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

The search king’s efforts to expand is putting pressure on telecoms to respond.

Tim Beyers
Tim Beyers
Apr 29, 2014 at 7:35PM
Technology and Telecom

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.