Google Fiber Is Shaping Up to Be an Expensive Headache for AT&T

AT&T (NYSE: T  ) wants to expand high-speed fiber Internet access to 21 major metropolitan areas. Fool contributor Tim Beyers explains the company's motivation, and its implications, in the following video.

In a press release earlier this month, AT&T said it plans to expand ultra high speed broadband to as many as 100 cities and municipalities. Plans call for U-verse TV with GigaPower Internet at speeds "up to 1 gigabit per second." The announcement comes just weeks after Google (NASDAQ: GOOGL  ) (NASDAQ: GOOG  ) committed to expand its fiber service to as many as 34 municipalities.

Tim says it's a game one-upmanship that benefits Google investors nearly as much as it hurts AT&T investors. Why? Google is flush with more than $57 billion in cash and investments versus about $8 billion in debt. By contrast, AT&T counts 46.6% of its entire capital as debt -- a limitation that could prevent the company from rolling out ultra service as fast as executives might like.

In response, the telecom used the rollout PR to essentially lobby for local assistance. Lori Lee, senior executive vice president of AT&T Home Solutions, said the company is interested in working with communities that offer "solid investment cases and policies." Translation: Those cities that offer us tax relief and development funds can expect us to invest. Those that don't, well ... don't hold your breath.

Now it's your turn to weigh in. Do you believe AT&T will invest what it takes to compete with Google Fiber? Or do you expect the search king to make the big investments required to become a top national supplier of high-speed broadband? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short AT&T stock at current prices.

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  • Report this Comment On April 29, 2014, at 9:52 PM, wjcoffman wrote:

    Go GOOGLE! I hope they put the screws to AT&T. (T) added a $10 charge because I went over my 150GB/month limit. Really? Never mind I have lightening (sic) quick DSL. Thieves.

  • Report this Comment On April 30, 2014, at 10:21 AM, DFG100 wrote:

    Google is doing a good thing for the market in that there may be a possibility that its installations will eventually force price cuts by the traditional ISPs. Without this kind of market move consumers cannot count on the FCC to force competition to give consumers higher speeds at lower prices. Remember, even at 1gig speeds we in the US still lag far behind other countries such as Japan and China in high speed low cost internet services. That said Google does not pay dividends. In my view that makes them not a candidate to buy. AT&T does pay dividends and will be around a long time. Go for the dividend payer!

  • Report this Comment On April 30, 2014, at 4:45 PM, tmc80tmc wrote:

    NOT deploying a 21st century network back in 2006 when they should have been is THEIR fault, not that of google!

    AT&T should have leveraged BellSouth to build the network, instead they slowly reneged (or walked away from) their promises as conditions of the merger and went to go on to DUOPOLIZE the wireless industry by destroying competition there (and their little unlimited data plans too, snickering like a wicked witch or the mogul Mr. Burns from the Simpsons all the while).

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