Google, continuing its journey outward from its original search-engine concept, has begun the initial marketing phase of its next product, Google Fiber. This new fiber-optic cable service promises a connection speed 100 times faster than that of conventional broadband and will carry signals for high-definition TV and internet data.
Google will launch Fiber in one market only: Kansas City in the United States. And it will do so in an innovative way: Since July 26 the company has been inviting Kansas City residents to pre-register for the service, and it will determine the size and extent of the cable network it will construct based on the amount and the geographic footprint of the demand. Taking a grass-roots approach, Google has divided the city into small “fiberhoods” and will install in any given fiberhood only when there is sufficient interest there. The company is encouraging interested potential customers to convince their friends and neighbors to sign up. The eventual goal is to link all the fiberhoods to form one citywide network. Most analysts expect that Google will likely reach its customer sign-up objectives given the benefits offered by Fiber.
Once it goes live in early September, Google Fiber will be available in three packages: Gigabit internet (1 GB upload speed, unlimited data) and 160-channel TV for $120 a month; Gigabit internet only for $70 a month; and “free” internet with a $300 one-time “construction fee.”
Tarifica’s Take
The fact that Google sees benefits in laying cable is a good indication that, as we reported last week, fixed line services are by no means going the way of the dinosaur and will continue to be of critical importance in an increasingly data-driven world. While Google Fiber, if it takes off as anticipated, will certainly serve to increase the volume of internet use and thereby synergize with Google’s core business, we believe that Google expects Fiber to yield good returns on its own over time. In fact, we would not be surprised if the company were to direct Fiber into other geographic areas and/or the business-services sector in the not-too-distant future. Notwithstanding the potential returns associated with this endeavor, Google is also likely using the launch as a means by which to prod traditional fixed line operators (phone and cable) to upgrade their own networks.
Tarifica would advise fixed line operators to pay close attention to Google Fiber. When a company as leading edge, successful and internet savvy as Google begins laying cables, it clearly demonstrates what we have been saying for some time: The future of fixed line networks and services lies in the explosion of data traffic that will need to pass through fixed line networks. By enhancing those networks for data optimization, fixed line operators can go from being voice providers with contracting businesses to being primarily data providers, which should lead to renewed growth and far better returns on investment than have been generated by these operators in recent years.
The present moment may be a difficult one for traditional fixed line operators, as non-traditional entities like Google threaten to move in on their turf. However, in our view, operators that are nimble, savvy and brave will position themselves to not just repel these new threats, but to also enjoy what we expect to be great business opportunities for years to come.