Bit Rate

Google Fiber Is Not Just a 'Hobby,' CFO Says

1/23/2013 1:35 AM

Google once described the fiber-to-the-home project as an “experiment.”

But Google CFO Patrick Pichette, on the company’s Q4 earnings call Tuesday, insisted that “it’s not a hobby” -- a reference to Apple’s regular description of the Apple TV set-top.

“We really think that we should be making [a] good business with this opportunity and we are going to continue to look at the possibility of expanding, but right now we just got to nail [it] because we are in the early days,” Pichette said in response to an analyst question on Google Fiber. “We just got to nail Kansas City.”

Google has spent untold millions on the FTTH buildout, and has now begun hooking up customers in several Kansas City, Kan., neighborhoods. "It's a perfect place for us to kind of debug all of the elements of the product and the experience for the users," Pichette said.

Then again, Google has previously asserted that other ventures it’s embarked on were great businesses -- until it killed them. One example: Google TV Ads, the online TV-ad-buying marketplace the company pulled the plug on last August after four years.

Also recall that Google originally labeled the “Think Big With a Gig” project an experiment. “Like our municipal Wi-Fi network in Mountain View, the purpose of our 1-Gigabit fiber-to-the-home project is to experiment and learn,” Google spokesman Dan Martin said in early 2010.

If nothing else, Google has done a great job of building hype with the FTTH stunt, promising 1 Gbps broadband -- 100 times faster than most people in the U.S. use (never mind that you'd need at least two dozen PCs, iPads, Xboxes, Rokus and other devices all streaming video simultaneously to really take advantage of a gig). About 30% of potential subscribers in the Kansas City metro area paid the $10 preregistration fee to be first in line for a Google Fiber hookup and another 30% of the qualified population “expressed interest” in Google Fiber’s high-speed Internet and video offerings, according to a survey last fall by L.A.-based media and technology consulting firm Ideas & Solutions.

I’m still not convinced Google is getting into the ISP game because it sees broadband as a major cash cow. It would take many years and multiple cities before Google Fiber would register as more than a blip on its earnings.

So what’s Google Fiber all about? An executive with an Internet hosting provider, who’s familiar with the initiative, told me that Google Fiber is “for them to understand the true cost of delivering bits to the home.”

“They’re looking to get their own research on last-mile networks,” the exec explained. That way, if ISPs claim that it costs them a certain amount to deliver content to subscribers, Google can say, for example, “No, Comcast, it doesn’t cost $150,000 per year or whatever to deliver this traffic -- it costs $5,000 and here’s how we did it.”

Perhaps it’s more than a hobby, then, in the sense that proving out the economics of the broadband business and promoting the adoption of ultra-fast Internet services are key to all of Google’s businesses, including search and (obviously) YouTube.

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