What If Google Fiber Is More Than An Experience?

| About: Alphabet Inc. (GOOG)

Interesting turn of events in the last few weeks. After making a case that Google was making a big mistake in trying to go after same-day shipping and that it should focus on areas where it would have an edge (retail stores and Google Fiber), Google announced it was moving on to Austin, Texas, as its second Fiber city. Then, yesterday, Google announced it would also be offering its service in Provo, Utah. Just to recap, Google Fiber offers the following options:

  • $300 installation fee only for seven years of free 5mb Internet
  • $70/month for 1GB Internet connection (which ranks at the very top of Netflix’s ISP rankings)
  • $120/month for 1GB Internet connection and HDTV cable

I don’t know about you (actually I do), but this is not even comparable to what I’m getting from my current ISP. Because of that, Google Fiber was able to secure huge market share in its first market (Kansas City) and looks likely to do the same in Austin and Provo.

Fiber Was Deemed An Experience

At first, Google Fiber was explained as a way for Google to show consumers and cable companies what was possible. It has clearly worked, scared off cable companies but ultimately they seem to be too old and have too much infrastructure to adapt so far.

So The Experiment Expands

Google’s recent announcements send a very important signal in my opinion. It would not be moving to other markets if it could not see this as a potentially profitable business. Of course, it probably needs to enter these markets slowly and carefully because the market share is key here. But what if Google is thinking about expanding Fiber into many other cities. What would this mean to Google? And for cable companies? I’ve heard the idea that Google could/should spin off that business but I don’t agree. The synergies are too important to risk having the companies work apart.

I always talk about owning the “ecosystem” and in a way, Google Fiber is the ultimate ecosystem play.

Cable Companies Must Be Trembling

Imagine a competitor offering a service that is multiple times better than your offering at a lesser price, with a brand (Google) that is loved. Companies like Comcast (NASDAQ:CMCSA) and Time Warner (TWC) must be having daily meetings about trying to compete with Fiber…I’m guessing their best hope is that Google does not start speeding up its expansion. Can you imagine if Google Fiber arrived in a few bigger cities? The best part for Google of course is the fact that no one seems capable of offering something even close to Google Fiber’s offer (for many different reasons including those huge data centers, etc).

Hoping To Find Out More Today

I doubt that Larry Page will give out much about Fiber but I do hope that in tonight’s earnings call, analysts will at least ask about it, what it means, plans for the future, etc.

What are your thoughts on Google Fiber? Do you think it could end up having a significant impact on Google’s long-term future?