Google Fiber says it might expand from KC to nine new markets

02/19/2014 12:00 PM

04/15/2014 11:32 AM

Google Inc. told dozens of cities Wednesday that it is considering bringing them its Internet and TV services, nearly three years after promising the hookups it has yet to fully deploy in Kansas City.

In a post to its blog, Google Fiber said it would ask 34 cities in nine metropolitan areas to fill out a checklist of items “to explore what it would take” to string a fiber optic network in those communities.

Google has regularly said it needs cities to clear out red tape that can slow the expensive work of building a network street by street.

The company’s Internet service is distinct because it relies on running fiber optic cables directly into homes and offering 1-gigabit-per-second uploads and downloads at home consumer prices.

“We continue to believe that the Internet’s next chapter will be built on gigabit speeds,” wrote Milo Medin, Google’s vice president of access services. “We’re aiming to provide updates by the end of the year about which cities will be getting Google Fiber.”

Any impact on Kansas City could be difficult to gauge. Because the company relies mostly on contractors for the labor-intensive network construction and home installations, expansion to other markets is unlikely to slow progress in this market.

An expansion would balloon its customer base, possibly providing Google greater negotiation leverage with entertainment companies for its TV lineup. It still notably lacks the popular cable channel AMC.

The news could signal a big expansion hitting several regions in the country, although none of the country’s largest markets such as New York, Los Angeles or Chicago are included. Instead, Google says it is contemplating networks in Phoenix, Atlanta, San Jose, Salt Lake City, Nashville, San Antonio, Portland, Ore., and Charlotte and Raleigh-Durham, N.C.

“I’ll be surprised if they end up expanding to all nine of them,” said Donna Jaegers, a telecommunications industry analyst at D.A. Davidson & Co. “They would like to stir the pot” and possibly pressure existing cable and phone companies to crank up their home Internet service speeds, she said.

She noted that the nine markets represent places where the country’s three largest cable companies — Cox Communications, Time Warner Cable and Comcast — dominate. In Kansas City, Google Fiber mostly poses a threat to Time Warner Cable, although it came on the heels of AT&T’s U-verse build-out.

More than 1,100 communities in 2010 pleaded with Google to bring them the ultra-high-speed Internet service. In the spring of 2011, Google named Kansas City, Kan., as its first choice. It then gradually expanded its plans to include much of the Kansas City market.

So far, it has completed construction and installation to much of Kansas City, Kan., and to a central section of Kansas City. It has said it will tackle sign-ups for the southern and northern stretches of Kansas City later this year. Yet home installations for much of that area probably are more than a year away.

Google Fiber will not say how many customers it has, or when it expects to turn a profit in Kansas City.

The company has made agreements with several suburbs in the market — although notably not with Overland Park or Independence — but has not said when installations in the outlying areas might begin.

Meanwhile, Google has cut a deal to build a similar network in Austin, Texas. That news was followed by announcements that AT&T and another Internet service provider in that market would sell consumers gigabit connections.

Google also bought an existing fiber-to-the-home system in Provo, Utah, and has begun delivering its service there.

The Internet giant’s blog post did not say how broad its expansion plans might be. It doesn’t say whether Google Fiber service will be sold in all 34 cities, or necessarily any. Still, the news bolsters long-running speculation that Google might compete nationally at selling Internet access and TV programming.

“We’re aiming to provide updates by the end of the year about which cities will be getting Google Fiber,” Medin said on the Google Fiber blog. “We’re going to work closely with each city’s leaders on a joint planning process that will not only map out a Google Fiber network in detail but also assess what unique local construction challenges we might face.”

The company said local geography, existing infrastructure and housing density will play into its expansion decisions.

Cities will provide “maps of existing conduit, water, gas and electricity lines so that we can plan where to place fiber,” Medin wrote. “They will also help us find ways to access existing infrastructure — like utility poles.”

The Google Fiber business model has centered on going to neighborhoods where it can register the greatest demand and making consumers now-or-never offers on hookups. That’s intended to avoid costly piecemeal installations across a market.

One analyst said the news reinforces the view by some that Google sees profits in selling Internet service, not just a way to pressure existing companies to provide better speeds.

“It could turn out to be a significant, profitable business for Google” and stiff competition for others in the industry, Carlos Kirjner, an Internet analyst for Bernstein Research, wrote in a note to investors on Wednesday.

Experts have also said Google Fiber’s entry into other markets might hurt Kansas City’s “there first” bragging rights but is more likely to spur innovations that make full use of the service. So far, no consumer applications have been unleashed that need the gigabit speeds of Google Fiber.

But industry analysts say developers will grow more inclined to invest in creating such applications the more broadly the service is deployed.

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