Panera Bread announced today that it is expanding its free Wi-Fi initiative from the 325 locations currently now available to 500 locations over the next 12 months. It expects to hit 375 locations by year end.

Here are some usage tidbits they released:

• Of the hundreds of thousands of customer accesses over the last year, the average connect time is one hour.
  
• The average total online time per bakery/cafe has increased three-fold over the last twelve months. 
  
• Free Wi-Fi is not only keeping customers in stores longer, but doing so during off-peak hours.
  
• The network is managed by ICOA (OTCBB: ICOA), a public hotspot service provider based out of Rhode Island.

Good News for Panera; Bad News for Starbucks
I relied heavily on Panera's network while I was in St. Louis last month (where the chain is known as the St. Louis Bread Company). Knowing that they offered free Wi-Fi kept me out of Starbucks. Granted, had I already subscribed to T-Mobile's Wi-Fi service I would have eagerly rushed to Starbucks. But the service is too expensive, even for me, a Wi-Fi addict. Naturally, while I was in Panera I couldn't help but wondering what was going on inside the minds of executives over at Starbucks. I've heard rumors that managers of some Starbucks locations have urged higher ups to let them offer their Wi-Fi networks for free, to better compete with the independent coffee shops that already offer free Wi-Fi. But Starbucks is stuck. The network is controlled by T-Mobile and the carrier is clinging to the notion that Wi-Fi should be a direct revenue generator. Yet Wi-Fi will ultimately be an indirect revenue generator, a la Panera.

In a Parity World, Wi-Fi Makes a Difference
Now I realize that Starbucks and Panera are not direct competitors. Starbucks is strictly a coffee shop while Panera is a full-fledged bakery/deli/coffee shop. Also, Panera locations typically have a great deal more square footage, so they have less of a problem with customers camping out for hours on end. And Panera has more to gain revenue-wise from offering free Wi-Fi because if it can convince someone (like me) to drive past Starbucks for Panera, it may sell me a great deal more than a cup of coffee. Still, the two chains do share many of the same clientele, and I suspect it is these people who will force Starbucks to rethink Wi-Fi.

In my mind, the only question is when, not if Starbucks will offer Wi-Fi for free. T-Mobile needs to borrow a page from Wayport and figure out how to build a business model that allows venues the ability to offer free Wi-Fi without significant trouble or expense.

So congrats to Panera. The chain caught a lot of flack a year ago for the free Wi-Fi "gimmick." But now this gimmick is setting the chain apart from Starbucks, which is in danger of being better known for "overpriced Wi-Fi."