Internet Wars: AT&T and Google Go at It Again

The two companies are fighting for more of the ultra-fast Internet market.

Apr 23, 2014 at 9:35AM

AT&T (NYSE:T) can't seem to stay out of the news lately. The company has had some very public battles with T-Mobile, but its new target appears to be Google (NASDAQ:GOOG) (NASDAQ:GOOGL).

AT&T announced this week that it's considering expanding its fiber optic Internet network, called U-Verse with GigaPower, into 100 new markets. But the news may be more of a pushback against Google than a great move for investors.

Big deal, or big disappointment?
Let's get this out of the way first: AT&T is not guaranteeing that it's expanding its ultrafast Internet into 100 new markets. The company is saying that there are 100 new candidate markets that could possibly receive its faster Internet. The announcement actually comes just two months after Google said it's considering expanding Google Fiber Internet service into new markets. As coincidence would have it, AT&T's candidate markets are almost exactly the same as Google's candidates. What a small world. 

AT&T said in a press release that, "This expanded fiber build is not expected to impact AT&T's capital investment plans for 2014." This means that it won't be doing much actual Internet expansion this year above what's already previously been announced.

That's not to say that some cities in AT&T's list won't get fiber services, but rather that none have been confirmed. Much of it will depend on how well the cities can work with AT&T to bring the service to their towns.

Google has a similar strategy when considering new markets for its Internet service, and neither of the companies will bring their fiber optic network to all of the candidate cities -- at least not right now.

How it could help AT&T
While AT&T may have made its recent announcement to make sure it keeps up with Google Fiber, the news isn't exactly irrelevant.

Part of Google's initial strategy when first launching Google Fiber was to push Internet service providers to up their Internet speeds, as well as increase competition. That's clearly paying off right now as AT&T is following in Google Fiber's footsteps.

In the long term, it could also help AT&T differentiate itself from competitors like Comcast and Time Warner Cable, which are in the middle of a possible merger. Most of AT&T's current fiber optic service offers speeds at 300 megabits per second right now, but will soon increase to up to 1 gigabit per second. When it's upgraded, AT&T U-Verse with Gigapower will be 100 times faster than average home Internet speeds.

As Barrron's Tech Trader blog pointed out recently, AT&T's ultra fast Internet expansion could eventually hurt Time Warner, since it would be moving into more markets where the cable company exists. But for now, AT&T's focus is squarely on fighting Google in the wired Internet space.

Foolish final thoughts
While it's good for competition that AT&T is looking to expand U-verse with Gigapower, right now, there's not much upside for investors. Ultimately, I think Google has a bit of an advantage with ultra-fast Internet, as many users aren't typically happy with any cable providers' customer service, and Google's a new player offering customers a brand-new product.

The good news for AT&T is that it's actually moving quickly to try to keep up with Google's latest moves. While other Internet providers may be a bit behind, AT&T is trying to match Google in both Internet speed and locations, which will at least help AT&T stay ahead of the non-Google competition.

AT&T may be scared, but you can get rich
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Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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