AT&T's High-Speed Internet in Austin Is Cheap for a Reason

The Google (NASDAQ: GOOGL  ) Fiber rollout in Austin, Texas, hasn't even started yet, but Big G is already getting results from the project. This week, Austin's incumbent telecom giant AT&T (NYSE: T  ) opened up a high-speed Internet package at prices comparable to Google Fiber, and with speeds reaching gigabit parity in 2014.

Today's blue-plate Internet special, with a side of privacy invasion
Before diving into what this means for Google, let's take a closer look at AT&T's product. For $99 a month, Austin residents will get a fiber-optic connection running at 300 megabits per second, upped to 1 gigabit for no additional cost next year.

That's the "standard" package. The "premier" contract offers the same Internet speeds at $70 per month. Counterintuitive, you say? Hold that thought.

AT&T's 300-megabit solutions are available today (again, upgraded to 1 gigabit for free next year), while Google Fiber installations are scheduled for the summer of 2014. Google Fiber prices in Kansas City are comparable to AT&T's "premier" pricing, even if you add $50 a month to include TV services to each package.

The trade-off? AT&T will analyze your Web-browsing habits and send you personalized advertising in exchange for the lower pricing. I suppose AT&T sees the tailored ads as a value-added product, justifying the "premier" name.

That caveat to AT&T's lower pricing reminds me of two very different things:

  • Google's deep integration between its ad networks and other products such as Gmail and the Google search engine.
  • The recently unveiled NSA efforts to collect intelligence on international terrorists, which also gather a ton of data on regular Americans. Keep in mind that AT&T doesn't deny allegations that the company is getting paid something like $10 million a year to supply the NSA and CIA with customer data. Instead, AT&T insists that nobody needs to know about these breaches of the company's own privacy policy.

How does that even work?
It's unclear exactly how AT&T will collect the search terms and other information it would need in order to place personalized ads on your desktop. The company did tell GigaOm that it will use "various methods to collect Web-browsing information," but that encrypted pages using the HTTPS protocol are off limits.

That might mean forcing "premier" gigabit customers to use an AT&T-approved search engine, among other things. All Google searches are encrypted by default, so Ma Bell wouldn't be able to read that data even if it wanted to. By contrast, Microsoft's  (NASDAQ: MSFT  ) Bing cheerfully presents search boxes and results over a basic HTTP connection, leaving off that crucial S as in "secure." Bing doesn't seem to work with HTTPS at all, actually. The Yahoo! search tool does offer a Bing-powered search experience over encrypted HTTPS connections, but the vanilla Bing site just doesn't play that tune. And even so, Yahoo! searches still default to unencrypted HTTP transports.

The bunny is inspiring other service providers to do better. Image source: Google Fiber.

I'd expect the cheaper AT&T installation process to include a quick change to your browser's default search engine, away from the ever-popular Google and over to either the Microsoft or Yahoo! flavors of Bing. Or AT&T could write its own wrapper around Bing, providing Ma Bell's own branding alongside unencrypted searches.

What does this Austin adventure mean in Mountain View?
Getting back to Google investors, this is a win for Big G even if AT&T wants to mitigate it with a custom search experience that doesn't include Google.

The whole Google Fiber project was never meant to blanket the nation in Google-owned fiber connections. Rather, it's meant to prod other Internet service providers like AT&T into offering cheaper, faster, better connectivity. That's compatible with Google's overarching vision to change the world via improved Internet services, and also feeds Google's own coffers, as hyper-connected consumers tend to click on more ads.

But again, AT&T wants to remove Google's benefits from a faster fiber service in Austin. It's also an interesting test of exactly how creeped-out American consumers really are by the Edward Snowden saga.

Will the tech-savvy Austin community trade some privacy for a $30 monthly discount on gigabit Internet connections? Will the Texans take AT&T's tainted service today, or wait a few months for an alternative that stands up for privacy rights? Only time will tell. Add Google and AT&T to your Foolish watchlist by clicking here and we'll keep you on top of this developing story.

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