Google is ready to throw down a few billion bucks on a much bigger fiber buildout: The company said last week that it's in discussions with 34 American cities about the possibility of bringing Google Fiber to their doorsteps.
Even if its plans are fully realized -- and there's no guarantee they will be -- the company would still be a small fry in the U.S. broadband market. But the timing of Google Fiber's first expansion plans since its first three markets were announced is enough to revisit questions about the parent firm's murky motives.
There's likely more to Google Fiber's strategy than meets the eye here, however.
In what may or may not be coincidence, the Google Fiber announcement came less than a week after Comcast's blockbuster $45 billion bid for Time Warner Cable, which would result in a cableco/Internet service provider that spans two-thirds of the U.S. Meanwhile, the FCC's 2010 network neutrality regulations were ruled invalid in January by a federal court, raising fears that ISPs will start demanding fees from YouTube or Netflix to deliver bits to their customers. (The agency says it is prepping revised net neutrality rules.)
Those developments have consumer advocates, who are worried that broadband access is being concentrated into a smaller number of powerful players, cheering Google's fiber visions. "Our research has highlighted the value that disruptive deployments like Google Fiber and municipal networks can provide," said Sarah Morris, senior policy counsel at Open Tech Institute, a division of nonpartisan think tank New America Foundation.
Google, in rattling its fiber, is threatening to launch an alternative to cable and telco services across the country. DirecTV, for one, relishes the prospect of the Googlers turning up the heat on ISPs, which are the satcaster's rivals: "Frankly, the more competition in the broadband space, the better," CEO Mike White said on DirecTV's earnings call.
Of course, Google hasn't committed to do anything except explore possibilities with the cities, and it's conceivable it could end up building very few actual networks. Together, the 34 cities represent about 2.8 million households. Adding the approximately 750,000 passed today by Google Fiber in Kansas City (both in Kansas and Missouri); Provo, Utah; and Austin, Texas, the company would still reach just over 3% of American homes. That's less than a quarter of Verizon Communications' FiOS, the only other widely deployed fiber-to-home network in the country, which passed 18.6 million premises at the end of 2013.
Google has avoided FiOS markets altogether (not to mention colder-weather climes that would make fiber construction more costly), instead picking areas that fall within AT&T, Comcast and Time Warner Cable footprints. If Google does pull the trigger, the expansion won't be cheap: Deploying fiber in all 34 cities would cost between $2.2 billion and $3 billion, Sanford Bernstein senior analyst Carlos Kirjner estimated.
Kirjner believes Google Fiber is what Google says it is: a major opportunity. Within six years, Google Fiber could reach 40 million homes and serve 20 million broadband customers -- and yield $20 billion in annual revenue, by his math. The capital-intensive characteristics of Google Fiber are divergent from the parent company's high-margin, cash-cow search-advertising biz, but that doesn't mean it can't work.
"I don't think this company is thinking two or three years out," Kirjner said. "They are thinking 10 years out."
Google Considers Bulking Up On Its Broadband Fiber
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