The research group notes that even with $45 billion in cash on hand, Google probably doesn’t have the money to blanket the nation in its fiber. But it can cover enough ground to severely disrupt the pay TV business with a superior ISP/video solution.


While even its vast cash resources won’t allow it to roll out fiber to every TV home in the U.S., Google Fiber is something pay TV operators should be “very, very afraid of,” said a report issued Wednesday by research group SNL Kagan.

“Google Inc. is reinventing the business of pay TV and broadband — and it may not need to wire every U.S. city to make an impact,” wrote SNL Kagan analys Deborah Yao, in the report’s lead.

Also read: The economics of Google Fiber and what it means for U.S. broadband

Two weeks ago, in Kansas City, Mo., Google launched a new fiber-based broadband and video service.

For $120 a month, subscribers get uncapped internet access that’s 172 times faster than the national average. They get a 2 terabyte DVR, capable of recording up to 500 hours of programming and eight shows at one time. And they get an as yet incomplete but growing selection of basic cable channels, albeit one that currently lacks such powerful draws as Disney’s ESPN, News Corp.’s Fox News and AMC.

The research company quoted Moody’s investment analyst Gerald Granovsky, who said that even with an astounding $45 billion of cash on hand, Google lacks the resources to accomplish the staggeringly expensive task of rolling out its fiber nationally.

“They don’t have the cash for it,” Granovsky said. “We would be shocked if they were to expand this.”

But as SNL Kagan insinuates, Google — which spent $500 million to bring its Fiber to Kansas City — might just try. Quoting our own Stacey Higginbotham, the research group noted Google’s belief that it won’t lose money in Kansas City, with a customer-required $300 connection fee covering deployment cost.

SNL Kagan added that Google cut expenses by building its own set tops and running its fiber over aerial power lines instead of cutting them into the ground.

Also notable: Verizon spent $23 billion to bring FiOS fiber to 17 million homes.

“One could argue that Google may not have to wire every U.S. city, but just enough cities for pay TV operators to start changing their behavior,” reads the SNL Kagan report. “As Google proves that it can offer a superior product at lower prices, regulators could pressure cable and telecom operators to do the same.

According to the research group (and as previously noted by GigaOM) Time Warner Cable — the largest multichannel operator in Kansas City, with a 33.9 percent market share — is so concerned about Google Fiber, it’s offering employees $50 gift cards for tips about the service.

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  1. “As Google proves that it can offer a superior product at lower prices, regulators could pressure cable and telecom operators to do the same.”

    I think making that happen could well be Google’s intention.

  2. I can at some point envision a re-reg of telecommunications, much like in 1996. Then regs said that incumbent phone companies would have to sell a switch on their network so the cables or anyone could get into telephony.

    I can see a day where we have new reg’s and cable companies will be required to provide a TV switch to other competing companies to run competing TV systems to their networks.

    Sounds freaky, but congress has bought this one more than once. Look at electricity and natural gas deregulation…. let’s send someone else’s product down the line. It goes in here, and comes out there.

    The problems might be horrific, but the software giants can probably figure this stuff out.

    1. Very sharp comment

  3. Edmund Singleton Thursday, August 9, 2012

    Rome was built one brick at a time; let the good times roll…

  4. One word: FIOS

    Verizon, having spent billions on FIOS, admitted it wasn’t worth it to expand coverage anymore and will concentrate on filling in areas they’ve already got presence (which translates as “we’re wiring apartment buildings in NYC, Boston and DC”

    Laying cable is a big job – FIOS goes in and rewires the house, which is the only way to get fat pipe broadband: the cables installed in the early 80s don’t do it.

    There’s no point for Google to expand this program if they can’t wire a significant portion of the US and that will take years – it took FIOS about 5 hours to wire my fairly modest house.

    And given they have yet to sign up their first customer… the gaps in the channel line-up are significant.

    Biggest story on their deployment is that they are giving away an Android tablet to use as a remote control, which, if they don’t mess up the UI, really give second screen a boost: http://bit.ly/MOVWzf

  5. “FIOS goes in and rewires the house, which is the only way to get fat pipe broadband: the cables installed in the early 80s don’t do it.”

    This blanket statement isn’t true. While Verizon might have needed to rewire Alan’s house, they did not need to rewire my home, which was built in 1980. Verizon ran its fiber optic directly to an Optical Network Terminal they placed inside my home, plus one short coax cable to their router. All the other original cable TV coax is still in use for the hi-def TV signal, while the broadband is over WiFi.

  6. `SNL Kagan added that Google cut expenses by building its own set tops and running its fiber over aerial power lines instead of cutting them into the ground.`

    I live in KC and watched them string fiber through sewers as well in many hoods. Many ares of KC have no above ground power lines, especially in hirise living areas.

    1. How did they send it through the sewer ? Was there a specialist company advertising their company ?

    2. How did they get permits to run cable through a sewer?? I really want to know about that. That seems highly unlikely. And in reply to the statement from the article about running overhead, ALL communications constructors utilize power poles if possible. It costs about 60-70% less to build overhead than underground.

  7. Cables have fiber to all their nodes. Bringing fiber to the home is a much easier and less expensive process for the cables than Google laying new fiber all over the country.

  8. The real problem has been collusion. AT&T and Verizon basically won’t compete (with few exception to make their collusion deniable. The biggest problem is franchise agreements which will keep Google out of areas.

    1. The problem is not franchise agreements. There have not been exclusive franchises for years, and most municipalities would love for a competing operator to come in and provide service. The problem is finding someone willing to spend the money for a second system.

      What we really need are open networks where anyone can come in and offer services at competitive rates. That is the only way we will ever get real competition, and that won’t happen any time soon.

    2. It’s not collusion. It’s good business. MSOs don’t overbuild eachother because usually, it’s not feasible to split the market, and neither (assuming two competitors) will gain 100% of the market.

  9. I’m inclined to agree with Alan and Rich on this one. Google isn’t in the infrastructure business. That’s not to say they couldn’t get into it, but improving connectivity would bolster their existing products and service and allow them to deliver, curate, and advertise against more content. A product like GoogleTV can’t work without a fast connection and the proliferation of reliable IPTV would allow Google to try its hand at addressable advertising on a bigger scale than it’s doing now with remnant satellite inventory. I think Google has more to gain by controlling what goes through the pipes than by controlling the pipes themselves. Google Fiber seems like a tactic to scare those with fiber-laying credentials into expanding service.

    1. Google actually makes their own network infrastructure in-house, which can all be applied to the consumer sector.

      They’re one of the largest hardware manufactures in the world.

  10. Google TV: Game, set, match: https://fiber.google.com/about/ ….….Next …Apple TV (Hulu Plus Comes to Apple TV (Apple Device Catches Up With Xbox, Roku and Others) …. NAB IPTV Position? _______ None…. Large Internet companies are adding as much outside content with their OTA & Cable content as possible to increase their basic social network and application revenues …WHY? VOD is leading towards “Everything on Demand” (EoD). Video-on-demand (VOD) technology has become a balancing act for executives weighing how to offer more programming without threatening traditional ad revenue. …. (There are no industry standards). …. TV stations cannot stop the competition, but they can become better competitors. Complacency is their biggest enemy. Internet based companies want your broadcast advertising sales revenue, and not just a piece of it, they want ALL OF IT! Rich Lyons
    818 516 0544

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