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Many Realizing Google Fiber Will Never See Massive Deployment
Google Won't Have the Stomach for the Fight, or the Bill
by Karl Bode 09:41AM Tuesday Apr 09 2013
As we've noted more than a few times, the goal of Google Fiber is to generate press, gather real-world data on networks and video ad delivery, and light a fire under the pampered behinds of incumbent broadband operators, with the fleeting hope that tomorrow's networks will come just a fraction more quickly to an uncompetitive market. The goal was never to take the project nationally, though the company certainly benefits from people thinking that's a possibility.

While Google Fiber's announced expansion to Austin (or more specifically some scattered parts of Austin, eventually) has driven a new round of press hype, closer examination of the numbers reveals the daunting cost of even a minor Google Fiber deployment. Two analysts at Bernstein Research this week estimated that Google has spent around $87 million so far on the deployment, and that it could cost $11 billion to deploy 1 Gbps service to another 20 million homes.

In a research note the firm expresses doubt that Google Fiber ever becomes a major deployment:
quote:
We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the US, as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business.

For example, making the far from trivial assumption that Google can identify 20 million homes in relatively contiguous areas with (on average) similar characteristics as Kansas City when it comes to the most important drivers of network deployment cost, homes per mile of plant and the mix of aerial, buried and underground infrastructure, and that Google decides to build out a fiber network to serve them over a period of five years, we estimate the [total capital expenditure] investment required to be in the order of $11 billion to pass the homes, before acquiring or connecting a single customer.
Previous estimates have pegged a nationwide Google Fiber deployment at somewhere around $140 billion. Granted truly estimating the costs can be tricky given that Google is getting some real sweetheart deals that determine which cities get connected. Deals like the one they struck in Kansas City not only allow Google to cherry pick locations (even though they've installed a democratic system to determine neighborhoods), it allows them to walk away from the project entirely within two years if they get bored.

It's also difficult to project the costs incurred once the incumbent operators realize Google Fiber is a real player and pull out all the stops (and pay all the lawmakers) to make Google's deployment as difficult to possible. Right now, incumbents think Google Fiber is kind of cute -- so they haven't bothered to fire up their lawyers, lobbyists, and spin doctors.

Google could probably take over the broadband industry if they targeted particularly uncompetitive markets, they'll just ultimately lack the willpower to do so. Over the next few years, Google will likely take the inevitable turn from innovator and disruptor to turf protector, and their interest in these kinds of disruptive projects will wane. It would be very surprising to see Google Fiber expand to anything more than three or four cities in total.


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