|
 Google executives told reporters on Wednesday the search company has
reached out in recent weeks to cities from nine metropolitan areas
around the country, including San Jose, Atlanta and Nashville, to
discuss the feasibility of building out Fiber, which Google says
delivers the Internet at speeds up to 100 times faster than average
networks.
As Google delivers more music, videos and other content to mobile
devices, it is increasing investment in ensuring it gets the
bandwidth it needs. Web-access projects like Fiber could also help
grow revenues beyond its maturing search business, and give it more
insight into consumers' online habits — which, in turn, is crucial
to making ads more effective.
Google had initially billed its first Fiber broadband offer,
launched in Kansas City last year, as a test project to spur
development of Web services and technology. But industry observers
speculate that the one-gigabit-a-second high-speed Internet service
could become a viable business for the company, prompting
traditional rivals such as AT&T to mount a defense.
"We continue to believe that Google Fiber is an attempt by Google to
build a profitable, stand-alone business," argued Carlos Kirjner,
senior Internet analyst for Bernstein Research.
"Google is taking the long view and we think in five or more years,
it could turn out to be a significant, profitable business for
Google and headwind for incumbents."
AT&T Inc said last year it was ready to build its own
one-gigabit-per-second fiber network in Austin, provided it got the
same treatment from local authorities as Google. AT&T CEO Randall
Stephenson said in September he expects the telecoms carrier to
expand that offer to "multiple markets" in coming years.
And Comcast Corp, which will become the largest cable provider in
the country if it passes antitrust scrutiny for its proposed $45
billion acquisition of Time Warner Cable, argued to regulators this
month that Google Fiber could threaten its business over time.
Google now provides Fiber service, at up to $120 a month, in the
Kansas City metropolitan area. Last year, it announced plans to
expand in Provo, Utah and Austin, Texas in 2014.
The consumer response so far in Kansas City has been "overwhelming,"
Kevin Lo, General Manager of Google Fiber, told reporters on a
Wednesday conference call. He did not elaborate.
DISRUPTION AND EXPENSE
To make a difference to Google's overall business, which is expected
to generate roughly $70 billion in revenue this year, Fiber needs to
expand dramatically.
[to top of second column] |
In a city of one million households for example, Google would reap a
modest $288 million a year in subscription revenue if 20 percent of
families were to sign up for its $120 monthly service. If it were
able to enlist half the homes in the city, that could mean $720
million in annual revenue.
Fiber may not prove feasible for every one of the 34 cities under
consideration. The company will make a final decision on which of
those get Fiber by the end of the year, Lo said.
Building high-speed networks is a cumbersome process that typically
requires tearing up streets and working with local governments to
get access to utility poles and approvals.
Unlike in the past, when networks expand over time, Google's
approach will be to build out all at once in specific urban markets.
Kirjner has estimated the cost of making Fiber available to 300,000
homes in the greater Kansas City region at $170 million. Expanding
to 20 million U.S. homes, which Kirjner says is not likely for now,
would cost $10 billion to $15 billion.
To minimize disruption to locals, Google will work with city leaders
to make use of existing infrastructure — such as conduits, and
water, gas or electricity lines, Lo added.
"We plan to share what we learn in these 34 cities," vice president
of Google Access Services Milo Medin wrote in a blogpost. "It might
not work out for everyone. But cities who go through this process
with us will be more prepared for us or any provider who wants to
build a fiber network."
(Reporting by Edwin Chan; editing by
Alden Bentley)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
