Why Google Fiber Doesn’t Scare Your ISP

Kansas City is about to experience the Internet as it should be. If you’re in the right neighborhood, you could be enjoying downloads speeds of up to 1 Gigabit per second when Google’s pilot project lights up in Kansas and Missouri this September. You might think the Google initiative will force U.S. Internet service providers, which generally deliver downloads speeds a fraction of what the search giant is promising, to finally get their own fiber projects moving. But you’d be wrong. 

The cost of bringing fiber to the home is so high that even the largest ISPs can’t afford large-scale deployments. According to the FCC, a typical deployment costs the provider a minimum of $2,500 per subscriber. Google is apparently approaching the project intelligently, and it will probably find a way to cut deployments costs. But there is a limit to what even the Monster of Mountain View can do. “I don’t believe you can turn the economics of fiber on its head,” says Steve Timmerman, senior vice president of ASSIA, which builds management systems for DSL providers.  

The biggest expense is that of running the fiber itself. Digging trenches in an urban environment is labor-intensive. Google is using existing telephone poles to carry its fiber in Kansas City, but that’s not possible in many cities and suburbs where utilities have long since moved underground. What’s more, cutting deals to use overhead poles and underground cableways could be difficult once the companies that own them come to view Google as a competitor. 

Google, of course, is very large and can use its scale to buy fiber and equipment at excellent prices. But Verizon had the same capability and ultimately lost approximately $800 per subscriber on its fiber deployment, Timmerman says. 

Less tangible, but still significant, is the difficulty of running a consumer business, an area that Google has little experience in. Indeed, when it tried to enter the cell phone business directly with the Nexus One two years ago, it failed miserably. Although carriers like Verizon and AT&T aren’t winning any popularity contests, they do have huge networks of highly experienced technicians and customer service people who know how to keep a network running and how to manage a customer base. 

It’s also worth noting that AT&T’s much-hyped U-verse fiber service isn’t purely fiber; it’s actually a hybrid of fiber to the pole and DSL from the pole to the home – a cheaper, but slower, alternative to 100% fiber deployment, says ASSIA CEO John Cioffi. DSL still serves 70 percent of broadband customers worldwide, Cioffi notes. 

Will the carriers react to Google’s fiber deployment by redoubling their own efforts? That’s still unclear. But unless Google succeeds in proving that large-scale fiber deployment is economical, you’ll have to move to Kansas City to enjoy those cheap, 1GB downloads.

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