Google’s effort to install a blazingly fast, gigabit-per-second fiber Internet service in the two-state metropolis of Kansas City—a speed 100 times faster than the national average—is a radical new business direction for the company, and perhaps provides an unorthodox model for how to rewire parts of the United States.
At one level, the project reflects Google’s desire to keep developing new businesses by giving people ultrafast speeds and then offering experimental services like Google TV. But if Google’s business model for actually getting fiber built pans out, it may usher in a new era for privately built broadband.
Compared to many countries, the United States has slow and patchy Internet service. While a few areas enjoy very fast service, overall the United States ranks 24th worldwide in speed, with consumers receiving an average of 11.6-megabits-per-second download speeds.
An affordable service that is nearly two orders of magnitude faster began in one neighborhood in Kansas City, Missouri, last Tuesday.
In planning the deployment, Google carved the metropolis into 202 neighborhoods, and asked interested residents and businesses to pay $10 to preregister for the service. Once a critical mass did so—ranging from 5 to 25 percent per neighborhood (Google calls them fiberhoods), depending on the population density—Google went ahead with the street-level installation. If people reneged on their pledge to subscribe, they’d lose the $10.
The actual service is a bargain compared to many services that provide much slower speeds. Google’s gigabit Internet service is priced at $70 per month. When bundled with TV, the price rises to $120—and Google is certainly pushing that additional service (see “Searching for the Future of Television” and “Google Launches a Superfast Internet and TV Business”). Users subscribing for a TV service get a two-terabyte storage box for recorded shows and a Nexus 7 Android tablet to use as a remote control. (As a budget alternative, Internet at five megabits per second is available for a one-time fee of $300.)
While some people who preregistered have expressed irritation at having to wait in line, so far it seems to be working, says Jenna Wandres, a spokeswoman for Google Fiber. “We’re pleased with how many people in Hanover Heights have fiber,” she says, referring to the neighborhood that got the service on Tuesday.
Some industry veterans have expressed skepticism that Google can make the installation economics work, with some saying that it can cost between $850 and $1,250 per customer to get fiber installed—far more than the one-time fee of $300 that Google is charging for basic service.
While Google won’t disclose any numbers about costs or numbers of subscribers, Wandres insists that the strategy is economical. “This is not a beta program or an experiment. Efficiency is a huge focus for us as we build out Kansas City. And efficiency can cut costs,” she says.
The entry of superfast Internet may aid local entrepreneurship. An effort called Homes for Hackers is trying to get Kansas City homeowners with Google Fiber service to give free rooms to developers for three months, and a collection of local startups is betting the service will attract new companies.
W. Russell Neuman, professor of media technology at the University of Michigan, says Google’s effort is certainly novel, but that it is an open question whether it could change the economics of Internet service overnight. “Laying fiber is so far out of the scope of what Google normally does. But does Google know something that Verizon doesn’t know?” he says.
Major telecoms like AT&T and Verizon are taking a different path. They’ve focused on upgrading service in areas that they are already providing with wireline DSL service. Verizon has built out a fiber optic network over the past eight years—a $23 billion investment that has made the new service, called FiOS, available to 18 million U.S. households. And then it went about trying to sell the service plans. “Our business model does not call for FiOS to be built out into areas where we have not historically provided wireline service,” says Bill Kula, a Verizon spokesman.
The approach of those two giants has made high-speed Internet available to millions. (In Verizon’s case, the company generally charges $99 per month with a two-year contract for service of up to 300 megabits per second for downloads and 65 megabits per second for uploads). But it hasn’t extended the reach of the network. “Google Fiber is the most niche community approach that has been taken to date, but it remains to be seen how sustainable that approach is,” Kula says. “The question also is whether there will be a consumer demand and need for such speeds.”
Another route to juicing Internet speeds to gigabit-per-second levels is government investment. Chattanooga, Tennessee, received such a boost when the local power utility got a $111 million U.S. Department of Energy grant as part of federal stimulus efforts that built out the city’s smart grid (see “City with Superfast Internet Invites Innovators to Play”).