Google Breaks Out of KC, Prepares to Take On Austin

April 9th, 2013 by · 12 Comments

It’s still unofficial, but with this many leaks it’s quite clear we’re way beyond the rumor stage. Google is doing what I never figured they’d do: taking their formula from demonstration to an actual multi-market footprint. The next city to get the Kansas City Gigabit Express: Austin, Texas.

Google KC Fiber FootprintGoogle has been rolling out fiber to neighborhoods in Kansas City and lately to the nearby suburbs for over a year now. But the addition of Austin changes things dramatically. To paraphrase an Asimov book from a while back, sometimes the only numbers that make sense are zero, one, and many – but not two.

In other words, zero makes sense if the model doesn’t work, while one makes sense if it works well enough to exist but not to reproduce. But all other positive numbers mean the same thing as each other – that the business model works, and presumably makes money.

Google didn’t have to leave the KC metro area to make the case for viability. The only reason you do that is to make more money than you could in just one market.

In other words, if Google follows through today and 1Gbps home connections for Austin are on the menu, then I hereby eat my own words.  Google apparently does want to be a network operator.

The only question is how fast they want to make it happen, and just how good the financials in KC are to make them want to do it. And given the evolution beyond the demo, how will the incumbents respond to the threat?

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12 Comments So Far

  • Two questions says:

    Do you think that threats of competition would have the effect of depressing valuations across certain telecom sectors? Also, have they just pursued residences, or businesses too?

    • They have no business product yet, but supposedly they’re considering putting an SMB offering out there at some point. As for competition depressing consumer wireline valuations, I guess we’ll just have to see…

      • One more question says:

        Could this maybe be about getting more download traffic to give them some balance in their peering relationships?

  • Fibermancer says:

    I think Google needs to quickly reconsider if they’re planning to build in Austin. The rock in Austin in some of the toughest they’ll come across; so building virgin conduit systems will cost mega-money and take lots of time. They’re only hope to do this economically will be to use aerial lines, which would be safe enough as tornadoes and hurricanes never reach Austin, but then you face the always fun eyesore problem…

    • Trebor says:

      Fibermancer: One little wild card. Austin already supports a previous overbuilder, Grande Communications. Already challenged by stiff competition from TWC and ATT Uverse, they have plenty of existng fiber, colos, conduit and hundereds of miles of strand and make ready cleared. My money is their investors, ABRY, will be looking to sell. This may well become a modle for other small MSOs and overbuilders who can not afford to stay in the MVOD business….

  • Paul says:

    My sense is that Google is up to something other than actually seeking to compete for a share of the market for facilities-based delivery of broadband services (or of any other service). Their experience in the Kansas City market shows that they had not staffed-up with people knowledgeable about dealing with the companies that own the utility poles. It seems to me that, if the KC project was meant to test the potential of a business that would be based on Google’s own construction and ownership of wireline facilities, Google would have taken more care in lining up the necessary staff. I read an article today postulating that, by expanding to Austin, Google might be trying to send a message to the ILEC’s and cable companies to the effect that, if these companies adopt policies that would limit customers’ access to content offered by entities other than they, Google will overbuild their networks. I am not ready to buy into that theory either. Unless Google’s senior management remains ignorant of their company’s experience in KC, they must understand that the ILECs and CATV companies will not view a Google-built competitive fiber infrastructure as a threat at any time in the relatively near future.

    • Fancy Pants says:

      I am probably just the old codger screaming to get off my lawn, here. The guy who advocates for the ice cart lobby being protected from those rascally refridgerators.

      But I still do not get this business model at all. $99 for a Gig is not sustainable with any current capital outlay for equipment, opex for staff, or support tools, period. It’s stupid, frankly. Unless there is another motive, as noted above.

      • Brent Neader says:

        Lets be honest here, at probably a few levels they are over subscribing. Obviously everyone isnt going to use 1gb at the same time, or anything close to that, even if you could find a place, or places, to serve you at those speeds.
        It does though remove your local connection from being the bottleneck in any online event. I am sure someone at google ran the ROI’s and if i where to guess it will make money at some point (other community fiber groups have done builds, and became cash flow positive, given they arent doing a gig, but at a certain point as we have somewhat established the speeds arent revelent), though the ROI may not be the usual short timeframe most other providers strive for.

        Lets also assume here that google has settlement free peering with most big providers out there, and most home users use larger amounts of download, not upload, and peering is all about who “takes” the traffic, so who knows how much of their incomming traffic is basically free.

  • CK says:

    Since Google is planning to build a campus in Austin already, the extra capital spend to seed a fiber build out should not be that much more incrementally. Especially if they acquire fiber assets like they just did in Provo UTAH, also now Google Fiber city #3.

  • schmuckinsurance says:

    1 instance is an experiment, maybe some think 3 labs means it is a business just hard to believe what is happening here.

  • Sasha says:

    It’s an amazing post in favor of all the web users; they will take benefit from it I am sure.

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