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Monday, July 28, 2014

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  • Google Fiber To Expand To A Second City; But If It's Not A "Hobby," Then What Is It Exactly?

    Google announced late yesterday plans to extend its Google Fiber service to a second city, Olathe, KS (population 125,000), in Johnson County, about 30 minutes from Kansas City, where Google Fiber has been initially deployed. With the news, the question once again arises, if Google Fiber isn't a "hobby" (as Google executives recently stated), then what is it exactly? And by extension, what are its real implications for broadband ISPs, consumers and over-the-top video?

    To be sure, Google has gained tons of publicity for its 1 gigabit broadband service in Kansas City. Some reports suggest property values in "fiberhoods" have increased. One investor has bought a home in a fiberhood and is offering rent-free space to startups. But beyond the anecdotes, Google hasn't released any data about what the adoption rate has been, or how it has impacted incumbent broadband ISPs/pay-TV operators.

    As a result, it's hard to assess how competitive Google Fiber actually is. Last summer I asserted that Google Fiber, while plenty sexy and appealing to early adopters, is, in reality, out of synch with typical consumer technology adoption. Mainstream users don't want to help debug Google Fiber, especially not when their current ISP service works fine for their needs. Further, Google Fiber's pricing of $70/mo for broadband-only or $120/mo for broadband plus TV would mean rate increases for just about everyone who switches from an incumbent provider.

    No question, there is a segment of the population that will be interested in Google Fiber, but it seems very narrow to me. So if it's unlikely to change the competitive dynamics much by demonstrating vast demand for 1 gigabit service, then what does Google accomplish with Google Fiber? It may put some incremental pressure on incumbent ISPs to bump their speeds, but speeds are increasing already anyway (as one example, Comcast just increased my broadband to 50 mbps downstream at no extra charge; other ISPs are doing similar upgrades as DOCSIS 3.0 is adopted).

    ISPs recognize that the explosion in online video is the big driver of subscribers' interest in better broadband. But they're also cognizant of what people value and what they'll be willing to pay, factors that inform their network investment decisions. So while Time Warner Cable has gotten grief in the tech media lately for saying its customers don't need or want 1 gigabit service, the reality is that until there's evidence its customers are defecting in droves to Google Fiber, it's probably fair to say they're content with TWC's broadband service, even for their video streaming.

    Google deserves credit for pushing the envelope with Google Fiber and for those individuals who have switched over, receiving 1 gigabit must be a thrill. But until Google announces a much broader rollout, syncs up its offering/pricing with consumers' expectations and demonstrates an impact on the competitive environment, it's hard not to see Google Fiber as more than a hobby, its executives' comments to the contrary notwithstanding.

     
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