Google Fiber is gearing up to expand to one more metro area—Salt Lake City. The Utah capital will join the Atlanta, Charlotte, Nashville and Raleigh-Durham metro areas in the next phase of building out Google’s fiber network. And the signs point to the initiative moving beyond novelty status into the realm of, possibly, being a profitable threat to incumbents.
Google is already live in Austin, Kansas City, Missouri, and Provo, Utah with its fiber-fed 1Gbps Internet and TV packages. For now, the five new cities are in the design phase, with service turn-ups to be announced. Pricing plans, if they follow other rollouts, should include a free basic Internet connection at 5Mbps following a $300 construction fee, a 1Gbps broadband available for $70 a month, and a broadband plus TV service for $120 a month. These prices are similar to European offerings and well below a typical cable subscription.
“Salt Lake has more than breathtaking mountain vistas and fantastic ski slopes,” said Devin Baer, associate city manager for Google Fiber in Salt Lake City. “It also hosts a booming technology sector, world-renowned universities and a vibrant local culture. We’re looking forward to seeing Salt Lake residents use gigabit Internet to spark creative ideas, jumpstart businesses and collaborate in ways they couldn't before.”
The addition of Salt Lake City and Atlanta to the roster indicates that Google is deviating from the smaller fiber builds that have characterized its network plans to date. And that could indicate that the Internet giant is willing to become a force in the broadband market after all. Early assessments were that it would remain a bit of a market curiosity.
Last year, research firm IHS postulated that Google Fiber would be offered only in smaller markets, limiting its economic and competitive impact. Consider that Austin and Provo together collectively have a population of about 1.4 million, while Kansas City, the first Google Fiber market, has just 446,600 people. That means that until now, Google’s chosen fiber homes represent only about 0.4 percent of U.S. households.
“So, even if Google managed to secure a high market share in these metropolitan areas, it would still be able to reach only about 0.2% of US homes with the service,” Dexter Thillien, senior analyst for multi-play at HIS, said. “While the deployment of Google Fiber to the cities may capture attention, the company’s plans are miniscule compared with what its competitors undertake in the overall market.”
In comparison, No. 1 U.S. ISP Comcast boasts about 22 million broadband subscribers. And telcos, which are more directly analogous with Google as fiber and IPTV providers, blow it away too. Verizon has 6.6 million FiOS Internet subs, while AT&T, which competes directly with Google in Austin and in Kansas City, has about 12 million. And of course, AT&T and Verizon have spent many billions of dollars trenching fiber in larger population centers. But as a result, they’re much more able to monetize service upgrades for profitability in their smaller markets than the Internet upstart.
But Salt Lake City and Atlanta buck that trend. The SLC metro area has about 1.14 million residents (using 2013 estimates), while Atlanta, the ninth biggest metro in the U.S., has 5.5 million. It’s also worth noting that the Phoenix-Tempe-Scottsdale area, home to 3.3 million and the 14th largest metro, is on the roadmap for build-outs.
So, it’s clear that Google is now tackling a bigger bite—and giving itself a bigger monetization footprint.
Google is also being opportunistic in its experiment to bring high-speed broadband to various locations, and is optimizing its investments by buying up failed rollouts of dark fiber, IHS noted. If the fiber experiment is successful for Google, it may very well become a long-term undertaking for the
company, allowing Google to expand its core activities to new markets. That’s especially relevant for its video and content services, and, of course, advertising.
And indeed, in this context, Google’s fiber experiment also may serve as a test to see how consumers might use more bandwidth, and inform the company about the sort of needs consumers might have over the next decade or so—and how to serve those with money-making Web services.
“Google Fiber could be much more disruptive than I had originally thought,” said Alex Cho, a research analyst with Seeking Alpha. “I anticipate that the increase in bandwidth will pave an easier pathway to various other infant technologies like the Internet of Things, cloud computing and contextual machine learning technologies. I anticipate that this will positively affect Google as it will increase overall activity on the Web, which Google monetizes via its ad network and Web properties.”
Google itself seems to indicate that things are playing out as such.
“During my time working in Provo, I’ve seen the impact of Google Fiber firsthand,” said Baer. “Hackers from across the country have gathered at DevMountain to develop new Web and mobile applications; the United Way of Utah County has promoted new digital literacy programs throughout the community; and one organization, called Now I Can, has used Google Fiber to remotely connect parents with their children undergoing intensive physical therapy in Provo.”
Only time will tell if Google plans to make a serious run at becoming a top nationwide ISP. But recent moves show that it is, at least for now, pulling the right levers to turn a profit while it figures that out.
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