When it comes to disliked industries, Internet service providers, or ISPs, are generally a hated lot. According to the last American Consumer Satisfaction Index survey, the two worst-performing industries out of 43 surveyed, were subscription television companies and ISPs, reporting a score of 63 out of 100. When it comes to ISPs, many blame the lack of geographical competition as reason for the poor performance as there's simply no reason to lower costs or improve service.
More recently, however, many incumbent ISPs are facing a threat from new entrant Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and its Google Fiber offering. And it's been strong competition indeed -- the service promises lightning-fast 1 gigabit upload and download service for $70 per month. If you don't particularly like paying for Internet service, Fiber also has a slower, Basic Internet service for $0 monthly- though you do have to pay a one-time $300 construction fee that can be broken up into 12 equal payments of $25).
Unlike ISPs that act as a merely a delivery pipe, Google monetizes its Fiber service in two distinct ways. First, the company makes money on the actual delivery. But the second, more insidious way Big G monetizes its Fiber service is it compliments Google's core business of search. Simply put, offering lightning-fast service will increase search revenue, as will extending the number of people with Internet access. And if you live in these three cities, you may have the opportunity to get Google Fiber as your ISP.
Drumroll, please ...
Recently, the company announced through its blog it is now in the preliminary stages of bringing Google Fiber to three new locations: Irvine, Calif., Louisville, Ky., and San Diego, Calif. During these stages the company works with city leaders in what it calls a joint planning process.
Of course, with the tremendous demand for Google's Fiber service from both citizens and municipal leaders, you wonder how jointly this decision is made. Earlier this year, Milo Medin, Google's vice president of access services, gave insight into Google's strategy for dealing with municipalities: "If you make it [the process to bring Google Fiber to their city] hard, enjoy your Time Warner Cable."
As previously stated, considering most competing ISPs are strongly disliked with higher costs, slower speeds, and lower-quality service, Google's seemingly been able to dictate its terms. For the best example of Google's reception, earlier this year the Oregon House of Representatives voted on a bill to make it easier for Google to extend to Portland.
However, in classic government fashion, the bill actually made it harder because of tax changes -- the House quickly scheduled another vote to fix the error, even displacing other scheduled votes. To date, Portland is listed as a potential Fiber city on Google's website.
Fiber benefits every consumer, whether you buy it or not
Regardless of whether you choose Google's new service, simply having the service come to your city is a win for consumers. That's because the ISP industry is defined by a general lack of competition. In an earlier article, I wrote about two specific cases where Google Fiber improved the ISP experience: In Charlotte, N.C., Time Warner Cable increased Internet speeds for no additional cost in response to Google's possible entry, and AT&T charged less for its Gigapower service in areas with Google Fiber than in areas where it is not.(NYSE:T)
I expect Google's low cost has to do with its dual-monetization business model than an actual desire to be the lowest-cost provider, but considering search revenues are borne by third-party advertisers, this is a good thing for consumers when Google comes to your city. For citizens in Louisville, Irvine, and San Diego, feel free to reach out to your elected representatives and let them know you support increased Internet competition in your municipalities. If not -- in the words of Medin, "enjoy your Time Warner Cable."