Home White Spaces & Dark Fiber: Internet Giants Angle For Control Of The Internet’s Pipes

White Spaces & Dark Fiber: Internet Giants Angle For Control Of The Internet’s Pipes

Battle lines in a cold war over the backbone of the Internet are forming between Web generation Internet companies like Google, Facebook and Amazon  and traditional infrastructure incumbents like the cellular operators and cable companies such as AT&T and Comcast.

The old guard may soon find themselves on the losing end of the battle.

A report by the Wall Street Journal notes that the powerhouses of the technology world have been investing heavily in so-called dark fiber—the term for unused transmission capacity on fiber-optic cables. (When optical cables are used, they’re “lit up” by communications lasers; by definition, unused fiber is “dark.”) Google, Facebook, Microsoft and Amazon have all invested, to one degree or another, in dark fiber while also moving to build their own data centers and buy excess wireless spectrum over the last couple of years.

All that could significantly change the balance of power in terms of how traffic moves across the Internet and whether carriers or others can still act as bottlenecks or extract tolls along the way.

Google Leads The Charge

First, a little historical context. During the dot-com boom of the late 1990s and early 2000s, big telecom companies rushed to build up network capacity, anticipating a vast increase in Internet traffic from all corners of the world. But these companies overextended themselves and ended up building way more cables than what was necessary at the time. In doing so, they drove the prices of fiber and data way down and ended up bankrupt and broken.

You may think of websites like Pets.com as the quintessential symbol of dot-com excess, but in reality, the infrastructure builders and investors played a huge role in the ensuing crash.

Enter Google. Born in the late 1990s and flush with cash just a few years later, the search giant seized an unparalled opportunity to start buying up this dark fiber capacity on the cheap. The “GoogleNet” was a big rumor in 2005 as Google took the opportunity to access dark fiber networks while building its own Internet switches to help move traffic across its networks. GigaOm founder Om Malik wrote extensively on the GoogleNet in 2005.

In 2013, Google is now at the forefront of the fiber battle. The search giant’s highly publicized Google Fiber project is already providing gigabit speeds to residential and business customers in Kansas City, Austin, Tex., and Provo, Utah. More are on their way. 

See also: The Genius Of Google Fiber

That’s not all Google has done. It partnered with several Asian countries to build a 6,000-mile cable that connects Japan, China, Singapore and other nations, and in 2008 poured money into another 6,000-mile, $300 million cable linking California and Japan. Google has also bid in several U.S. wireless spectrum auctions and is actively researching ways to make use of underutilized spectrum—so-called “white space“—in the U.S.

Microsoft also is working on spectrum and white space, as Peter Lee, the head of Microsoft Research, said in an October interview with ReadWrite. Microsoft is also investing in its infrastructure to bolster its cloud business across the world.

The plan for Google and Microsoft is clear: They are stockpiling unused fiber and spectrum and finding ways to use it more efficiently, effectively building their own pipes to meet the demand of their networks. That’s a direct challenge to telecom giants like AT&T and Verizon, who have long played tug-of-war with Internet services in an attempt to earn more money off their infrastructure developments. (That’s what a lot of the fuss over “net neutrality” has been about.)

According to the WSJ, Facebook has begun serving traffic on previously dark fiber in Europe. Amazon is already a MVNO—Mobile Virtual Network Operator—that leases spectrum from cellular carriers to provide wireless access for its Kindle e-readers. Amazon’s cloud infrastructure is also the biggest and most important in the U.S., carrying the load burden of some of the Web’s biggest content providers. Apple, which didn’t get mentioned in the WSJ piece, also has plenty of cash it could throw at fiber and spectrum should it choose.

In short, just every large tech company that’s dependent on the Internet wants a stake in the pipes that deliver their data and services.

Even partial ownership of these pipes buys these huge service providers peace of mind. For one thing, they ensure that they’ll have enough bandwidth to serve consumers and businesses across the world. That also allows Google, Facebook, Amazon and Microsoft to sidestep any net-neutrality shenanigans from the telecom companies while monitoring and protecting their networks from outside eyes such as the NSA or foreign governments.

Telecoms Fear Becoming Dumb Pipes

The telecoms, of course, have long feared being relegated to the role of straightforward information carriers—”dumb pipes,” in telecom parlance. In practice, though, telecom efforts to be “smart” conveyors of information has mostly involved foisting unwanted services on consumers and attempts to hold up Internet services for more cash. Former SBC chief Ed Whitacre went on a memorable tirade to this effect in a 2005 interview with BusinessWeek:

How concerned are you about Internet upstarts like Google, MSN, Vonage, and others?

How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?

The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!

The balance between telecoms and Internet giants has been, shall we say, delicate for the last decade or so. As Web services have grown, they’ve stressed cable and cellular companies’ networks. Netflix alone accounts for close to a third of all U.S. Internet traffic; it and Google’s YouTube together account for about half of U.S. Internet use.

Cellular carriers, who long profited by forcing their own services onto mobile users by pre-installing them on handsets, found themselves cut out entirely by Apple’s iPhone and haven’t gained much of a foothold in the Android world, either. 

Meanwhile, telecom and cable companies have both tried to expand their own Internet service offerings, although often as not they’re competing more with each other than with other big Internet companies. AT&T has its U-Verse product for digital television packages while cable empire Comcast purchased NBC Universal several years ago to make sure that it has a big stake in the content and services that people use on its network. 

Big Money Stakes

It is important to remember that while the likes of Google, Facebook, Microsoft have huge cash stockpiles and high margins, the telecom companies are even bigger. For instance, AT&T’s third quarter revenue was $32.2 billion. Verizon’s third quarter was $30.3 billion. Comcast was at $16.2 billion. In comparison, the latest Google quarterly revenue was $14.8 billion. Amazon’s was at $17.09 billion (though it was not actually profitable as it invests in its own business and infrastructure). 

The telecom companies are high revenue organizations that have much lower margins than the Web corporations because they are constantly investing in their pipes and networks on a year-to-year basis. Google can dabble in dark fiber and white spaces because its advertising business throws off a lot of free cash flow.

Yet if Internet companies really want to control the pipes that their traffic flows on, they may one day have to invest heavily in ways that could that impact profits and cash reserves—just like the telecom companies. For the Web companies, it could become an instance of “be careful what you wish for” when it comes to controlling the backbone that runs the Internet.

Consumers, meanwhile, have to hope that they’re not just trading one much-loathed master (the carrier and cable companies) for another. On the other hand, as the Web generation companies mature and begin serving their own needs, the rest of the world also benefits as it becomes more connected, faster and intelligent.

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

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