.

That effort comes amid an ever-increasingly competitive environment for wireless carriers.

While AT&T is currently the largest U.S. wireless carrier, its leadership title is now shaky given Verizon Wireless' announcement today that it plans to acquire carrier Alltel Corp. for $28.1 billion.

If approved by regulatory agencies, the acquisition would make Verizon Wireless, a venture of Verizon Communications (NYSE: VZ), the largest U.S. carrier. The deal would add Alltel's 13.2 million subscribers to its own 67.2 million users, pushing it of ahead AT&T's 71.4 million subscribers.

But public advocacy groups are already protesting the proposed acquisition, stating that it raises "serious questions" for consumers. Public Knowledge, a Washington, D.C.-based public interest group, issued a statement today warning the deal, which is pending regulatory approval, would give consumers fewer choices in telecom services.

While market consolidation typically benefits remaining vendors, the mobile connectivity space isn't a traditional business environment, given the differentiators in play, ranging from service to devices to support for emerging mobile technologies.

Calls to AT&T for comment were not returned by press time.

For its part, Starbucks views wireless connectivity as a big value-added service and customer loyalty perk.

"This is what our customers have been waiting for," Doug Cavarocchi, Starbucks spokesperson, told InternetNews.com, adding that 14 percent of Starbucks transactions involve a prepaid card. "Starbucks is excited to offer a mix of free and paid Wi-Fi options to meet the needs of both frequent and occasional customers."

AT&T's partnership with Starbucks kicked off in February, when the carrier took over for T-Mobile in providing wireless access to coffee customers. Starbucks first went wireless with T-Mobile in 2002.

As each Starbucks is switched to AT&T from T-Mobile, the coffee seller will discontinue the T-Mobile HotSpots available at the locations. However, T-Mobile customers will be able to access the new AT&T network, Cavarocchi said -- but they'll have to pay for it.

Starbucks customers who are not AT&T subscribers, and who don't use cards, can use the service for $3.99 a session. A monthly subscription can be purchased for $20 and also includes access to all of AT&T's 70,000 hotspots throughout 89 countries.

With the AT&T program, AT&T broadband and U-verse Internet customers get unlimited Wi-Fi access. Approximately 2 million of its 12 million customers are from the small to midsized business segment. AT&T's 5 million remote access services business customers will also get free access.

Users of AT&T's Business Internet Services, VPN Tunneling Service, and the vendor's Network-based IP VPN Remote Access who are authorized for Wi-Fi use, already have access to any Starbucks Wi-Fi spots at no additional charge.