The Free Market and Super-High-Speed Networks

Carl Weinschenk

One of the things to watch for in 2013 is if the free market actually works.

Well, sort of. One of the oft-repeated arguments of the folks who want to loosen up regulations is that a freer and open marketplace will encourage competition, improve services and drive down prices.

They may have a point. No company represents the free market better than Google (unless, of course, it’s Facebook, Apple … OK, there are a bunch of others). The telecommunications hydra launched Google Fiber in the Hanover Heights neighborhood of Kansas City in November. The service offers speeds as fast as 1 Gigabit per second (Gbps). During 2013, Google will set up shop in more areas of the city.

The relatively small expansion doesn’t seem like a big deal. However, it won’t be long until the project expands to other cities and poses a real threat to the cable/telco duopoly. This is how Light Reading puts it:

The coming service sign-up period means Google Fiber hopes to get off to a (relatively) fast start in 2013 as it gets ready to greatly accelerate deployments in the summer and fall. It also means Google Fiber is pretty much on track now, giving the area's incumbents -- Time Warner Cable Inc. (NYSE: TWC), AT&T Inc. (NYSE: T), SureWest Communications (Nasdaq: SURW) and Comcast Corp. (Nasdaq: CMCSA, CMCSK) -- some fair warning and time to decide how they will counter Google Fiber with pricing and product packaging.

Anyone thinking that Kansas City was a one-and-done fast fiber joyride for Google — and, really, there isn’t any reason to really think that that is the case — will recognize reality when reading this Wired piece. Google Executive Chairman Eric Schmidt, according to writer Michael Copeland, “hinted” at an expansion and said that the service will move to “hopefully more cities.”

The commentary in the story pointed to how much it would cost Google to expand the service to cover large tracts of the nation and concludes that it is not a likely course for the company. However, Copeland certainly thinks that Google is a player with which the MSOs and telcos must reckon:

Is that really the business Google wants to be in? Not likely, at least not at that expense and scale. Google’s bread-and-butter is still its online advertising business, and its nascent content business. But if it turns out Google Fiber helps Google sell more (and more valuable) ads and content, that gives Schmidt’s comments a bit more weight. Google can justify funding a modest expansion of Google Fiber. Will it blanket the nation? Probably not. But just ask those happy Kansas City web heads; there’s always the chance your neighborhood could get lucky.

The reason that the cable and telephone guys should worry is simply that Google Fiber threatens to trump their game — by a lot. Business Insider CEO and Editor-in-Chief Henry Blodget posted a story about a visit to Kansas City by BTIG analysts Rich Greenfield and Walter Piecyk. The commentary has lots of good information on what the company is offering and how it is deployed. Blodget, who obviously is not from the objectivity-is-everything school of journalism, calls the service “awesome” and sums up what it means for the local cable company in no uncertain terms:


The Time Warner Cable system in Kansas City appears to be freaking out about the rollout of Google Fiber, and for obvious reasons. Google Fiber puts the Time Warner Cable offering to shame.

It also is important to remember that Google isn’t the only game in town. For instance, Slashdot reported in mid-December that Gigabit Squared has agreed to work on a high-speed network for Seattle.

The bottom line is that the free market seems to be working: Private companies moving more squarely into the business of super-high-speed networks will benefit the public both because of those offerings and the subsequent improvement in services that will have to come from the cable and telephone companies.



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