Cable Operators

Google Can’t Change Broadband Economics

8/13/2012 12:01 AM Eastern

Google is hoping to show the world what’s possible
with a 1-Gig Internet hookup.

One thing it won’t prove, though, is that fiber-to-thehome
is any less costly than it’s always been — an economic
reality that will limit Google Fiber’s influence on
broadband in the U.S.

Fiber-to-the-home
networks, like the
one Google expects
to light up commercially
this fall in
parts of Kansas City,
Mo., and Kansas City,
Kan., cost between
$1,000 and $2,000 per home passed, according to IBB
Consulting senior partner Afzaal Akhtar.

Even on a small scale, an all-fiber network won’t see
a payback for at least two years, Akhtar said: “A metro
network buildout’s big cost components tend to be labor
costs … and Google is not going to get more favorable
terms than anyone else.” IBB’s clients include major
MSOs, wireless carriers and media companies.

Google has declined to reveal what it will invest in the
FTTH buildout and launch, but claimed it anticipates
operating it “profitably.” That’s different from anticipating
a return on invested capital, analysts noted, pointing
out that Verizon Communications has yet to recoup its
$23 billion investment in FiOS after eight years.

The Google Fiber service, priced at $70 per month for
1 Gigabit per second of symmetrical bandwidth with an
optional TV package, could bring pressure on incumbent
providers Time Warner Cable, AT&T and SureWest
Communications in the Kansas City neighborhoods
where it becomes available, Akhtar said.

But everywhere else in the U.S., fiber-to-the-home is
simply too expensive to pose a real alternative, according
to Steve Timmerman, senior vice president of marketing
at ASSIA, which sells digital subscriber line networkmanagement
software. “The cost of laying fiber, even if
you’re Google, is uneconomical,” he said.

Comcast chairman and CEO Brian Roberts, on the
operator’s earnings call earlier this month, called Google
Fiber “a bit of a laboratory” and noted that the MSO
staged a demo of 1-Gbps DOCSIS 3.0 service in Chicago
last year.

Ultimately, Roberts said, Comcast is bullish on any
applications that encourage faster Internet tiers: “Fundamentally,
that’s a really good thing for us.”

TAKEAWAY

The Internet giant’s fiber-to-thehome
test bed could yield new
apps that take advantage of
ultra-fast connections.

September