IHS: Google Fiber Not Going Nationwide21 May, 2013 By: Erik Gruenwedel
Deployment costs should keep Netflix’s fastest broadband provider on the sidelines as a regional player
Bad news for Netflix subscribers hoping to get faster broadband service.
Google’s heralded fiber optic network is likely to remain a minor player in the U.S. broadband market, with the search behemoth unlikely to deploy the service nationwide due its high cost, according to a new report from IHS Screen Digest.
Google Fiber, which bowed in Kansas City area and announced subsequent rollouts in Provo, Utah, Austin, Texas, regularly tops Netflix’s monthly bandwidth speed ranking for ISPs delivering its subscription video-on-demand service.
Google Fiber’s pricing plan in Kansas City includes free basic Internet connection at 5 megabits per second following a $300 construction fee, and 1 gigabit-per-second broadband available for $70 a month, or with TV service at $120 a month. These prices are similar to European offerings.
IHS believes Google Fiber will be offered only in smaller markets such Austin and Provo, which collectively have a population of about 1.4 million and roughly 600,000 households, respectively. The cities represent only about 0.4% of U.S. households, so even if Google managed to secure a high market share in these metropolitan areas, it would reach only about 0.2% of U.S. homes.
By comparison, Comcast in 2012 claimed 18.3 million broadband subscribers, AT&T totaled 16.4 million, Time Warner Cable had 10.9 million and Verizon reached 8.8 million. Matched against any of the top eight U.S. broadband companies, Google is a minor player, according to IHS.
Specifically, the research firm says rolling out fiber optic networks is expensive and not likely to break even in the short term. As a result, Google has been expanding its fiber network by buying up failed rollouts of unused fiber, otherwise known as dark fiber. In some ways, Google is being opportunistic in its experiment to bring high-speed broadband to various locations, according to IHS.
It said trials of 2.5-gigahertz service in California underscore Google primary focus to learn about trends in consumer usage of its content services. The company also is using this approach to gain a better understanding of how consumers use its core service: advertising.
However, if the fiber experiment is successful for Google, IHS said it could become a long-term undertaking for the company. This would allow Google to expand its activities beyond and leverage its entire ecosystem, which increasingly is encompassing a variety of business models and devices.
Some have argued that Google can deliver a lower-priced broadband service because it picks and chooses where to roll out — getting incentives from local governments to enter their communities. But AT&T also has announced its intention to roll out a fiber network in Austin, meaning Google will have a harder time in the Texas capital because of increased competition, according to IHS.
“While the deployment of Google Fiber to the cities may capture attention, the company’s plans are miniscule compared to what its competitors undertake in the overall market,” said Dexter Thillien, senior analyst for multiplay at IHS. “AT&T and Verizon have spent many billions of dollars establishing fiber networks in larger population centers, something Google is unlikely to be able to match.”