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More on Google's (GOOG) fiber service: Though it's charging $70/month for standalone 1 Gbps...

More on Google's (GOOG) fiber service: Though it's charging $70/month for standalone 1 Gbps connections, Google says it will offer free 5 Mbps connections (save for a $300 installation fee) for 7 years, in the hope that users will upgrade. Time Warner Cable (TWC) might have something to be worried about after all. So might Google investors if the company chooses to expand the service, and its engineers don't find ways to minimize capex.
Comments (16)
  • I think its a good indication that Patrick Pichette (Google CFO) is the executive sponsor of the project within the company. I'm guessing they've done analysis that shows it's likely to be a good investment.
    26 Jul 2012, 03:13 PM Reply Like
  • I'd pay for the 1Gbps connection, hell I'm already paying $60 to comcast and I dislike them...
    26 Jul 2012, 03:15 PM Reply Like
  • All I've seen over the years is that it costs at least in the ballpark $3,000 to trench fiber to someone's house. First you have to spend a few million on lawyers, then wait a few years for city hall to approve it, then pay the city's ransom, then hire tons of union labor, buy massive Caterpillar back-hoes, then .... work on it for 2-3 more years, and then launch service. Of course: Also install all the fiber, all the electronics, and all the CPE. Why would Google be able to do this any better than all the others who have tried for 15-20 years to do the same and it cost a heckuva lot more than $300 per home, all in? Let's take a town of 10,000 people. First, you have to spend $10 million in lawyer fees to convince city hall to move forward, give them a bunch of freebies. So that's $1,000 per house before you have put the first shovel in the ground, and that assumes 100% take rate. Most overbuilders never get more than 20% take rate. So that's $5,000 per home. Then add the equipment, labor, installation, and a few years of waiting. Has Google shown how they can somehow do this for less than $5,000 or so per home?
    26 Jul 2012, 03:19 PM Reply Like
  • Interesting post. I can see Google having lower equipment costs than other fiber providers by using cheap Ethernet switches and high-density servers/storage rather than traditional telco gear. But construction/installation costs will be tougher to bring down.
    26 Jul 2012, 03:42 PM Reply Like
  • Remember, these cities had to submit proposals and compete to bring Google's gigabit service to their town. Chances are, Google paid a lot less to Kansas City in legal/extortion fees than Verizon pays Anytown, USA for FiOS.
    26 Jul 2012, 04:44 PM Reply Like
  • I suspect that the true value is enabling a whole new kind of net consumption. Long payback? Maybe. Somebody's gotta do it and I hope it isn't Comcast or AT&T.
    26 Jul 2012, 05:41 PM Reply Like
  • How, precisely? I have a 20 meg or 50 meg connection today. Not sure I would want to pay more for anything faster, as best I can tell. And what do you mean by "enabling a whole new kind of net consumption?" Let's say you have a 30 meg connection today; how much extra would you pay for 100 meg or 200 meg, and if you're Google how do you get a return on your up-front investment?
    26 Jul 2012, 06:30 PM Reply Like
  • kevin: I also suspect this.
    27 Jul 2012, 11:13 AM Reply Like
  • it's about the future - right now 30 meg connection is ok, but consumption is growing exponentially. Google is ahead of the curve and will have a valuable asset that is irreplaceable in 10 years.

     

    As for the guy who said it costs 10 million to pay for lawyers and cities to approve installation of a fiber service, I think that's too high. In fact, I bet Google could get it done for less than $50,000 of legal fees. You have to remember that cities want the fiber network as much as Google wants to install it. This is the U.S. not communist USSR; we can get things done without bribes.
    26 Jul 2012, 08:00 PM Reply Like
  • If cities want fiber, then why have they so consistently been fighting it tooth and nail in many places where Verizon and others want to upgrade? It takes FOREVER to get a permit. You have to conform to "universal service" and the CDO (that would be the Chief Diversity Officer) and give free service to the government's many arms. Verizon started in 2003 and now you can ask them what % of homes they have been able to cover 9 years later and $20 billion of capex into it. If you are going to spend 3 years negotiating with a city government and have a legal team doing the fighting for you, it will cost many multiples of $50,000.
    27 Jul 2012, 12:50 PM Reply Like
  • I hope Google fiber comes to Atlanta. I would pay $70 a month in a heartbeat for a 1GBPS connection. I dropped my Comcast cable television and VOIP several months ago because I have come to believe it is a terrible value and the customer service is the worst I have ever experienced bar none. I am still paying Comcast $80 per month for an Internet connection with a max download speed of 20MBPS and the average speed is much less during the evening hours. Last evening I was having trouble streaming and I checked the download speed and it was under 500kbps - almost unusable for streaming. In any case the traditional cable companies need viable competition and Clearwire's WiMax is not it.
    27 Jul 2012, 01:54 AM Reply Like
  • Luke: I also hope that Google comes to Atlanta. The naysayers are afflicted with short-term vision.
    27 Jul 2012, 11:16 AM Reply Like
  • In my opinion they should start laying the fiber everywhere and while they are doing it the Utility companies can jump in on the costs of digging all the ditches and lay the power lines....

     

    Synergy sounds good to me, lowers the costs for everyone.
    27 Jul 2012, 01:34 PM Reply Like
  • Yes, follow that strategy, and then you can launch service uniformly in about 80-120 years from now.
    27 Jul 2012, 01:43 PM Reply Like
  • Won't it take that long regardless? I mean I don't know if you know this but some places in the country still don't have cable tv, and phone lines are as unreliable as 20-30 years ago. Cell phone service HA

     

    Or are you just arguing that because it'll take a long time we shouldn't do it?
    27 Jul 2012, 01:47 PM Reply Like
  • I'm saying that they don't dig trenches for new utility lines that often, whether water pipes or for other things. My only point is that either (1) It will take a LONG time, or (2) it will cost a fortune per household, or (3) BOTH. I just want Google to outline the true construction economics of this, including obtaining the permits and so forth. ALL all-in overhead and all cost. No happy-talk. No "we'll charge you $300" if in reality the cost is $3,000 or $10,000 per household.
    27 Jul 2012, 05:19 PM Reply Like
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