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Just recently Google (NASDAQ:GOOG) has announced its decision to lease Moffett Federal Airfield and Hangar One from the National Aeronautics and Space Administration (NASA) (SFGate 1). All that has been officially released is that Google will refurbish the hangar. Hangar One, which was built in 1932 and is one of the world's largest self-supporting structures, has floor-space covering more than 8 square acres. Hangar One was once used by the Navy to house the USS Macon, a World War 1 blimp. Which leads us to one question: What value would Google see in this building and be willing to sign a company lease for the structure at 2 million a year, plus an estimated 33 million for the refurbishment costs? Will it be filled with robots? Is it linked to the mysterious barges? Will it be a giant Google Glass store? The truth is, no one knows. All that Google's spokesperson has said is that it will be used for research, which brings us to the purpose of this article, Project Loon.

Project Loon

Halfway across the world, Google has started a new project in New Zealand. In June 2013, thirty balloons were launched from New Zealand's South Island. These balloons were the first tests of Google's new golden egg "Project Loon". Project Loon proposes launching high altitude communication balloons at an elevation of 20 kilometers. For reference, most commercial aircraft fly at around 30,000 feet or just over 9 kilometers. Google plans to use software and algorithms to navigate its fleet of high flying communication balloons to form a slow moving communication network. This would essentially create a global network of aerial cell towers that each could provide internet access.

From Google Loon 1:

Project Loon balloons float in the stratosphere, twice as high as airplanes and the weather. They are carried around the Earth by winds and they can be steered by rising or descending to an altitude with winds moving in the desired direction. People connect to the balloon network using a special Internet antenna attached to their building. The signal bounces from balloon to balloon, then to the global Internet back on Earth.

In short, each balloon would provide connectivity to the surface of approximately 20 kilometer radius, according to Google. Google also ensures speeds that would be comparable to today's 3G network. Google has also hinted they have developed a new specialized radio frequency technology, which could be perfect for the development of Project Loon. Given Google's resources, and willingness to invest heavily into new projects, it is very feasible to think the Google Loon does have the potential to create an International Communication Network for Free. Google has made it very clear that Project Loon is free and anyone will be able to use its network. That being said it isn't 100% charity on Google's part. Google profits off of most internet users through ad display as well as auxiliary product offerings. In 2013, it was estimated that 70% of the world still does not have access to the Internet (IWS 1). Even at Google's size, there is huge growth potential in the growing number of internet users across the globe. Google's Project Loon could drastically cut that number to shreds, and it wouldn't be difficult to foresee the population with internet access double. This would create a massive untapped market for Google to expand into.

This graph shows the Internet accessibility of each country by percentage of their total population.

This leads us all back to the purpose of Google's purchase of Moffett Airfield and Hangar One. Coincidence? I think not. I simply could not see a better place to store and launch high altitude balloons than from an refurbished Blimp Hangar. With the Airfield next door and Google HQ close by, Hangar One would present a perfect base of operations when Google deploys a much larger scale of Project Loon.

Disruption by Google Loon

While the ability to offer free internet to all would seem great, there are undoubtedly losers in any major transition such as this. The biggest losers would be telecom and internet service providers. These would include major players such as AT&T (NYSE:T) and Verizon (NYSE:VZ), all the way to in-flight service providers such as GOGO Inc (NASDAQ:GOGO). Initially plans are to provide service up to 3G standards. While this would not put most telecom providers out of business, it offers several potential outcomes. First, it would pressure many internet service providers to either increase the speed of their service or to reduce costs.

Another possibility could be that after rolling out a 3G network, Google would steadily upgrade that network, forcing internet service providers to offer superior upgrades and/or lower pricing in order to retain customers. While this would be a costly endeavor for both sides, there is no incentive like switching to a free alternative. This could be similar to the race to provide the cheapest web browser several decades ago. Microsoft (NASDAQ:MSFT) ended the war, not by continually lowering the price of their web browser, Internet Explorer, but rather by making it free. It's hard to compete against free, and if that was your entire business model, then you were wiped out. Such a situation could happen here in the next few years, though this time on a global scale with the ability to affect billions of people like never before.

Conclusion

Project Loon is, for the most part, good news. Free access to the internet and greater accessibility across the world would be a boon for people, most companies, and online retailers. Google, of course, would stand to make a pretty penny if they could pull off such a feat. However it isn't good news for everyone. Major telecom providers, as well as internet service providers, would face stiff competition, if not become obsolete altogether. Google Loon offers the potential to completely revolutionize the idea of free internet access for all, and with the power of Google behind it, they might just pull it off.

Source: How Google Plans To Expand Into A Massive, Untapped Market