Wednesday, May 22, 2013

Light Reading - Google Fiber's Future Looks Limited

Light Reading - Google Fiber's Future Looks Limited: Google is destined to remain a small player in the broadband service market, unable to dislodge cable companies such as AT&T Inc. and Comcast Corp., according to analyst Dexter Thillien of IHS iSuppli.

Outside of a few select metro areas, the costs and risks get too high for Google Fiber's 1Gbit/s broadband service, Thillien writes in a report issued Tuesday.

IHS is not the first to warn against expecting Google to light up fiber across the nation. Last month, analysts at Alliance Bernstein said in a report that they remained "skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the U.S., 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."

These analyses affirm recent posts on this blog casting doubt on the irrational exuberance of some who believe Google is going to overbuild metal wire-based incumbent telephone and cable company footprints with fiber.  It might make sense on the surface as somnolent incumbents have placed their wireline plant into "harvest" mode (in the case of the cablecos) and runoff mode (telcos).

But as deep as its pockets are, Google simply can't afford anything other than one off, opportunistic builds. And the incumbents can't undertake massive fiber infrastructure CAPex using grandma's shareholder dividend.  As I've been saying for several years, that leaves it up to communities to build their own municipal or cooperatively owned fiber networks.


InfoStack said...

People are missing the point that Google's model is a milestone like Microcell's revolutionary 10 cent (400 minutes for $40 bucket) was in 1996 for the wireless industry. Ultimately it took the market a full 2 years to wake up to the full impact of digital pricing reflecting marginal cost, but even then they didn't understand all the moving pieces and price/yield bottomed in 2003-4 at 4 cents/minute because the carrier marketing departments and senior management were inept. Only SMS saved them at that point because it reduced voice consumption, lowered costs, and added ultra-high margin revenue. (Note, carriers didn't have to push SMS; it happened generatively for a number of reasons that they actually tried to prevent.)

Nor does Google fully understand all the issues; at least on the surface. However, what the IHS analyst is saying is just slightly better than rubbish.

Fred Pilot said...

And you sir are missing the point it costs a lot of money to build fiber infrastructure. Your comments on end user pricing are not relevant to that fact.

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