Trying to figure out what Google is going to do with fiber is now the best guessing game in the industry. I will be the first to tell you that I have no idea what they are up to, and so this will not be another pundit announcement proclaiming that I have any insight about Google’s intentions. I just find it interesting that every pundit has a different view of what Google is up to. Here are some of the theories that I have seen:
Broadband Experiment. A number of industry experts have postulated that Google is undertaking a grand experiment that lets them create a giant broadband lab where they can play around with ideas and applications that need gigabit bandwidth speeds. Google’s future in the US is going to rely a lot on there being good bandwidth everywhere. Today they need bandwidth for YouTube, but that is not a good enough reason to build gigabit networks. Most metropolitan areas have plenty of bandwidth already to support video streaming and I even have enough bandwidth for streaming video sitting on an island in the Caribbean.
So if this is a bandwidth experiment, what applications does Google have in mind? Certainly they have their eye set on the Internet of Things. One can expect a huge increase in the need for bandwidth to process the monstrous amount of data that is going to come from billions of sensors in the world around us. I am sure that Google wants to be the one who monetizes the processes that will make sense of big data.
I saw some merit in this argument until Google purchased the Provo network. Certainly, if their intentions are for this to be just an experiment, then Kansas City and Austin are big enough places to test almost anything that needs to be tested.
To Lure More Investors to Build Fiber. This country has fallen woefully behind the rest of the world in terms of making basic infrastructure investments in fiber (and everything else like bridges). For the past fifteen years there have been numerous companies making backbone fiber investments, but very few investing in the last mile. Verizon built FiOS into the best parts of their markets. Some hundred towns and cities have built fiber to everybody. And a number of rural telephone companies have built last-mile fiber – there is better bandwidth availability in much of North Dakota than there is in Manhattan.
But the vast majority of the country does not have fiber. If Google really believes that it needs fiber everywhere in a decade to sell the services it wants to sell, then perhaps a major motive is to show others that investing in fiber can be profitable. Certainly Google could build fiber everywhere themselves, but that would be a massive investment. And one really wonders if Google wants to become that much of a brick and mortar company since most of their revenues now come from advertising.
This is an intriguing concept and it seems to already be working. When Google announced they are building Austin, AT&T came out almost immediately with the same announcement. CenturyLink just announced they are building gigabit fiber in Omaha, Nebraska. A start-up called Gigabit Squared has announced fiber projects in Chicago and Seattle. So, maybe this is what Google is really after.
To Make Money. And at an industry event last week a Google spokesperson said that Google is just in this to make money. Maybe that is it in a nutshell. I know as a consultant who has been working with building fiber networks for the last decade that there can be very decent profit margins from building last mile networks. Verizon has proven that fiber can work, and they did it the hard way by building to compete against their own copper network and their own existing revenue stream. In a competitive environment where a new fiber network attracts all new revenue is a very solid investment as an infrastructure play.
But if this is Google’s only reason for building fiber I am a bit flummoxed. They are doing what I call a dumb pipe deployment. They are selling very fast bandwidth, but at rates higher than market. Their only other product is a somewhat standard cable TV offering. And that’s it. If they were in this to maximize profits there are a ton of other things they could sell. For example, voice is still a quite viable product that is mostly margin. And there are a ton of other products hitting the market around the country from advanced security, home automation, medical monitoring that all could drive a lot more money to the Google business plan. Maybe they are going to do all of these things over time. But for now, to me, this does not look like a business plan whose sole goal is to maximize profits. It looks more like a cherry-picking business plan that is going after those customers who will pay a premium for very fast fiber.
To Rule the World. This is my favorite theory. I read a guy who said that Google wanted to rule the world by owning all of the data in the world. By building fiber, Google gains the ultimate connection to people. When the Internet of Things starts monitoring everything around us Google would know more about you than you know about yourself.
Like all of the other ideas this one has at least a little bit of merit. Google is putting a lot of effort into analyzing and dissecting everything about you so that it can maximize its advertising efforts. And as we move into the Internet of Things, your ISP will have the ability to know literally everything about you including things like your blood sugar levels. I don’t put a lot of credence in this idea, mostly because it scares me to death to think that somebody wants to be Big Brother.
My guess is that all of these factors are part of the motivation for Google to do this. They know that getting very fast fiber to people is a good thing and even they probably don’t have a master plan about where this will ultimately go. Obviously they will expect to make money at it, and if they don’t they would ditch the businesses at some point. And with the giant bandwidth laboratory Google is going to learn a lot of things the rest of us won’t know. That alone probably makes it worth the effort.