Google gets serious about rescuing broadband

With Net neutrality in serious jeopardy, and cable giants Comcast and Time Warner Cable on the verge of a competition-killing merger, is there any good news for Internet users? Yes, there is, courtesy of Google, which appears to be making a serious run at the market for high-speed broadband.

In the last few months, Google has announced plans to explore fiber-to-the-home (FTTH) networks in 34 cities, and it is reportedly planning to spend $1 billion or more on a fleet of satellites that would connect unwired regions of the world. Google is also rumored to be in talks to purchase Skybox Imaging, a builder of low-cost, low-orbit, imaging satellites. Clearly, Google is looking seriously at Earth orbit for connectivity or imaging (for mapping) — perhaps both — as well as more conventional ways to bring connections as fast as 1Gbps to its customers.

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Despite the high cost of Google’s proposed FTTH projects, a recent report from analysts at a major investment bank states that the cost barrier can be overcome: “We think there is a nontrivial chance that Google could build Google Fiber into a profitable competitor to cable and telephone companies,” wrote analysts Carlos Kirjner and Peter Paskhaver of Sanford Bernstein.

Silicon Valley uses the phrase “disruptive” far too casually, but a serious attempt by Google to become a major provider of ultrafast connectivity would in fact disrupt the cozy, oligopolistic world of the major Internet service providers. If so, that would be very good news, indeed.

America, far from first in broadband Internet connectivity

Despite our country’s wealth, consumers and businesses in the United States are plagued with broadband connections that are on average slower and more expensive than those of developed countries in parts of Europe and Asia. The average download speeds in the United States are about 10Mbps, less than half of that enjoyed by users in South Korea, according to Akamai’s State of the Internet Report.

Because averages are distorted by outliers, it’s worth noting that two-thirds of U.S. users have speeds that are slower than 10Mbps, and more than a quarter of U.S. homes have no broadband service at all. In other words, America’s broadband infrastructure is truly substandard.

Blame this poor showing on the lack of serious competition in the broadband market. In many parts of the country, there are only one or two providers to choose from. No surprise, the choices are very similar in what they offer and the price they offer it for. That’s an oligopoly at work. Yes, cable connectivity is almost always faster than DSL over copper wires, but still not very quick compared to the rest of the developed world.

Worse, the two biggest landline providers of broadband — AT&T and Verizon — have been excruciatingly slow to build out true FTTH networks. (Although AT&T’s Uverse is billed as FTTH, it isn’t. It’s a hybrid of fiber and copper.) As a result, Netflix reports that its users — who consume about a third of current Internet capacity — get far worse performance from AT&T and Verizon than they do from the Google Fiber service now available in a handful of cities.

Google Fiber now looks like a serious, sustainable business The search giant had been experimenting with FTTH projects in several cities, notably Kansas City, but many analysts and observers (including me) didn’t take the Google Fiber effort seriously. FTTH is very expensive to build, is burdened with regulatory hurdles, and requires that the provider offer a good deal of customer service and support, which Google has never done very well.

But in February, Google said it is working with 34 cities across the country to expand its FTTH service. Not all of those cities will ultimately get the service, but the move was a clear signal that Google want to compete with the carriers in major markets.

The announcement was met with some skepticism from analysts, but in early May the Bernstein analysts published a bullish report on Google’s plans. They conducted a door-to-door survey of Google’s first Fiber customers in Kansas City, which showed that Google could get 50 percent market penetration of its 1Gbps broadband service in the next three to five years with service that provides 100 times faster download speed than the U.S. average.

What’s more, the Bernstein analysts said Google Fiber could be profitable and they believe Google is serious about the effort. “We don’t think Google Fiber is an experiment, a regulatory ploy, or just a bluff to keep incumbents in check or get them to upgrade their networks. We believe the potential to build a large, profitable business is one of the main motivations for Google,” they wrote.

AT&T has begun to ramp up its FTTH efforts, saying in April it may roll out 1Gbps fiber-optic service to as many as 21 new metropolitan areas, including Atlanta, Chicago, Los Angeles, San Francisco, and San Jose. It’s hard to believe this had nothing to do with competitive pressure from Google.

Google’s next broadband frontier may be in space Could a fleet of satellites extend broadband to connectivity-short parts of the world? Google appears to think so, according to reports this week by the Wall Street Journal. The paper says Google plans to spend $1 billion on a fleet of satellites that would connect the unwired regions of the world.

Google didn’t confirm the report, but it didn’t knock it down either, saying, “Internet connectivity significantly improves people’s lives. Yet two-thirds of the world have no access at all.” The company is already spending big on Project Loon, an experimental project that uses balloons as devices to spread connectivity.

There are also widespread reports that Google is close to buying Skybox Imaging, a company that has launched one small imaging satellite into low-earth orbit and plans to launch 23 more. (I interviewed its co-founder John Fenwick recently.) Skybox plans to use the satellites to shoot high-definition images from space and sell them. The company’s technology would be an obvious complement to Google’s mapping and imaging businesses, but it could also be used to deliver broadband. Neither Google nor Skybox have commented on the reports.

Whether or not Google really plans to get into the satellite business, there’s now no doubt that it’s serious about moving into the broadband business. However, building out fiber networks will be a slow process, so don’t hold your breath for 1Gbps broadband to come to your neighborhood. It’ll take much longer than that to reach even the big cities.

Still, Google’s entry into the business may well have the effect on broadband that T-Mobile’s aggressive moves have had in the cellular market, where odious, two-year contracts have largely gone away and prices of some services have dropped sharply. (But competition in the wireless market may be sharply curbed if Sprint succeeds in buying T-Mobile USA, which news reports say is imminent, though the federal government has said it opposes such a merger.)

When companies like AT&T, Verizon, and Comcast have no serious competition, they do what they want — too bad for those who don’t like it. Thanks to Google, that’s finally going to change.

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This article, “Google gets serious about rescuing broadband,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.