Google Fiber’s Ripple Effect
The threat of superfast Google Fiber is causing other Internet providers to crank up their own offerings.
The United States is 16th in the world in broadband availability, speed, and price.
As Google plans to expand its ultrafast Internet service from a fledging effort in Kansas City to Austin, Texas, and Provo, Utah, evidence is emerging that the company has forced broadband competitors into offering dramatically better service.
New data from Akamai, which delivers a hefty portion of all Web traffic, reveals a remarkable turn of events in Kansas. In the fourth quarter of 2012, Kansas saw the largest jump in average Internet connection speeds of all U.S. states compared to the fourth quarter of 2011, with an 86 percent surge (see “When Will the Rest of Us Get Google Fiber?”). The next-highest increase was in Wyoming, at 51 percent.
Google began installations in November in Kansas City, Kansas, offering one-gigabit Internet connections—nearly 100 times faster than the U.S. average—for $70 per month, or $120 with television service, a Nexus 7 tablet remote, two terabytes of DVR storage, plus another a terabyte of cloud storage. The rollout and TV service had been announced a few months before. “It could be the case that the other incumbent providers were going, ‘Oh, crap, we stand to potentially lose subscribers to this deal with Google if we don’t provide competitive service,’ ” says David Belson, who authored Akamai’s state of the Internet report.
There is no public data that gives a complete picture of the speed improvements or price reductions that Internet service providers in the Kansas City area made in response to the beginning of the Google service, which delivers broadband over fiber-optic lines. But Susan Crawford, a professor at the Benjamin N. Cardozo School of Law in New York and former special assistant for technology policy in the Obama administration, says her research suggests that Google is indeed the driving force in the Kansas market.
In December, Time Warner Cable increased speeds of some services in the Kansas City area, boosting its “turbo” service from 15 megabits per second to 20 megabits per second and its fastest service from 50 to 100 megabits per second. “I see Time Warner Cable in and around Kansas City acting like a bulldog with a bone,” says Crawford, author of Captive Audience: The Telecom Industry & Monopoly Power in the Gilded Age. “They want to make sure they hang onto subscribers, not lose them.”
In general, there is plenty that the dominant Internet providers can do to provide better deals without much effort, she says. Cable companies like Time Warner Cable and Comcast have the technical capacity to speed up service, and also plenty of room to lower prices, given the estimate from one analyst—Craig Moffet of the Wall Street firm Bernstein Research—that they typically make 97 percent profit margins on Internet services.
The competition may be even hotter in the newer Google Fiber battlegrounds. After Google announced plans for Austin (see “Google Fiber Takes on Texas”), AT&T quickly announced it would match that effort with its own one-gigabit service, and Time Warner Cable sweetened its Internet plans with free Wi-Fi in public areas to existing customers.
Google has not disclosed how many customers it has in Kansas City, or what plans those customers bought. But Akamai was able to do some forensic work to see just how small Google’s service footprint was, and thus just how little it took to wake up the competition.
According to Belson, in the fourth quarter of last year, Google served less than a tenth of a percent of the 830,000 Internet addresses that Akamai counted in Kansas, or fewer than 830 customers. “Ultimately, we didn’t see enough unique IP addresses from [Google] that those speeds would have unduly influenced the overall [speed] calculation,” Belson says.
Even more remarkable, perhaps, was that Google Fiber customers were using far less than the available blazing speed. IP addresses associated with Google Fiber were seeing average connection speeds of twice the Kansas average of five megabits, and peak speeds of five times greater than the average of 25 megabits.
Some of this might be explained by the fact that some Google Fiber customers took only a basic hookup with five-megabit service for a one-time $300 installation fee, and did not accept the fast service. But the larger reality is that, so far, “there is not a whole lot of stuff out there today that is really gigabit-capable,” Belson says.
Nonetheless, gigabit speeds have proved to be quite capable of waking up a nation of Internet service monopolies and duopolies (see “A Tale of Two Genachowskis”).