Now that was fast! T-Mobile which had sued Starbucks last week over the coffee chain partnering with AT&T and offering free WiFi has settled with the Seattle-based coffee giant. The terms of the settled were not revealed, though I think the iPhone 3G launch might have made AT&T push some buttons and get this whole thing resolved. We are hardly surprised by this out of court settlement: 53% (62 out of 111 votes) of the respondents to our poll basically picked “out of court settlement” as a likely outcome.

What do they say – one man’s meat is another man’s poison. Looks like that was for T-Mobile USA that has filed a lawsuit against Starbucks, which had recently switched over from T-Mobile to AT&T.

AT&T offering free WiFi at Starbucks locations is putting the hurt on T-Mobile’s WiFi business, prompted the lawsuit. (Hey Ma Bell, thanks for listening to our suggestion about free Wifi. ) At the time of the original WiFi announcement all three parties – Starbucks, T-Mobile and AT&T – made polite noises about getting along and impacting each other’s business.

Even though, only two markets (San Antonio, TX & Bakersfield, Calif.) have switched to AT&T, T-Mobile is chagrined that Starbucks & AT&T are offering a free WiFi promotion. ( Rest of the Starbucks’ stores still use the T-Mobile network. As a result the free offer breaches most of the agreements put in place between the three parties.

“Our wifi business is a key component of our strategy as we are looking at it to build our TMobile@Home offering,” Peter Daobrow, spokesperson for T-Mobile said in conversation this morning, The company plans to have about ten T-Mobile@Home devices by end of this year. He wouldn’t say how much his company is going to lose because of Starbucks actions. “After six plus years of our relationship this was quite a disappointment. They didn’t involve us even though it does impact us financially.”

The fact that a coffee seller has become a key pawn for two telecoms is amusing. First, the free WiFi is vital for AT&T, which might be facing the worst kind of network usage with the launch of 3G iPhone. They need to offload as much traffic off the 3G network to WiFi networks, whether at home, work or at Starbucks. T-Mobile on the other hand seems to make a considerable amount of money from its WiFi network, which also compensates for its current lack of 3G network. [Full lawsuit embedded below the fold.]

T-Mobile International, which is currently using Wi-Fi for its convergence offering in the U.S., has disclosed an investment in Ubiquisys, a maker of femtocells. T-Mobile also said it was trialling the startup’s femtocells in Europe. Femtocells, which plug into an existing broadband connection to provide a signal in places where mobile network coverage is poor, are getting their day in the sun. Google, Accel Partners and Advent Ventures are also investors in Ubiquisys, which has raised $37 million.

I’ve been watching the mobile industry commit hara-kari over the past few days. US Cellular is the latest to join this mad dash to the bottom. Their new $99 unlimited calling plans make me wonder if they have actually thought through this move and its long-term implications.

A friend of mine, a veteran of the long-distance wars who’s worked with the phone companies, both the wired and the wireless kind, described the big three mobile carriers — Verizon, AT&T, and T-Mobile — as dumb, dumber and dumbest.

These moves remind him of the crazy 1990s, when Sprint, MCI and AT&T fought over long-distance minutes by offering lower prices and thus slowly destroying their ability to make money to support their bloated infrastructure. It’s pretty much the same situation here — but the pain is going to be felt much sooner.

Here is why: I am one of the high-end customers of AT&T, locked into a 2-year contract for my iPhone. I’ve been paying $99 a month (plus about $40 for data and messaging) for 2,000 rollover minutes, free weekends and evenings.

It’s never been tough for me to go over the 2,000 minute-limit, since my mobile is my primary phone. Result: I end up paying between $25 to $150 in overages, depending on the amount time I spend on the phone. I am the perfect customer, the kind that makes up for the ones at the bottom of the pile who either don’t spend enough money or didn’t care to get big buckets of minutes.

But now I am going to get an unlimited plan. And that is the big question: Why would you as a company limit the amount of money spent by some of your best (and I mean high-spending) customers? I suspect most of the people who are going to sign up for these $99-a-month plans are going to be folks like me — existing customers who are looking to bring their  wireless bills under control.

These are particularly attractive options for small biz, startups and web workers. Now your communication costs are pre-determined, which is a good way to budget. I am asking the GigaTEAM to switch to a $99 plan (on offer from whatever mobile operator they use) and also putting the PBX-land line option on hold…forever.