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McDonald's, Toshiba Roll Out Hotspots in Chicago

In its ongoing attempt to transform its fast-food restaurants into Wi-Fi havens, McDonald's on Tuesday launched wireless Internet access in 60 locations in the Chicago and Milwaukee areas.

McDonald's last month rolled out hotspots in New York and San Francisco with Cometa Networks and Wayport, respectively. The Oak Brook, Ill.-based chain tapped Toshiba to provide the service in its home market. Toshiba said it will be up and running in around 130 McDonald's by September.

Pricing at the Chicago locations is comparable to other McDonald's hotspots. Customers can purchase one hour of Wi-Fi for $4.95 or an all-day connection for $7.95. Through September 28, they will receive a coupon for a free hour of Wi-Fi when they purchase an extra value meal or premium salad.

The pilot program in the three cities is scheduled to run through the end of the year, at which point McDonald's is expected to choose one of the providers for its nationwide rollout. "McDonald's has positioned this to us as more or less a competition," said Robert Granadino, director of business development, wireless initiatives and hotspot solutions for Toshiba. "At the end of the trial, they're going to make a decision on who they want to go with."

While Toshiba might appear to be at a disadvantage by landing the Chicago market, Granadino isn't worried.

"There are going to be market differences between, certainly San Francisco and Chicago -- the type of people and the technology -- but that's something they're going to take into consideration. They're trying to keep everything apples to apples, as much as they can."

Toshiba may even have an advantage being in the smaller market, according to Keith Waryas, an analyst with research group IDC. "They're not likely to be taxed as heavily as in San Francisco and New York," he said, allowing them to potentially respond to problems more quickly.

Granadino said McDonald's is primarily looking at three things: service, support and usage.

"There are three major categories that we're being evaluated on. One is the service level agreement -- how reliable is your network? Another is support. If there were any problems on the network, how quickly were we able to resolve them? If there were problems with end users or questions, were we able to adequately answer them? The third is usage. How many connections did we get? How much revenue did we generate?"

Toshiba is using its "smart" access point (AP) -- an integrated four-port router and 802.11b access point -- for the hotspots. Granadino said the low-cost device ($199 wholesale) enables Toshiba to deploy rapidly.

"When we go out to deploy, we don't have to carry out a router, and a gateway computer and an access point to hook up and configure on site. They're already configured. It's just a small access point where you plug in the power, plug in the Ethernet and you're done. We were able to do around 60 locations in 10 business days."

Granadino said McDonald's is managing the backhaul, which is typically DSL. Toshiba controls all the hotspots from its network operations center (NOC), and also handles the authentication and billing.

Hotspots are on the rise -- researchers predict that there will be as many as 200,000 worldwide by 2008 -- but analysts remain skeptical about whether or not they will be profitable.

IDC's Waryas believes that some hotspots, such as those in airports, will certainly be successful, but he's not so sure that McDonald's will be. "McDonald's is built around getting you in and getting you out quick. What added value does this bring?"

He suggests, though, that McDonald's may pull it off simply because of the sheer volume of customers it serves. "The trick is mass of users." A giant like McDonald's would probably need less than one percent of its customer base to use the service in order to break even, he said.

Granadino argues that the network was as likely to see use from the parking lot as from inside the restaurant. "[Critics have asked] 'how can you possibly imagine people walking in and sitting down next to a 3-5 year old eating a happy meal and trying to do some work?' Well, that's not exactly the way I imagined it. I think that yes, we're trying to get to the windshield warriors as opposed to the nationwide travelers predominantly with this deployment, but much of the time I think you're going to find people pulling up into the parking lot, downloading some e-mail, looking up and saying 'Boy, those fries and coke look really good. Maybe I'll do a drive-through before I hit the road again.'"

Waryas isn't buying it, though. "I'm not convinced that people will sit in their car and tap into McDonald's wireless network," he said. "I understand the parking lot argument, but I'm not sold on it. My gut tells me that people don't want to sit in their car doing this."