Editor’s Note: Why don’t publications capitalize titles any more?
I really do not see Google Fiber as being disruptive other than offering a lower price to consumers. They offer the lower price because they can afford to offer the service and just break even on costs. Their “real experiment” is to determine if the higher speeds equate to greater ad revenue. Google’s goal is to increase access to Google properties where they will deliver more advertising to consumers as well as collect more data on their living habits. Their business model is perfectly valid.
Having another competitor in the market is always beneficial and Google has shaken up the market in a few areas, but they still offer the same types of services in the same bundled paradigm. It is not Google’s fault. They are forced to offer the video packages from the content providers. Maybe someday they will have enough market clout to break the forced video bundles or at least change the way that they are offered.
When Google Fiber was still incubating inside of Google, the plan was to try a few different business models and share the results with the world so different service providers and communities could find a business model that worked for them. Instead as the organization grew and new employees came on, they became a service provider themselves. The “fiberhood” concept is not new. We met with Google a few times, and discussed our model of efficient buildout that utilized the capital from high-interest areas that we built out first to fund the continual build-out of an area. In one meeting we demonstrated our OSS that collected names and location information from potential customers on our web site and plotted them on a Google map with our current fiber facilities. We were then able to use that data to design our network build-out plan and market to new customers.
Google spent more time talking to us about the software and techniques than building the network in our cities. When I heard about “fiberhoods,” I thought catchy name, but the concept was not new. Our twist on the concept was also borrowed and enhanced from traditional wire-center planning from the Bell System days.
If states and towns want to promote broadband deployment, they will not place restrictions on how the build-outs will occur. Although this method will tend to favor more affluent neighborhoods, it does benefit densely packed neighborhoods as well. The value being that eventually the whole town can be covered with less capital expenditures.
AT&T and Verizon are taking a different tactic of selling their wireline assets in less populated areas and focusing on the most profitable markets. Fortunately there are companies like Frontier, FairPoint, and CenturyLink that see a good business serving those areas. We still have a long way to go in this country to deliver true competitive broadband to consumers.
Google Fiber has convinced other ISPs to embrace a different approach to deploying broadband.
Google’s groundbreaking Fiber program, which offers 1 gigabit-per-second broadband for just $70 per month, has thrived because it takes a different approach to deployment that incumbent ISPs have been reluctant to embrace. Fiber’s success, however, has already caused other ISPs to change their approach to broadband deployment, according to a recent Wall Street Journal report. Eventually, this shakeup in broadband services could create an entirely new form of competition in the broadband market.
Federal policies on the availability of wire and radio services created in the 1930s, and updated for cable TV in the 1960s, required service providers to cover entire geographical regions indiscriminately. The idea was to ensure that no part of a city went without access to the communications services that would soon become essential for both businesses and consumers. This led to the longstanding regional monopolies that many cable and internet service providers still hold (and under which many customers still suffer) to this day.
Congress updated these policies in the 1990s in an effort to speed up the deployment of internet connectivity, allowing service providers to compete in certain regions that might be more profitable. Although some have used this approach in some way – say, underserving rural areas with low populations – none have capitalized quite like Google did when it introduced its Fiber program in Kansas City, Kansas, and Kansas City, Missouri, in 2011. Google identified profitable areas within these cities in which to deploy its Fiber service – what are now referred to as “fiberhoods” – and spent less time on those that were less likely to provide a return on its investment. The Journal explained in a recent article:
If interest exceeded a certain threshold, generally between 5% and 25% of households, Google connected the area. The threshold varied based on population density. Google also worked with local officials to speed the permitting and construction process. It skipped some areas entirely, because they were too thinly populated or because of construction challenges, a company spokeswoman said.
To date, Google has conducted preregistration in 364 neighborhoods; all but 16 hit Google’s threshold for connection. Google hasn’t disclosed how many homes in each neighborhood subscribe to its service.
A survey earlier this year of five neighborhoods in the Kansas City area conducted for brokerage firm Bernstein Research found that more than half of households had signed up for the service. At that rate, the service would be “very profitable” for Google, Bernstein analyst Carlos Kirjner said.
What the Journal is calling the “selective approach” has begun to catch on among competitors. Roughly seven months after Google announced its intentions to bring Fiber to Austin, Texas, AT&T announced its own 1-gigabit offering in Austin. There, the company is “building to demand and working with local authorities to reduce construction costs,” according to the Journal report.
