When Google in February of 2010 unveiled an “experimental” project to build a fiber network capable of pumping out Gigabit speeds — and started a selection process to pick a city to take part in the fun — it generated lots of interest and even more questions
Was Google Fiber truly just an experiment? Is Google doing this merely to hasten the industry’s pursuit of 1 Gigabit-per-second speeds? Or (gasp!) is Google building a fiber-optic Trojan horse, planning a profitable business that wreaks havoc on the broadband businesses of incumbent telcos and cable operators?
Fast-forward six years, and no one is closer to a bona fide motive. Google Fiber is still a small player in the TV and broadband industry, but it is expanding into new markets, testing new deployment models and broadening its mix of services.
And its true intentions remain maddeningly mysterious. It was widely believed early on that Google Fiber was entering the broadband picture to apply pressure on Internet-service providers to accelerate upgrades. Some analysts wonder if Google is, indeed, in this for the long haul.
BUSINESS OR HOBBY?
“For a while, I thought perhaps they were just doing some dabbling,” Teresa Mastrangelo, principal analyst at Broadbandtrends LLC, said. “But they’ve been at it for five or six years, so the dabble part of it is no longer applicable to them because they are expanding market share and they are continuing to do new things.”
One of those new things surfaced last week, in the form of Google Fiber’s fresh twist on an old thing — the landline phone. Edging it closer to the ability to offer a triple-play bundle, Google Fiber unveiled Fiber Phone, a $10 per month optional add-on that will eventually be offered in all of its markets.
But Mastrangelo said she still wonders if Google Fiber will eventually hand off some of its operations to municipal partners after deployments are firmly established. “I think that’s always a possibility because they are working with so many cities … but I don’t think the play is temporary,” she said, noting that the current rollouts ensure that Google’s products and apps are part of the service bedrock in those markets no matter who runs the operations.
Craig Moffett, principal and senior analyst at MoffettNathanson, offered a slightly diferent view. Google Fiber is testing and refining ways to team up with local partners and stimulate the deployment of broadband, but Google isn’t necessarily interested in building a lot of broadband infrastructure itself, he said.“They seem to seem to want to showcase every different variety of public-private partnership that they can come up with to create a menu of options for municipalities to follow,” he said. “I think it speaks to what we’ve always believed with Google Fiber — that their goal isn’t to see how many homes they can cover [but] to see how many homes they can prompt someone else to cover instead.”
If Google Fiber’s aim is to prod ISPs to move more rapidly on 1-Gbps upgrades — a move that would further open the floodgates to over-the-top video services — then it has already accomplished its mission.
Cable operators and telcos are now pushing forward with new fiberbased services and DOCSIS-fueled offerings that deliver residential Gigabit speeds. Among them, AT&T continues to broaden the reach of its fiberbased “GigaPower” platform (now available in 20 markets, with 36 more in the works) and Cox Communications expects to have 1-Gbps speeds available in all of its markets by year-end. Comcast has launched “Gigabit Pro,” a targeted (and pricey) 2 Gbps fiber-to-the-premises residential service, along- side an aggressive plan to deploy DOCSIS 3.1, a new multi-Gigabit platform for hybrid fiber-coaxial networks. Mediacom Communications and Suddenlink Communications also have major Gigabit initiatives underway.
Moffett agreed that Google Fiber has successfully induced cable operators and telcos to deploy broadband service more quickly while also influencing the policy debate in areas such as network neutrality.
But Google Fiber (whose executives were not available to be interviewed for this story) has also influenced pricing for super-fast broadband. A case in point is AT&T. The standalone price for the telco’s 1-Gbps service is $70 per month in Google Fiber markets, mirroring Google’s pricing, but it asks $110 a month for the same service elsewhere.
“Google Fiber has had a downward impact on pricing,” Moffett said. “Ultimately, that might be their most important legacy.”
But it has had less influence on broadband caps. Google Fiber’s service is uncapped, but Comcast, AT&T, Mediacom Communications and Suddenlink Communications are all employing or testing usage-based policies.
NEW DEPLOYMENT WRINKLES
Based on Google Fiber’s expansion plan, and some recent tweaks to its deployment model, it appears as though it has no near-term intention of slowing its pace.
Google Fiber currently offers service in parts of Kansas City, Kan.; Kansas City, Mo.; Provo, Utah (via its $1 acquisition of the iProvo network); and in Austin, Texas. It has also committed to deploy operations in a handful of other markets, and is considering expansion to several other major hubs, including Chicago and Los Angeles.
Google has also been implementing new strategies aimed at accelerating the availability of its services without having to build networks from scratch.
For instance, Google Fiber has started to tap into existing infrastructure to reach parts of San Francisco and Atlanta. Google has also inked a deal to offer services on a fiber network that Huntsville Utilities is building in Alabama. Those approaches could serve as a blueprint for more rapid growth.
“The process has been slow for Google,” Mastrangelo said. “But I think they are trying to look at more ways to accelerate the deployment of their services.” Google Fiber said it remains open to employing various deployment approaches.
“Since we started Google Fiber, we’ve built the majority of our networks from scratch. But over time, we’ve learned that every city is unique, and we can bring service to more areas by taking different approaches to expansion,” Chris Levendos, head of network deployment and operations at Google Fiber, said in a statement to Multichannel News. “In Provo, we purchased a network from the city. In Atlanta, we’re constructing our own network as well as using existing fiber to provide Google Fiber to some apartment buildings. And in Huntsville, we’ll be working with a muni-owned network to bring our high speed service to the city. We think there’s a lot of value in continuing to pursue new models — ultimately, it means we can work with more cities to help bring Google Fiber to more people.”
Meanwhile, a new report from Moffett shed some light on Google Fiber’s subscriber progress, at least from a pay TV standpoint.
Google Fiber ended 2015 with more than 53,000 video subs, he found, according to data culled from the U.S. Copyright Office. That, Moffett noted, would make Google Fiber one-seventh the size of midsized cable operator Cable One, the smallest distributor his firm covers.
Though small, those numbers don’t represent the full extent of Google Fiber’s progress, because it leads with broadband. And it doesn’t say how many customers opt for its free basic Internet service (at speeds of 5 Mbps downstream and 1 Mbps upstream). The new structure of Alphabet, Google’s parent company, does offer a hint at Google Fiber’s financials. Alphabet’s “Other Bets,” areas covering moonshot projects such as self-driving cars and Google Fiber, lost $3.56 billion in 2015 on revenues of $448 million.
“Google Fiber will continue to be, we expect, the biggest consumer” among the Other Bets, Ruth Porat, Alphabet’s chief financial officer, said on the company’s last earnings call, a small indicator of Google’s commitment to the fiber project.
Other industry analysts are more bullish about Google Fiber’s prospects. In a report issued last fall, Bernstein Research senior analyst Carlos Kirjner held that the market is “too dismissive” of Google Fiber. It has a “better- than-good chance to build a profitable local-access competitor,” he said.
Nor are Google Fiber’s competitors ignoring the threat. Comcast, for example, has been distributing flyers in Atlanta urging people not to “fall for the hype” of Google Fiber and touting the features of its products, including X1.
As for the broadband side of the equation, Mastrangelo said she believes that cable still holds the high ground, in part because its networks are already built and can be upgraded relatively quickly.
“I think cable still has the upper hand on being the provider of fast speeds in the U.S., despite what Google and others are doing, simply because they have the time-to-market advantage,” she said.