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Will This Two-City Experiment Speed Up Google Fiber's Expansion Plans?

By Anders Bylund - Oct 5, 2017 at 9:09PM

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Google's high-speed internet service is dropping TV services from the menu in Louisville and San Antonio. That's one way to keep regulators satisfied.

Alphabet (GOOG -0.27%) (GOOGL -0.21%) is changing its sales tactics around the Google Fiber high-speed network service. When Google Fiber opens its doors in Louisville and San Antonio, the company won't try to sell a bundled TV service alongside every internet plan.

Wait -- isn't Google Fiber dead already?

Rumors of Google Fiber's demise have turned out to be greatly exaggerated. It's true that Alphabet is evolving its strategies for this service, but the plan to build out fiber access in more markets remains on track. For example, Google Fiber is currently installing fiber runs and supporting assets in both Louisville and San Antonio. The service is also evaluating a list of 19 additional cities for the next round of expansion announcements, including large metro areas such as Los Angeles and Dallas, but also smaller markets like my own backyard here in Tampa, Florida.

So things are moving along, despite rumors to the contrary. Future installations might rely more on next-generation wireless networks in order to avoid expensive and regulation-laden fiber installations, but the concept of offering high-speed internet service at a reasonable cost has not changed.

Scissors cutting a coaxial cable just below the connector

Image source: Getty Images.

What's new?

What's new in the San Antonio and Louisville projects is that Google Fiber apparently won't sell a TV service at all. TV-plus-internet bundles have been a staple in earlier Google Fiber markets, like Provo, Atlanta, and Kansas City, but will be absent from these two rollouts. At the same time, FierceTelecom notes that the service's fees for cable TV packages will rise in some established markets by the end of 2017.

So Alphabet is pushing its internet service customers away from the TV bundles in several ways. The company also argues that many customers are dropping their TV contracts anyway, preferring so-called over-the-top alternatives such as Netflix, Hulu, or its own YouTube TV product for their video entertainment needs.

"There are so many ways to watch what you want, when you want it," Google Fiber said in a prepared statement. "For our existing markets with TV as a part of their product offerings, nothing is changing -- although more and more of you are choosing Internet-only options from Google Fiber. We've seen this over and over again in our Fiber cities."

In other words, Google Fiber sees the writing on the wall for traditional cable TV packages, including its own handpicked and negotiated bundles. Rather than seeking to protect that outdated service model, the company prefers to nudge the industry a bit closer to the edge of oblivion.

What's next?

It's unclear whether Google Fiber plans to stick with this TV-free model, since the two cities under the microscope today could turn out to be temporary test markets. But I see at least one reason why the practice could work to Google's advantage, regardless of the missing revenue streams from TV services. Dropping the TV content could also speed up regulatory negotiations in future Google Fiber markets, since local broadcasters are being kicked off the list of people to appease.

So the experiment in Louisville and San Antonio could actually pave the way toward a larger and quicker expansion schedule with a simpler business model. As an Alphabet shareholder, that sounds good to me. And if that speeds up Tampa's access to low-cost gigabit fiber services in the long run, I'd be a happy consumer too.

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