It's easy to assume Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Fiber is just another pet project that'll eventually get the ax. But Fiber has the making of a true business, and Google is already treating it that way.
In yet another move that should have Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) shaking in their boots, earlier this week The Wall Street Journal reported Google's hired one of Qualcomm's senior vice presidents and general manager, Dennis Kish. The former chipmaker executive is now VP of Google Fiber, taking the reigns from one of Google Fiber's early leaders, Milo Medin, who will stay on as an advisor.
Gearing up for expansion
Kish is expected to bring "operational expertise" to Google Fiber, particularly as the company expands its fiber optic coverage into new cities.
Google is in the process of selecting new locations for its next wave of Fiber expansion, and is currently in talks with 34 cities in nine major metropolitan areas throughout the US. Google will evaluate all 34 cities based on how easy it'll be to build out the fiber network, as well as how long it will take to set up and how expensive it will be. After that, the company will select which cities will get the service. Right now Google Fiber is only available in the Provo, Kansas City and Austin metropolitan areas.
Google Fiber's Internet speeds come in at around 1Gbps, which is about 100 times faster than average speeds in the US -- for just $70 a month. As the company's Internet ambitions expand, Evercore Partners predicts Google Fiber could become one the nation's top 10 Internet providers in the next seven to nine years.
Even with the expansion plans, Internet titans Time Warner and Comcast aren't in immediate danger. Time Warner Cable controls about 13% of the U.S. home broadband market and Comcast takes an impressive 24%.
But the Qualcomm hire does point to a more ambitious Google Fiber business, which might eventually lead to a wireless service from Google.
The future of Fiber
Back in April rumors surfaced that Google may be interested in becoming a wireless carrier.
According to The Information (paywall) the company has been in talks with Sprint and Verizon to possible purchase wholesale cellular coverage. Google would then sell smartphone plans directly to customers as a mobile virtual network operator, or MVNO. There hasn't been much information on the report was published, but the move wouldn't be all the surprising.
With Google continually building out Fiber, the company could build a strong (although small) Wi-Fi network in Fiber cities, then supplement the service with a discounted cellular package to cover areas Fiber can't reach or where a cellular connection is needed.
That's just speculation at this point, but with Kish coming from Qualcomm it makes a wireless Fiber business all the more convincing. Qualcomm is one the leading mobile wireless chip companies, and earns two-thirds of wireless baseband revenue from its integrated mobile processors. Kish's background in such a mobile-focused company could help Google move one more step to in that direction.
Right now Google earns about 90% of its revenue from advertising, and Fiber's not going to change that anytime soon. But Google's hiring of Kish and its current expansion plans show the company is serious about its Fiber business.
Earlier this year Carlos Kirjner, from Bernstein Research, wrote in an investor note:
"We continue to believe that Google Fiber is an attempt by Google to build a profitable, stand-alone business. It may not make a huge difference for Google or for the incumbents in the next one, two or three years, but Google is taking the long view and we think in 5 or more years, it could turn out to be a significant, profitable business for Google and headwind for incumbents."
If Google gains control (at least in part) of how people connect to the Internet, it could bring more ways for the company to serve up advertising. Google made a similar move when it launched the Android OS for free, which gave the company control of how the majority of the world interacts with the mobile Web, in order to get its services and ads into consumers' hands.
While Google Fiber's future is still up in the air, hiring Kish gives the business a bit more weight, and indicates that Google isn't likely to write this business off anytime soon.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and 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.