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Google opens talks on expanding Fiber home Internet service

Paul Sableman

Paul Sableman

By Brandon Bailey

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San Jose Mercury News


Google is inviting 34 cities around the country to begin talks on joining the gigabit-speed home Internet service known as Google Fiber, in a move that promises lightning-fast downloads to millions of consumers while transforming a former sideline into a substantial business for the giant tech company.

Google wants to discuss building and operating optical fiber networks, starting as early as next year, in Phoenix; Atlanta; Nashville, Tenn.; Salt Lake City; San Antonio; Charlotte and Raleigh-Durham, N.C.; Portland, Ore.; and San Jose, Calif., along with neighboring towns in those areas.

While some cities ultimately may not qualify or could decide not to participate, Google Fiber general manager Kevin Lo said in an interview that the company “absolutely” wants to add all 34 if possible.

“The future of the Internet will be built on gigabit speeds,” said Lo, adding that high-speed connections to the home are essential for Internet developers and companies like Google to deliver new and better online services. “We’re going to do our part to help move the Web forward.”

The effort could also create a new profit center for Google, according to some analysts, although others question the wisdom of competing with giant phone and cable companies in a sector that’s far different from its core business. Google makes most of its money by selling online advertising.

Google’s expansion comes at a time when cable companies provide Internet service to the largest chunk of U.S. consumers — and as the two largest operators, Comcast and Time Warner, are preparing to merge. If Google expanded to all 34 cities, it would serve about 10 percent of U.S. consumers, said Susan Crawford, a visiting law professor at Harvard who studies telecommunications and Internet access.

While Google has declined to release subscriber numbers or financial results from its initial fiber operation in Kansas City, the company has said it expects to make a profit. When asked if the service is profitable, Lo would only say, “Clearly, fiber can be a good business.”

But in response to other questions, Lo indicated the company was pleased with consumer demand in Kansas City, where the company began delivering fiber service to homes in 2012 — charging $70 a month for a 1-gigabit connection — as well as in Austin and Provo, Utah, where Google Fiber began connecting homes last year.

Google selected the 34 new cities from more than 1,000 that submitted applications four years ago, when the company first announced plans to build a high-speed municipal network as both an experiment and an example to the industry and policy-makers.

San Jose Mayor Chuck Reed said he wants to pursue the project for his city, which he boasted is home to more tech workers than any other Silicon Valley community. Google Fiber promises downloads that are much faster than even premium speeds offered by cable providers like Comcast, and up to 100 times faster than typical consumer Internet service in the United States.

“It would be great for our residents to have really fast Internet service,” Reed said. On a national level, he added, “high-speed Internet access is one of the things we need for economic development. The U.S. generally is far behind other parts of the world.”

As in Palo Alto, Calif., and some other cities, Reed said San Jose already has pieces of a fiber network that Google might be able to use and expand. A spokeswoman said Google is open to that idea.

In all 34 communities, local leaders have shown a strong interest in improving Internet access, said Google spokeswoman Jenna Wandres. That’s important because, while the company isn’t asking for direct financial subsidies, Google is counting on local officials to pave the way on several points.

In the next few months, Google will ask the cities to provide detailed reports on housing density, topography, geology and current locations of utility poles and underground conduits. Google may ask cities for help in obtaining rights to use existing poles or conduits, for which Lo said the company is willing to pay “market rates,” rather than spend more to install new ones.

Google also wants cities to show they can process a large volume of permits once the company begins installation, which could mean hiring or assigning inspectors to focus on the project, so the company can move quickly and on a predictable schedule.

“Building an entire network across a city is a big, big project,” said Lo, who oversees daily operations for Google Fiber. “It does take time, but a little bit of planning now goes a long way to minimize disruption to residents.”

Google used that approach to advantage in Kansas City, Kan., and neighboring towns, according to financial analyst Carlos Kirjner of Bernstein Research. The company urged residents to subscribe to the new service in advance, and warned residents that if they didn’t join the first wave, there would be a long wait to get connected later.

That allowed Google to plan which neighborhoods to connect first, and to move efficiently through neighborhoods with high concentrations of subscribers, according to Kirjner. In a lengthy report on the project, he said Google’s approach is more cost-effective than traditional Internet providers that add new subscribers as they come, requiring installers to travel farther from one job to the next.

While most telecom companies are unionized, Google also lowered its costs by using non-union workers and contractors, Kirjner noted.

In addition to Internet service, Google negotiated licensing rights to offer a package of cable television channels to Fiber subscribers, priced competitively with cable company offerings. Lo said Google decided to offer TV because consumers are used to buying cable and Internet service together. He boasted that a home fiber connection provides a superior signal and image quality.

Providing television service could create new opportunities to show video ads to subscribers, although Wandres said Google doesn’t currently do so.for the company, Kirjner said in his report. But after estimating that Google spent about $94 million to create the Kansas City network, Kirjner calculated the service stood to make a small profit even in its first year, with potential for larger returns in the future.


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