News leaked out that Google is experimenting with Fiber Phone with members of its Trusted Tester Program. Google offered phone service to those customers and wrote the following:
With Fiber Phone, you can use the right phone for your needs, whether it’s your mobile device on the go or your landline at home. No more worrying about cell reception or your battery life when you’re home… Spam filtering, call screening and do-not-disturb make sure the right people can get in touch with you at the right time.
Google is installing the needed equipment for test customers and is at the beta stage of testing. There has been news about possible pricing or when this might be made available to all customers.
In early February Google announced it is now offering a 100 Mbps data product for $50 to go along with the $70 gigabit offering. In Atlanta the company has eliminated the ‘free’ Internet product where customers paid a one-time fee of $300 and got a 5 Mbps product for 7 years with no additional fees.
With these changes Google is looking more and more like a typical triple-play provider. It’s not hard to understand why they would make these changes. It’s very expensive to build a fiber network and the best way to pay for it is to get as many high-margin customers as possible on the network to pay for it.
As exciting as the $70 gigabit product is there are a huge number of households that just can’t afford that price. So by adding a $50 product that is still blazingly fast Google will make their broadband affordable to a lot more people in each market.
There is one interesting market dynamic that Google is probably going to soon see. In looking at the customer penetration rates for many of my client ISPs I’ve almost always seen that the fastest Internet product (assuming it isn’t priced too high) will get 10% to 15% of the customers in a given market. Given a choice, the rest of the customers will take something slower if it saves them money. This is not something that’s true only for fast fiber networks, but I’ve seen this same relationship hold true for cable companies with HFC networks and for DSL networks. There are only a few markets where a higher percentage of customers buy the premium data product.
If Google goes back and introduces the 100 Mbps product in their older markets they will probably see two things. First, they will add customers who find the $50 price affordable. But they are also going to see gigabit customers downgrade to 100 Mbps to save $20 per month. Overall I would guess this change will produce a significant net change upward in total revenues in Google’s older markets. In Atlanta I predict they will get a lot more 100 Mbps customers than gigabit customers.
And Google ought to do okay with voice. My experience is that they will have a hard time selling voice to existing customers but that they will do okay with new customers as they add them. The FCC reported that voice just fell under a 50% nationwide penetration, and that is still a lot of potential customers. I see clients still doing surprisingly well with residential voice and still doing extremely well with business voice.
It’s interesting to see that after a few years in the market that Google is morphing into a more normal triple play provider. I’ve expected this from the start because my take is that a large majority of the households still wants the double play or triple play and if you want to get a lot of customers you have to provide what customers want to buy. Anybody that expects customers to buy from more than one vendor to get what they want is going to drive away a lot of potential customers.