Alphabet's earnings call and a report from the Washington Post indicate that Google Fiber is going into high gear. Service providers – both traditional "phone" companies and cable – have more to worry about, with Tier I/ILEC/whatever you want to call 'em legacy players facing the biggest challenge from accelerated fiber and service deployments.
Most of Alphabet's "Other Bets" (i.e. anything not the cash cow search engine and targeted ads) $869 million capital expense (capx) spending in 2015 went into Google Fiber. It is also one of the few in the portfolio that is producing revenue, but how close it is to break-even is unknown. Regardless, more money will go into Google Fiber this year as it continues rollouts throughout the south and looks at the potential for deployments in eleven cities, including Portland, Oregon, LA, Tampa, and Chicago.
But that's not all. The initial Google Fiber service offering was just gigabit Ethernet, broadband, no value-add services on top. Some subscribers have been invited to try phone service, Google Fiber Phone. The service includes linking/forwarding all calls to a single phone number, voicemail transcription, call screening, and do not disturb.
Add in Google's demonstration of a "competitive video solution" and the company has a triple play that can go head-to-head to with fiber and cable broadband offerings in some measure. If you want to feed incumbent paranoia a bit more, add in Project Fi, a mobile MVNO offering running across Sprint and T-Mobile networks right now. Sprint has a continued wounded duck look of late, making it a potential acquisition target for Google should the company decide to get serious about wireless, rather than playing the Android arms dealer selling to all sides.
Cable companies are well suited to match Google Fiber, with Comcast and others choosing a path to implement multi-gigabit services using DOCSIS 3.1. Comcast announced this week it is rolling out service in Atlanta and Nashville in the first half of the year, with Chicago, Detroit and Miami to get gigabit service in the latter part. Cox has introduced gigabit speeds under its G1GABLAST brand in 10 states and says it will have all of its markets up to gig by the end of this year.
AT&T, CenturyLink and Frontier all recognized the threat from Google Fiber and cable's embrace of gigabit speeds long ago, deploying fiber and gigabit offerings to counter in a number of markets. Verizon, once a leader in home fiber deployments with FiOS, is now left to boosting its minimum service to a whole 50 Mbps with a top end in some markets for 500 Mbps. No new fiber deployments have been announced for years, leaving the company to try and milk, er, optimize revenue from its existing FiOS footprint by bundling 100 Mbps, phone, and TV for $70 a month in its latest move.
How Verizon copes moving forward is an interesting question, especially considering it isn't upgraded existing copper facilities to support higher speeds -- essentially an "abandon in place" strategy rather than moving to faster DSL and G.Fast technologies in non-FiOS markets. Google Fiber could have the opportunity to acquire (buy) Verizon territories the company isn't investing in, embarking on a rolling upgrade strategy with fiber and high-speed copper and leveraging SDN/NFV to replace and consolidate existing hardware.
How significantly and fast Google Fiber moves is another question. It may be happy to simply continue with its alternative carrier strategy than to take the full burden of being an all-service ILEC for an area, content to leave the heavier lifting to established carriers.
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