T-Mobile, AT&T and Starbucks have settled their dispute over Wi-Fi in Starbucks coffee shops, just days after T-Mobile filed a lawsuit about the service.

T-Mobile, which had a contract since 2002 to provide Wi-Fi in Starbucks stores, filed a lawsuit in the Supreme Court of the State of New York on Thursday charging Starbucks with breach of contract. The complaint addresses the transition of the Wi-Fi service from T-Mobile to AT&T, since Starbucks announced earlier this year that it was switching providers. According to T-Mobile, Starbucks recently began advertising a new Wi-Fi service from AT&T across the country, even though it had agreed not to advertise the AT&T service in any given market until all of that market's stores were transitioned to AT&T. Only two markets have so far been fully transitioned, the suit said.

T-Mobile also complained about a violation of another part of the agreement. AT&T and T-Mobile agreed to provide in-store services to each other's existing customers, including AT&T’s broadband Internet users who are eligible to use the Wi-Fi access, without charging each other. However, since Starbucks began offering a new promotion on June 3, T-Mobile -- since it is still operating the vast majority of Starbucks Wi-Fi -- was carrying the cost of supporting most new customers who were logging in to the new service through AT&T, it said in the suit. (Listen to a podcast about Starbucks' tough start with Wi-Fi.)

The companies have entered into a memorandum of understanding to resolve the dispute and are "committed to providing a high quality Wi-Fi experience for customers, including Starbucks Rewards Customers, at Starbucks locations nationwide," Starbucks said in a statement issued on Wednesday. The companies did not address further questions about the details of their new agreement.

Starbucks Rewards Customers are people who have signed up for the new promotion, which offers them two hours of free Wi-Fi access per day in Starbucks stores, as long as they make at least one purchase on their rewards card per month. So many people tried to sign up for the service on the first day it was available that Starbucks' Web site couldn't handle the traffic, Starbucks said. (See story on Starbucks transition to AT&T.)

The IDG News Service is a Network World affiliate.