Google Inc: Fanning the Fiber Flames

Expansion plans for the search giant's rapid-fire broadband service has several communities optimistic.

May 24, 2014 at 12:00PM

There's been a lot of buzz around the greater Portland, Ore. area since the news was announced the city is on Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) short list for its lightning-fast Fiber broadband network. Portland, along with eight other cities around the country, are taking regulatory steps to determine if signing a franchise agreement, a crucial step in the Google Fiber process, makes sense. In Portland, we'll learn what the city council has decided after a vote on June 11.

If early indications from current Fiber cities are any indication, there's good reason to be excited. A door-to-door study conducted in Kansas City indicates Fiber customers are loving their $70 a month broadband access. Interestingly, most existing customers don't come close to actually using all that speed, but love it nonetheless. It's no wonder Portland, and the other cities on Google Fiber's short-list, are excited. But the upside of expanding Fiber's reach should go well beyond the nine cities, Google investor's should be just as giddy.

So far, so good
The firm that conducted the survey in Kansas City, Bernstein Research, found some interesting tidbits about Fiber users that bodes extremely well for Google investors. Granted, a statistician would note that the 350 respondents included in Bernstein's neighborhood, door-to-door study is hardly a representative sample, but the findings were intriguing nonetheless.

At $70 a month, most Kansas City Fiber customers are paying more than other Internet access alternatives and, apparently, loving every minute of it. Rarely if ever is a gigabit actually used, but for Fiber customers that's not the point: it's there if, or when, it's needed. Another reason Fiber is so well-liked in K.C. are that other providers, cable in particular, "are setting the bar pretty low." Turns out, telecom providers aren't faring much better in the eyes of prospective customers.

Fiber vs telecom? Not even close
Customers undoubtedly win when Google Fiber enters the picture, as AT&T's (NYSE:T) recent lip service demonstrates. It's more than a coincidence that AT&T announced it was "exploring" ways to roll out its own rapid-fire gigabit connectivity service in 21 cities around the country. AT&T said it intends to begin expansion of its high-speed Internet efforts in North Carolina. Of course, that "news" only came after Google's announcement that two N.C. areas were on the above mentioned, Fiber short-list.

If nothing else, Google Fiber is making other providers, like AT&T, address consumer's needs. Whether the phone giant or any of its brethren actually follows through with plans to improve its products and services is still up in the air. But if Google Fiber continues to generate as much excitement, and more importantly results, as it has to date, AT&T and others better start doing more than just talk.

So far, many industry pundits aren't buying AT&T's schtick. One industry insider and an AT&T customer in Austin, TX (an early home of Google Fiber), where AT&T is supposed to already have gigabit Internet access, said it doesn't work and, "Ma Bell should have some explaining to do before these 21 cities get too excited about their hoped-for gigabit service." Maybe a few AT&T execs should book a trip to Kansas City and speak to some satisfied Fiber customers.

Final Foolish thoughts
All it took here in Portland, and the other eight cities on Google Fiber's list, was just the notion that a rapid-fire alternative to cable and telecom Internet providers was possible. But Google really fanned the flames in Portland when it recently posted a couple jobs, "if it proceeds" with a Portland roll-out. Unfortunately, a Google spokeswoman brought us back down to earth when she said mentioned a job posting in San Antonio – another candidate – and the others that would follow.

Some investors may question if Google's self-driving cars, Loon balloons, and other off-the-charts innovations will actually generate enough revenues to warrant the time and expense: but Google Fiber isn't one of them. Customers are screaming for an alternative to service-challenged cable and telecoms, and are willing to pay for it. Keep the Fiber fires burning Google, both your new customers (here's one vote for Portland) and shareholders alike will thank you for it.

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4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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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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