Who Will Win the Telecom Battle?

facebookNow that Google has pulled back with expansion of Google Fiber it’s easy to see that the cable companies and telcos think they have won the broadband war. But I think if you look a little closer this might not really be the case.

Tech companies like Google, Facebook and Amazon are still focused on making sure that people have enough bandwidth to take advantage of the many products these giant companies offer or plan to offer in the future. And all three companies are growing in importance as content providers.

Consider first the strength of these companies as content providers. Google owns YouTube which is becoming the most important video destination for the younger generation – and those kids are growing up. We’ve seen young millennial households largely reject traditional cable TV offerings. While Amazon Prime is not nearly as big as Netflix it is a strong second and is continuing to grow. Amazon is also reported to be pouring big money into producing original content for its platform. Facebook is on a trajectory to become the preferred source of news and information. And their Facebook Live is also quickly becoming a huge content platform.

But content isn’t everything. Consider that these companies have amassed an enormous private fiber network. Google doesn’t talk about it’s network, but way back in 2013 it was reported that Google had assembled a network consisting of 100,000 miles of dark fiber. We also don’t know the size of the networks, but both Amazon and Facebook have also built large private networks. We know that Google and Facebook have partnered to build a massive undersea fiber to China and are looking at other undersea fiber routes. Amazon has built a huge network to support its cloud services business. It would not be surprising if these companies have already together amassed a larger fiber network than the telcos and cable companies. If they are not bigger yet, they are on a trajectory to get there soon. With these networks the tech companies could hurt the big ISPs where it most hurts – by taking a huge bite out of their special access and transport businesses.

These companies are also not done with the ISP business. Google Fiber has retracted from expanding FTTH networks for now, but they acquired Webpass and are looking to expand as an ISP using wireless last mile. And we saw in Huntsville that Google is not afraid to use somebody else’s fiber network – something we have never seen any of the telcos or cable companies consider. It would not be surprising to see Google make deals with other private networks to expand its ISP business to avoid spending the upfront capital. But perhaps Google’s biggest foray into providing data services is Google Fi, their service that provides unlimited cellular data using WiFi first rather than cellular. It’s been rumored that Google is looking for partnerships to expand WiFi access in many markets. And it’s been reported that Amazon is strongly considering becoming an ISP. I’ve not heard any details about how they might do this, but the company has shown the ability to succeed in everything it’s tackled – so it’s an intriguing possibility.

It’s a gigantic task to take on companies like AT&T and Comcast head on. I think Google Fiber learned this the hard way. But at the end of the day content is still king. As these companies continue to grow in influence as content providers they present a real challenge to traditional programmers. But they also are a growing threat to the big ISPs. If these tech companies decide that their best strategy is to directly deliver their content to subscribers they have a big enough marketing position to pull along a huge number of customers. It’s clear that consumers like these tech companies far more than they like the big ISPs, and in the end the accumulated animus with customers might be their undoing.

This kind of industry shift won’t happen overnight. But it’s already quietly going on behind the scenes. We may not be as far away as you might imagine when these companies provide more content than the traditional programmers and also carry more bandwidth on their own networks than the big ISPs. From my perspective that looks a lot like winning the battle.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s