Is Google Fiber One Big Ruse?

The world has buzzed with excitement ever since Google (NASDAQ: GOOGL  ) announced in early 2011 that Kansas City, Kan., would be the first lucky city to receive the tech giant's amazingly fast, inexpensive high-speed Internet and television service, Google Fiber.


Image source: Google.

Since then, Google has not only brought Google Fiber up and running in Kansas City, but also announced plans to bring Fiber to the dozens of smaller municipalities in Kansas City's surrounding area, as well as to Austin, Texas, and Provo, Utah.

Naturally, those announcements led hundreds of other envious communities to wonder when, if ever, Google Fiber would come their way.

I recently made the argument that, while Google has understandably chosen not to publicly outline its end goals for Google Fiber, at this point there appears to be no end in sight to its expansion plans.

Google Fiber is facing headwinds...
Then again, that article served as a counterpart to the particularly persuasive case laid out in May by fellow Fool Evan Niu, who astutely described the challenges Google Fiber will inevitably face as it grows into regions dominated by long-established competitors.

Some of those challenges are already coming to fruition. Just last week, for example, AT&T (NYSE: T  ) announced accelerated plans to have its own fiber broadband service available to consumers in Austin beginning this December, putting its own launch well ahead of the mid-2014 debut Google had planned.

To be fair, AT&T is "only" starting with connectivity speeds of up to 300 megabits per second in December, and says it will be able to offer upgrades for customers to one gigabit per second to match Google Fiber by the middle of next year. In any case, the fact remains that AT&T has a lot to lose if its millions of customers defect en masse when Big G arrives.

The same goes for Time Warner Cable (NYSE: TWX  ) , which, in a conspicuous attempt aimed at retaining customers, quickly responded to Google's original Austin announcement by saying it would more aggressively build out its citywide Wi-Fi network in the area. Incidentally, Time Warner provided an update on those efforts just a few days ago, saying it now offers 900 Wi-Fi hotspots at no cost to Time Warner Cable customers in Austin, with plans to ultimately maintain 1,350 across the city.

If that weren't enough, Google is also facing the threat of competition from impatient large cities, many of which may ultimately decide to create their own high-speed networks in lieu of Google Fiber. Take Baltimore, for instance, which was frustrated after spending millions of dollars lobbying to become the first city to receive Google Fiber, only to have Kansas City steal its thunder.

...but here's why Google may not care
But consider this: What if Google Fiber is simply one big ruse?

And not so much in a terrible, deceitful way -- that'd fly in the face of Google's long-standing company philosophy of making money without doing evil.

Rather, what if Google is tackling limited rollouts of Google Fiber specifically as a means to get everybody else in the space moving more quickly?

Remember, Google doesn't need people to sign up for its Fiber service to succeed as a company. Last quarter, for example, and with Google Fiber still only up and running in the Kansas City area, the company increased its already enormous revenue stream by 19% year over year to $14.1 billion. Meanwhile, its quarterly GAAP net income rose around 15.8% to an incredible $3.23 billion.

Google's concern, then, is obviously less about owning fiber networks for profitability and more about encouraging crazy-fast Internet, which translates into more web use. This, in turn, should lead more people than ever directly to Google's ever-growing, Internet-based portfolio of products.

In short, I don't think it would be a stretch to say the folks at Google probably wear wide smiles across their faces every time a competing high-speed Internet provider decides to beat them to the punch by quickly improving network speeds and lowering costs for consumers.

For Google, it's akin to a coin toss they can't lose.

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  • Report this Comment On October 12, 2013, at 3:36 PM, TheBorogroves wrote:

    Of course Google Fiber is an attempt to get other companies to do more for Google than they do for themselves, but there is not reason to disregard Google due to early actions by competitors.

    You don't need to look far back to see the last time AT&T was threatened by fiber competition with Fios. U-Verse was their alternative, but that didn't stop them from saying their FTTN was as good as FTTH. In the announcements about their Gigapower U-Verse, you don't see prices(Google fiber is relatively predictable to start) and I still don't see them claiming that it is FTTH(which leaves me skeptical, even though to reach the claimed speeds it would make sense).

    As for giving out wifi hotspots to compete with extremely high speed internet, it sounds like Time Warner isn't even offering a competing service.

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