Update: Despite being asked by an audience member about Google’s fiber efforts in Kansas City, a Google spokeswoman emailed me to explain that Schmidt wasn’t referring to Google’s network when he discussed the 300-500 Mbps speeds. She emailed, “”He was speaking about the future of fiber, not specifically about Google Fiber. As promised, we will deliver 1 gigabit speeds in Kansas City.” So, perhaps Schmidt was confused, because Google fiber will hit a gig.

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The video franchise license application follows an application that Google submitted to the Federal Communications Commission a few weeks ago to build a receive-only satellite farm in Council Bluffs, Iowa, which is about 200 miles away from the Kansas City markets and close to one of its major data centers. Together, the applications point to a serious effort on the part of Google to introduce TV services on top of its fiber broadband plans.

That Google would attempt to enter the video market isn’t totally unexpected: The WSJ reported late last year that the company was out seeking TV rights from major content owners such as Disney, Time Warner and Discovery Communications. But it appears that Google is laying the groundwork to make a serious assault on Time Warner Cable, which is the primary cable provider in its fiber markets.

But there are still some major questions left unanswered, as Google works to pull a video service together:

1. Will Google be able to get content owners on board? Some major content owners, like Viacom and Fox, are notoriously suspicious of Google’s video ambitions. Due in part to the perception that its search business aids piracy — and that YouTube is a haven for unlicensed, copyrighted content — there are some content providers that so far have been unwilling to work with Google. Writing big checks has a way of helping to make friends, but there might be some holdouts… Which raises the question: Will consumers sign up for a video service if some of the major networks are missing?
2. Will Google TV extend beyond the Kansas City markets? Google has been busy promoting the Kansas City deployments, but some believe that there’s an opportunity to extend its fiber ambitions beyond its initial test markets. There’s even some evidence in recent job listings from Mountain View. Check out this listing for a Google Fiber Business Analyst: Google says it’s “building one of the fastest national broadband networks to deliver next generation Internet content to users.” [Emphasis mine] If Google Fiber really is a national project, then we could see Google video services extended to other markets as the company lays down fiber.
3. What will Google’s TV service cost? This is potentially the toughest sticking point as Google negotiates rights with content owners. Most-favored-nation clauses, which are placed in deals struck by existing video operators, do not allow new entrants to negotiate better contracts than those already in place — one reason why the price of content continues to go up with every new deal. That means Google will be paying more than other providers for the same content, and will be unable to offer its TV services for less than existing providers. But! Given the high-speed-data nature of Google’s fiber product, I could see a product in which Google charges a one-time fee for the broadband service and video is an add-on service.
4. Will YouTube be integrated? Here’s a big wild card, especially as Google thinks about what the future of TV looks like. It’s spending big bucks on building TV-like channels of content for YouTube, so why not place those channels alongside more mainstream content from the major cable networks. Given the Gigabit speeds of the fiber product, all indications are that Google’s video product will be delivered via IP, so there’s no reason that YouTube — or really any streaming video content — couldn’t be a part of the broader video service.

Photo courtesy of Flickr user Pasukaru76.

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However, it looks like those issues may finally be resolved with Google paying the same attachment fees that cable and telecommunications companies pay utilities to use their poles, as opposed to paying additional costs associated with stringing cable higher up on the pole where electricity cables hang. A Google spokeswoman confirmed that the fiber was getting strung, but couldn’t tell me what percentage of the network would be underground as opposed to aerial. She said via email, “We don’t have a percentage estimate but we’re starting on utility poles and down the line, the fiber-to-the-home connections will be terrestrial.” Fiber is far cheaper to deploy aerially than planted in the ground because it avoids the labor costs associated with digging trenches.

Google has said it would start signing up customers by the end of 2011 and that it would begin connecting customers in “early 2012.” If the company has just begun laying its fiber, that may push things back a bit. The project has experienced a few minor delays, but so far seems to be moving ahead. Rather than when, I’m actually far more curious about what Google’s network architecture will be and what it will cost.

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However, those longing for innovation in broadband here in the U.S. can hope that there are bigger plans in the works. With a fiber to the home network and gigabit Wi-Fi Google could take a cue from the recent launches in France and in the U.S. of mobile networks that lean heavily on Wi-Fi. Then Google could build a network that offers truly ubiquitous broadband within the confines of Palo Alto, Calif., and maybe later in Kansas City.

From the application to the FCC, which was spotted by Stephen Crowley,

Google Fiber seeks to test Bluetooth and Wi-Fi protocols and performance (including coordination of Wi-Fi channels between devices and in the presence of foreign signals) within an integrated access point as part of a fiber residential gateway. This line of testing will reveal real world engineering issues and reliability. The planned testing is not directed at evaluating the radio frequency characteristics of the equipment (which are known), but rather at the throughput and stability of the home networks that will support the equipment, as well as its basic functionality.

Right now, the current Wi-Fi technology (802.11n) tops out 600 Mbps, which means Wi-Fi becomes the bottleneck if you have a gigabit network coming into your home. 802.11ac’s multi-gigabit speeds would go a long way to opening up that pipe. But while chip companies have produced silicon for the next generation Wi-Fi standard, the standard itself isn’t ratified, nor are those chips in any real products that have passed through the FCC’s approval process. This application may be one of the first application for a commercial next-gen Wi-Fi device, although Google asked the FCC to keep many of the details confidential.

Of course, such powerful Wi-Fi and a fiber-to-the-home network opens up many more possibilities than mere super-fast home networking. Google could use its residential gateways and the fiber connection to blanket an entire town with incredibly fast Wi-Fi (and Bluetooth) networks. These technologies would give Google the tools to make broadband truly ubiquitous both inside and outside homes, which is a goal I’d love to see.

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I spent some time talking to Dane Jasper, the CEO of Sonic.net about how he plans to take on the incumbents, the cost of a fiber build out and the natives of a city that already have sued to stop AT&T from building out fiber to the node broadband. We also touched on caps and why Jasper can’t see himself offering businesses gigabit services in the near future.

They may be rivals but Sonic.net and AT&T share a common enemy.

When it comes to building out infrastructure, from broadband to roads, someone, be it environmentalists or neighbors leery of the project’s components, are bound to raise a fuss. When it comes to better broadband, the cabinets holding the electronics raise the ire of residents who would rather not have refrigerator-sized boxes on their lawns. For example, residents of San Francisco have banded together to sue to stop AT&T’s planned U-verse deployment, which requires more than 700 cabinets to hold the electronics gear be placed around the city.

Jasper says because Sonic.net is deploying fiber to the home, he will use fewer cabinets (he estimates 188) but he’s still worried that San Franciscans will step up to hold up or halt his permits. AT&T originally had received its permits, but those permits were halted by the court while this suit goes forward.

Jasper is worried that the suit could take another three to six months, and will hold up his deployment, but he’s hoping that fewer cabinets and a willingness to share Sonic.net’s infrastructure with other providers might make city residents view his cabinets with a bit more favor. After all, instead of building new cabinets, competitors interested in the market could share space in the existing boxes. Jasper understands that cabinets aren’t ideal, but he’s also hoping that if he plays it straight with the city, he can convince them that fiber-to-the-home is worth the potential of a couple hundred eyesores.

The Economics of broadband and fiber to the home.

The Sonic.net employees. Look for them in your neighborhood, San Francisco.

Meanwhile, Jasper declined to disclose his costs for providing fiber to the home in San Francisco, but he did say the fiber deployed would be a mix of aerial and underground cabling. Aerial deployments are cheaper because there’s less labor associated with stringing the cable. Jasper said he hasn’t chosen vendors yet, but he is currently using ADTRAN, Clearfield and Corning in the fiber-to-the-home build out he’s building in Sebastopol, Calif. Sonic.net is profitable as a company, and has been in business for 17 years.

The question is if Jasper can keep Sonic.net in the black while building out and selling fiber to the home to consumers for $70 a month. Sonic.net today offers two products in most markets, a $40 ADSL service with one phone line and a $70 a month 40 Mbps bonded DSL service with two phone lines. Replacing the copper with fiber adds costs, but Jasper plans to keep the rate the same. Sonic.net’s well known for declining to cap its broadband service and for adding a variety of services to its bundle without charging more. Jasper says, “fundamentally we recognize that as a competitive service provider we need massively differentiated products and we have done that with our fusion copper products and uncapped service.”

But, as Jasper says, “we recognize that copper is not a long term solution ten to 20 years from now and it’s logical to build fiber out.” So while there’s a bit of a chicken-and-egg situation to building out fiber in terms of the customer demand not necessarily being there right away, Jasper believes that the demand will come and he can deliver the capacity and afford the build out. Jasper is using ist Sabastopol buildout to help model the costs and demand for fiber in San Francisco.

Why businesses won’t get Sonic.net’s Fusion products anytime soon.

No caps and no meters for Sonic.Net

To help keep costs in line, the fiber links are for consumer accounts only, at least so far. Jasper has been an ardent foe of broadband caps, where ISPs place a limit on the amount of data a customer can use each month. However, when it comes to delivering broadband to businesses, he recognizes that a superfast gigabit connection to a business will have a very different usage pattern than one delivered to a consumer. Yet currently Sonic.net only charges businesses a bit more than residential services at $45 and $90 respectively). Under a gigabit network, that lack of price differential and the possibility for a business to use all of their connection (or even half) becomes unsustainable.

“We haven’t built our fiber past any businesses yet, and we did it intentionally,” Jasper said. “With our stance on no capping, I have a little bit of concern delivering 1 gig to a business at $89.95 and them using half of it, because that could really happen.”

Sonic.net has a decade and a half modeling usage for consumers at lower prices than rivals offer, but with businesses and their demand for broadband, Jasper says there are a lot of unknowns. For example, the lack of applications for gigabit networks probably helps Jasper here, as does the fact that most consumers typically use downlink services to consume content. And currently there’s a limit to how much they can consume, even with three or four TVs downloading or streaming HD content.

“Consumption is still constrained by the number of TVs and hard drives and even though everyone eventually has more stuff, practically speaking it really does end up normalizing down to a reasonable level,” Jasper says. He points out that the inbound bandwidth costs and middle mile bandwidth costs are getting less and less expensive, which means that customers downloading content isn’t a giant cost suck. But a business might hook a data center or several servers up on a gigabit connection and use that to send a lot of traffic out. And that could get expensive.

So for those watching U.S. broadband policy, between Google’s plans to deploy fiber to the home in both Kansas Cities, a few municipal networks, Verizon’s FiOS network and Sonic.net’s plans, we’re getting more people to a gigabit. It can be done, so let’s see what we can learn as these companies push ahead. And when others say it can’t be done, perhaps we’ll have the information that proves them wrong.

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