I wonder what the minimum time of undercutting at a loss service they can offer is without it being considered anti-competitive.
[1] They guarantee 7 years of free service https://fiber.google.com/cities/austin/plans/#plan=free
For 2013 Comcast reported 13.5 billion operating income on 64.6 revenue [1]. This means that they could potentially lower their prices 20% without incurring in losses. If we assume that Google is able to operate more efficiently, which isn't such a bold assumption, they could potentially undercut prices even more. On top of that, we could also assume that in terms of infraestructure the cost of offering 10mbps is simillar to offering 1 gbps.
So I'm not that sure that they are operating at a loss.
[1] http://files.shareholder.com/downloads/CMCSA/3686143613x0xS1...
There's no reason to believe that Google's per-household costs are any less. These companies all likely outsource to the same local companies that put fiber in the ground. To the extent that Google has an advantage, it's with uptake rates. Verizon and Comcast have to wire whole cities, pursuant to build-out clauses in local franchises. Google refuses to accept such clauses, and only builds in neighborhoods with demonstrated interest. The economics of building fiber make this a huge advantage. Most of the cost of building the network is in passing by the house, which is a cost you pay whether or not the house subscribes. If your uptake rate is 40% versus 20%, your per-house capital cost drops dramatically.
I daresay it depends on what assumptions you make about future sign up rates, cost of capital and the like.
https://gigaom.com/2012/07/26/the-economics-of-google-fiber-...
Comcast's net margin is closer to 12-14%. And I would say that it's a pretty bold assumption that Google would be able to operate more efficiently than that: Comcast is a mature company in a mature market. Comcast's RF broadcast technology has some limitations, but it also has benefits: relatively low operational costs being a big one of them. Both Verizon and AT&T tried an architectural approach that is quite similar Google's, and their deployments stalled because of platform scalability problems.z
Is internet in Kansas really that bad? I'm paying $50/month for 30/21 (I'm paying for 25/25 but oh well) here in New Jersey [0]. I can't imagine doing much with that internet besides basic web browsing. Even low-res video is choppy at that speed.
Both Google and AT&T are wiring Overland Park with 1000/1000, so that ought to put CCI and Time-Warner's underwear in a bind.
It's a lot less legwork to setup shop in a city that doesn't already have red-tape in place.
> These cities are led by people who have been working hard to bring faster Internet speeds and the latest technologies to their residents. We believe these are communities who will do amazing things with a gig. And they are diverse -- not just geographically, but in the ways they’ll give us opportunities to learn about the wide range of challenges and obstacles that communities might face in trying to build a new fiber network.
So it sounds like a combo of local government initiative & geographic diversity. But yeah - unfortunate in the respect you said
Google fiber doesn't seem so special to me. Maybe I should read into how the money from the fiber network is made here. I think there are some government loans involved in getting the infrastructure in place, even though there already was a cable network that is currently advertising up to 200 mbit/sec.
I have 50/25 or so plus TV for about the same price in southeastern US. It's not fiber, but I end up with about the same service as you. At the level of service you and I are getting, fiber isn't necessary.
> Google fiber doesn't seem so special to me.
Probably not if you only have 50/50 for 50 euro. That's not nearly as great a value as Google Fiber, in my opinion. For that same amount, you get symmetric 1000/1000 with Google Fiber. Blows the kind of service that you and I are getting away, bigtime.
The utility of an internet connection doesn't scale linearly with speed. Once you're at the point where you can stream HD video, diminishing returns start kicking in pretty hard. How often are you waiting for a >100MB file transfer and can't work until it's completed?
There are at least four companies with fiber in the ground here in Copenhagen. I chose a fairly cheap company (http://andels.net/), with fiber in only the eastern and northern part of Copenhagen. They hooked up the apartment complex I live in (200 apartments) for 3800 DKK per apartment, which we pay off over 2 years, while everyone gets a 50/50 mbit connection for free in that period. You can upgrade to 200/200 mbit, which I did.
For the people who just use the 50/50 mbit connection, the investment will pay itself back in less than two years (because they save at least 100 DKK per month on Internet, while having a much faster connection than ADSL).
And as a side note, their installers are top notch. I was scheduled to have mine installed at say 9am. They called at about 830am and tell me that the original installer may not be right on time, so they are sending over a 2nd group to start the process while we wait on the first group. Both groups show up 10 minutes early - hell, they beat me to my house. They always put on protective boot coverings when they are inside, make sure you understand what's going on, answer any questions, etc. Very professional and a lot more fun to deal with than TimeWarner.
These are political problems and they have political solutions. It's not "sad" that Silicon Valley can't get faster Internet access; it's the nature of the way California's politics as a whole have developed. The number of veto players (http://www.amazon.com/Launching-Innovation-Renaissance-Bring...) and NIMBYs ensure the problems California is currently experiencing.
This is more of a problem in medium density residential areas. In high density areas, big buildings often lease basement space to utilities. In low density areas, there's lots of room for infrastructure. It's the suburban areas where people obsess on lawn care where this is a problem.
http://www.sfexaminer.com/sanfrancisco/san-francisco-seeks-t...
Sweden is spending a lot of money digging down fiber for everyone in Sweden right now.
There's more than just population density to take into account. It makes a big difference when you don't need nearly as much long haul backbone capacity because almost all of the destinations for the traffic are close to the subscribers.
The ISP model is hard because it just requires fucking shit tons of money to solve, and there's no getting around the tragedy of the commons problem. With telecom infrastructure, you can either use wired (expensive and with a heavily fragmented regulatory environment) or wireless (expensive with extremely limited spectrum - see the $12+ billion spectrum auction happening now).
Disruption is well and good, but it requires new technology that delivers similar services for a fraction of the cost. Until someone figures out a way to bring the economics of delivering content to end users down by a factor of several hundred, we're stuck with the current ISP situation.
But I agree with your premise, that hard problems with large rewards require a different sort of VC pitch and may take longer to see a payoff. And are completely worth pursuing!
1: https://www.indiegogo.com/projects/gigabit-wireless-to-the-h...
[0]: http://crosscut.com/2014/03/04/business/118993/google-fiber-...
"Sign-ups are beginning today in South and Southeast Austin. We’re starting with these neighborhoods, and will be opening new areas on an on-going basis."
Also, I'm pretty sure that TWC is available pretty much everywhere in Austin.
Edit: Google-washed version of what they demand from cities: https://fiber.storage.googleapis.com/legal/googlefibercitych...
Better yet, cities should eliminate them entirely to encourage even more competition. All those rules do is create barriers to entry that prop up the existing players.
If 1Gbps becomes a reality, then each house can become a small data-center, which was limited by upstream speed (less than 2Mbps) in the past.
Better streaming, easier remote backup, more devices connected, smoother remote computing, etc
The things people think of today for home broadband uses (video, gaming), will be considered a joke in ten years when it comes to using bandwidth.
Google is offering a "free" (after one-time installation) tier: "up to 5 Mbps download and 1 Mbps upload speed".
Suppose on that tier, they also offered a temporary "turbo" option, 1Gbps+ for the next hour, or next 5GB, or for the duration of a session with a particular site, whatever. And this "turbo" was available on reasonable, non-discriminatory terms to either the customer, or to remote sites serving data to the customer.
And of course, Google itself would usually enable the "turbo" for bulk and profit-maximizing interactions with its own sites, like HD media purchases, HD teleconferencing, or big software downloads.
Is this an unconscionable and punishable violation of the ideal of network neutrality, or just a boon to all involved: great baseline service for free, and spot acceleration available to everyone at non-discriminatory prices?
What if other upstarts could also offer such a "free" tier in other regions on similar terms – but only by assuming the extra occasional sales of "turbo" to both residential customers and bandwidth-heavy internet services?
Or the baseline where, because there's no revenue from 'turbo', a freemium broadband tier isn't offered at all, leaving customers without even the free 5Mbps, or (having paid for broadband instead) with less budget for garage-guys services?
(Also, if such a upsell were available, from Google or others, it'd not necessarily require bilateral contracts. It could and should be an automated service, discoverable in a standard way.)
... information from the use of Google Fiber Internet (such as URLs of websites visited or content of communications) will not be associated with the Google Account you use for Fiber, except with your consent or to meet any applicable law, regulation, legal process or enforceable governmental request.
https://fiber.google.com/legal/privacy.html
They don't really mention what information not associated to a Google account is mined except that it follows the company-wide privacy policy. So they probably mine it. It's probably comparable to Google DNS: https://developers.google.com/speed/public-dns/privacy
Request domain name, e.g. www.google.com
Request type, e.g. A (which stands for IPv4 record), AAAA (IPv6 record), NS, MX, TXT, etc.
Transport protocol on which the request arrived, i.e. TCP or UDP
Client's AS (autonomous system or ISP), e.g. AS15169
User's geolocation information: i.e. geocode, region ID, city ID, and metro code
Response code sent, e.g. SUCCESS, SERVFAIL, NXDOMAIN, etc.
Whether the request hit our frontend cache
Whether the request hit a cache elsewhere in the system (but not in the frontend)
Absolute arrival time in seconds
Total time taken to process the request end-to-end, in seconds
Name of the Google machine that processed this request, e.g. machine101
Google target IP to which this request was addressed, e.g. one of our anycast IP addresses (no relation to the user's IP)This phrase has rather a lot of qualifications which make it trivially easy to circumvent. For example, Google might associate the data with a different account, an internal "ghost" account that you specifically don't use for Google Fiber (but which is identical to it in every way).
I for one would like to see ISPs make an effort to construct systems where even the owner of the ISP doesn't really store any information. For example, they may store differential information about traffic spikes, to help avert DOS attacks. But other than that, they only do what they get paid to do: shuttle bits back and forth across the last mile of internet.
Edit: Did some research, seems it needs IGMP proxying, which should be doable on a decent router. https://www.dropbox.com/s/gj6guphe4bc8k4t/GoogleFiberRouterG... was a very useful link.
The one thing I hope that comes out of this, and the one thing I believe will benefit all Austin residents, would be the ability to negotiate for a lower monthly rate when their Internet/Cable contract renews sometime next year.
I hope that by April 2015 I have the leverage to call TWC and say: "Hey, Google fiber is offering Gigabit + TV for $130 a month, why can't my $155 monthly bill be lowered considering I pay for Internet + TV that is only 1/4 as fast?"
Most host providers, even REALLY inexpensive ones, charge $3-5/month/IP. So I consider $20-30 a massive markup for something pretty useful for a business account.
Is there a historical precedent that suggests that this will happen?
The major telcos continue to grow their profits year over year while decreasing their capital spending. I think the much more likely response to any success on google's part will be
- cities growing impatient for their turn and building their own networks (well underway[1])
- more and more attempts by existing ISPs at regulatory blocking of competition (well underway[2])
- finally, ISPs actually increase spending to match speeds (still in the lip service stage[3])
ISPs like their market strangleholds. They aren't going to just roll over. Meanwhile building infrastructure is fundamentally a lot of work, so no "Bell 2.0" is going to be born overnight if they're trying to actually build out a physical network (major ISPs merging[4] as a road to Ma Bell is a different story, though).
[1] http://arstechnica.com/business/2013/11/fed-up-with-slow-and...
[2] http://arstechnica.com/tech-policy/2014/08/how-big-telecom-s...
[3] http://arstechnica.com/business/2014/04/att-copies-google-na...
[4] http://en.wikipedia.org/wiki/Comcast-Time_Warner_Cable_merge...
I may still switch, but I'm about a half mile away from the "sign up now" zones.
In short, come to Atlanta, Google; I'm sick to death of paying $75 a month for a 300 gig cap.
For what it is worth I have seen the effect of google fiber locally (Cincinnati) even though Google has no plans of expanding to here any time soon. Cincinnati Bell recently unveiled a 1Gbps residential plan for $70/mo. This was a response to the city council approaching Google to see what they would need to do to bring fiber here.
Maybe, but I wouldn't compare Google with Bell Labs directly.
Remember that the only reason we had access to so much of what Bell Labs invented (e.g. Unix) is due to a 1958 antitrust lawsuit which resulted in AT&T being prohibited from profiting off of the computer business entirely[0]. As a result, Bell Labs had to license all technologies (except for telephone-related services) freely.
It wasn't until 1984 when AT&T sold off Bell Labs - almost three decades later. If AT&T had been allowed to profit off of Bell Labs, we might remember Bell Labs's legacy very differently.
If Google were subject to an analogous requirement that would be one thing, but absent that legal restriction, the two situations are very different.
Just so you know!
I think it helps if the fiber is owned by a party other than the access provider, e.g. the community or city, to avoid having a monopoly squeeze out all the consumer surplus.
How will this work with Google Fiber?
http://cdn.static-economist.com/sites/default/files/imagecac...
http://www.nbr.co.nz/sites/default/files/images/oecd-broadba...
Full html pages (where images were found): - http://www.nbr.co.nz/article/oecd-broadband-stats-show-nz-im... - http://www.economist.com/blogs/schumpeter/2014/03/telecoms-m...
From, Kansas City
