If you like your Internet service provider, you're probably in the minority. In last year's American Customer Satisfaction Index, ISPs finished as the second-worst industry out of 33 total industries surveyed. And that makes sense: A combination of oligopolistic agreements between major providers and state legislatures putting restrictions on county- and city-provided broadband Internet services have shielded major ISPs from competition, leading to higher costs and low-quality service.
However, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is looking to disrupt this arrangement with its Google Fiber service. Although the company has been rather selective in the markets in which it chooses to enter, the company is simply not playing by established rules. Its 1 GB/s upload and download service for $70 per month is cheaper and faster than most offerings. In addition, the company is offering a 5MB/s download and 1MB/s upload basic Internet deal for free (after a one-time $300 construction fee).
Incumbent providers have responded, understandably, to protect their market share in the cities Google seeks to enter -- even before Google is actually up and running. Google Fiber is improving the Internet by simply announcing its intentions.
Charlotte's Internet is getting faster ... and cheaper
Earlier this year, Google announced its plans to bring Google Fiber to four new areas, including Charlotte, N.C. And this week, Charlotte ISP leader Time Warner Cable (NYSE:TWC) responded in kind. In a press release (h/t Engadget), the company outlined its plans to improve its Internet offerings by increasing speeds with no additional cost.
Specifically, Time Warner Cable's Standard service will increase from 15 MB/s to 50MB/s; its Extreme offering will increase from 30 MB/s to 200 MB/s; and its Ultimate package will not only increase speed 500% -- going from 50 MB/s to 300 MB/s -- but the service cost will also be $5 cheaper than Google's $70-per-month total. Google improved the Internet for most Charlotte residents on the strength of an announcement.
It's not just Time Warner Cable, either. For a clearer example of the power of competition in the ISP space, look no further than AT&T's Gigapower in Texas. In the city where the company is headquartered, the service is $110 per month. Meanwhile, a short three-hour trip down I-35 South finds the service only $70 a month -- $40 cheaper. The biggest difference between the two cities? Austin has Google Fiber; Dallas does not.
A smart move by Time Warner Cable on a few levels
For Time Warner Cable, this customer-friendly move benefits the company on a few levels. First, faster and cheaper service will allow the company to lock in consumers who could possibly defect to Google once the service is functional, but there's an added benefit as well. Right now, the company is awaiting Federal Communications Commission and Department of Justice approval on its planned merger with Comcast. What was once considered in the eyes of analysts and watchers as a slam dunk is now considered less certain, with BTIG analyst Richard Greenfield now thinking the deal will be blocked.
The opposition has centered on the immense Internet market share of the combined entity, poor Internet quality, and customer-service issues. While TWC's Charlotte improvements doesn't totally offset those concerns, on optics it looks as if the company is focusing on consumers, and that can't hurt. For Google, however, its commitment to building a faster Internet -- and its ability to force other ISPs to improve their offerings -- will bolster its core business of search going forward.
Jamal Carnette 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.
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