The Beginning of the End of AT&T's and Comcast's Reign

The internet service providing industry has been dominated by a few huge players. But, Google's new product, Fiber, may signal the end of internet service as we know it.

May 14, 2014 at 10:30AM

Fairly recently, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) entered the Internet service providing industry with Google Fiber, an Internet service that is roughly 100 times faster than traditional broadband. At $70 per month, it's a bargain compared to the industry average of $65 per month for lower-quality service. Although it's only available in four cities in the U.S., data suggests it could spread like wildfire and wreak havoc on the profitability of current industry titans Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T).

Google Fiber

Source: Google

Kansas City experiment has been wildly successful
Google Fiber was first installed in Kansas City, Kan. in 2011. According to an article from the Wall Street Journal, a whopping 42% of households surveyed in Kansas City currently use Google Fiber.  

Google Fiber could be huge
Although it is nearly impossible to quantify the rate at which Google can expand its new product, it seems the new service has some serious growth potential. Google is currently prospecting in 34 cities around the country. Coming up with fancy projections would be silly at this point. But, it's safe to assume that if Google can offer a superior product at a comparable price to its competitors, the growth potential could be astronomical.  

Many people don't like their current Internet options
If the majority of people were perfectly happy with their current Internet service providers, it would be one thing. But, satisfaction surveys suggest that many people would love to drop their current service.

In a 2013 J.D. Power survey, overall customer satisfaction among Internet service providers was rated 683 on a 1,000 point scale. The American Customer Satisfaction Index released a report, also in 2013, where ISP's received the lowest customer satisfaction ranking of any industry in America. 

Clearly, there is a window of opportunity for Google to enter this near-monopolistic market. 

Google's new service could mean trouble for AT&T and Comcast
For the heavy hitters in the ISP industry, Comcast and AT&T, Google's new service could harm their revenue and ability to generate profit. In 2013, Comcast generated 25% of its revenue from high-speed Internet service, and AT&T's wireline data segment accounted for 26% of the company's revenue in 2013. 

Although many of Comcast's customers may have been displeased with its service over the past five years, shareholders were probably quite pleased. Since May 2009, Comcast stock has nearly doubled the S&P 500 Index. AT&T stock is another story, however, generating about one-third the return of the S&P 500. 

If Google's new service catches on, the negative effect on the market share and profitability of Comcast and AT&T could be huge. But, of course, neither company will go down without a fight. 

In fact, AT&T has responded to the threat. Recently, the company announced that it may begin to string its fiber optic lines directly to homes to match Google Fiber's superior speed. The company also announced plans to build an all-fiber network in Austin, Tex. and charge customers $70 per month (Google Fiber is also $70 per month).

What all this means for shareholders of Comcast & AT&T
Regardless of how it all plays out, Google Fiber should be seen as a negative thing for shareholders of Comcast and AT&T. Even if the two companies are able to revamp their current infrastructure to match Fiber's speed, their market share and profitability will likely suffer.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Michael Nielsen has no position in any stocks mentioned. The Motley Fool recommends Google (C shares). The Motley Fool owns shares of 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.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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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