What is Google Fiber?
The newest cable operator in the US is actually Google, branded under the name of Google Fiber and the impact it is having on the Cable industry is huge. Google Fiber uses fiber to the home to provide up to a full Gigabit of bandwidth and three offers that are compelling:
1. Gigabit+TV for $120/month
2. Gigabit only for $70/month
3. Free internet (5Mb/1Mb) for a one time $300 fee
If you are a Time Warner Cable customer paying typical prices, offer number 1 would be hard to resist. And if you are a cord cutter, offer number 3 might not be a bad deal. The return on investment of your $300 might be less than a year.
Time Warner Cable Reacts
Industry insiders might know that Google Fiber’s first two targets were both Time Warner Cable cities: Kansas City now in operation and then recently announced, Austin Texas. Publicly TWC has dismissed Google Fiber as another “over-builder” but the scary part is this: Google can afford to lose money during the build-out, but Time Warner Cable not so much. Internally TWC is reacting you can be sure on a plan to compete with Google Fiber as discussed in this Motley Fool article Google Fiber Has Time Warner Cable Tripping All Over Itself. TWC was probably mildly relieved that Google target number three was Provo UT and not a TWC city.
Why Google is even doing this?
Google makes most of their income from internet ads yet recently we’ve seen them expand in multiple new markets with the Android operating system, Chrome notebooks, self driving cars, Google Glass, and now Google Fiber.
One article I read speculated that Google merely wants to bitch-slap the service provider industry out of their daze and push them to provide the broadband speeds that are needed for the future, or in other words, if you can’t provide better bandwidth we’ll do it ourselves. But I’m not sure I buy that.
My own thought is that Google knows that today’s narrow niche internet super-star can be tomorrow’s has-been. MySpace (social media) , AOL (internet portal) and AltaVista (search) are examples.
I believe Google wants to build an empire that owns ALL of the internet related sectors, from search, home computing, mobile, software, hardware. Scary isn’t it?
Did I leave something out? Oh yeah, recently we talked about the introduction of Google’s new YouTube pay channels, see Cracks in the Foundation . So now Google becomes a combined content provider/service provider, similar to the strategy employed by the biggest cable operators. If Google can obtain market share as a content provider, the ability to produce even more advertising revenue could increase immensely.
When Google Fiber was only in Kansas City, it was easier to dismiss it as an expensive Google experiment. But now that it has expanded to a total of three distinct metro areas, this looks serious.
Time Warner Cable can’t sit back and watch their subscribers be stolen. My guess? They’ll have to compete and it will get bloody. I don’t think TWC’s HFC (hybrid fiber coax) network can easily be upgraded to provide each subscriber one Gigabit worth of internet. But they won’t need to.
Remember Google Fiber’s “free” plan that costs $300 up front? That’s pretty slow. TWC can compete with that one easily. And the Gigabit only plan? TWC Business Class already provides that kind of speed to commercial customers.
So TWC might not be able to match Google’s offer exactly but with a little marketing creativity they can offer alternatives that are just as attractive. Note that Google is only coming into selective “fiber hoods”. That makes it possible for (and this is the bloody part) TWC to give away things they might never have before, but just in those areas. How about a free DVR and HBO for a year for sticking with us? And at a lower price than $120/month?
If TWC doesn’t get aggressive Google Fiber will easily take those customers. In any case it should be an interesting battle. We’ll be watching Kansas City and Austin. Stay tuned.