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January 23, 2013

Will Google Fiber be Launched Elsewhere?



By Gary Kim
Contributing Editor



Few people, if any, could honestly say they “like” competing with Google (News - Alert). So Google Fiber in Kansas City, Mo. and Kansas City, Kan. continues to raise questions. Logically, many in the Internet service provider business wonder, or worry, whether Google really wants to be in the ISP business in a bigger way. 

The logical answer might be that Google’s real objective is to convince other ISPs to upgrade their networks faster. One might argue that is the thinking behind other moves Google has made in the past, such as sponsoring municipal Wi-Fi, airport Wi-Fi, investing in Clearwire (News - Alert) or supporting white spaces spectrum and putting forth a minimum bid of its own for 700-MHz spectrum, back in 2007. 

On the other hand, Google has hinted that it might not be done, in terms of Google Fiber. 

Patrick Pichette Google CFO, said on Google’s recent earnings call that Google Fiber is not a hobby. “We really think that we should be making good business with this opportunity and we are going to continue to look at the possibility of expanding, but right now we just got to nail because we are in the early days,” said Pichette.

That is the sort of talk that continues to worry some observers, even though a reasonable person would say it is a waste of Google’s resources to spend too much capital on such projects. 

Still, there is quite some room between a simple “demonstration project” that loses money, something Google has insisted would not be the case in Kansas City, and a full scale entry into the ISP business. For now, Google really wants to demonstrate that a high-capacity one Gbps symmetrical fiber to the home network can sustain itself at costs much lower than has been the case for telco and cable TV efforts.

Some might wonder why the search giant cares so passionately about “everybody” having fast Internet access, using fixed devices or mobile devices. And the reason is simple enough: it makes money from advertising and related services on its Internet apps. The more people who have Internet access, the bigger the opportunity for Google to monetize usage of its apps.

That also explains why Google is so interested in the fastest possible speeds. As all studies have suggested, people consume more bandwidth when they have faster speed access. In other words, they also view more pages. Pages are inventory.

So faster Internet access means more inventory to show people, and therefore more monetization of higher inventory.

Google in all likelihood would be quite content if it could spur all other ISPs to dramatically boost access speed, without building another Google Fiber network. But Google Fiber might be necessary, in at least one market, to suggest the business case is sustainable.




Edited by Jamie Epstein
 
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