Bit Rate

What Is Google Fiber Trying to Prove?

7/27/2012 12:35 PM

The Google Fiber project in KC still has the strong smell of a lobbying/PR stunt — rather than an honest-to-god broadband/TV offering that will bring competitive pressure to bear on cable and telco providers.

Here’s one of the main things the Google Fiber 1-Gbps experiment shows: That if you have a huge amount of bandwidth, TV is the killer app (see Google Outlines IPTV, 1-Gig Internet Service In Kansas City and Disney/ESPN, Fox, Turner And HBO In Talks On Google Fiber TV). Which, you know, is pretty much what cable operators have used the massive coax capacity for since the inception of the industry.

Google FiberDoes Google show that bandwidth pricing is dreadfully inflated in the U.S., and speeds are abysmal relative to the rest of the world? (”At least we beat New Zealand” on price per megabit, Google’s Milo Medin quipped at the launch event.)

The $70-per-month price point for 1 Gigabit per second of bandwidth certainly is more bang for your buck than ISPs in America offer. Comcast’s new 305-Meg tier is a whopping $300 monthly, and the Verizon FiOS Quantum 300-Meg Internet is somewhat more affordable at $205 or $210 (it’s five bucks lower if you lock in for two years).

Google’s objective in offering 1-Gbps service at a price point that’s lower than the fastest broadband services in the country appears to be an attempt to set a new price/performance bar for the industry — and push the notion that caps and usage-based pricing aren’t necessary.

The formula looks like this: faster and totally unlimited Internet = more Google searches and YouTube video views = more ad dollars for Google.

Does Google really expect to recoup its investment in KC Fiber? Or is it just an experimental showcase? Google has declined to reveal what it is investing in the FTTH buildout and launch, but claims it anticipates operating it “profitably” (which is different from anticipating a return on invested capital).

For now, the Google Fiber project is too small to matter in terms of real market dynamics.

Note that Google has wrangled itself the ability to cherry-pick customers. It’s only going to connect Kansas City homes if neighbors “rally” to sign up in large enough quantities. Cable and telco providers, under their franchise agreements, usually aren’t allowed to connect only select streets or higher-income areas.

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Programming Note: TV’s Cloud Power, exploring how operators and media companies are tapping into cloud-based technologies, has been rescheduled for Thursday, Sept. 13, at New York’s Roosevelt Hotel. Scheduled speakers include IBM’s Bob Fox, PwC’s Gordon Castle, Verizon’s Maitreyi Krishnaswamy and Current Analysis’ Ron Westfall. See multichannelevents.com/cloud for more info.

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