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More than 15 months ago, Google (GOOG) CEO Eric Schmidt publicly admitted that he wanted to build an infrastructure for what would be a global $100 billion company. Given that the search giant’s revenues are projected to reach just over $30 billion by the end of this decade, the claim was audacious — but not one to be taken lightly.
In order to build this leviathan enterprise, Google will have to continue to build its back-end systems at a rapid clip, but more importantly, it will also have to keep investing a copious of money to control the oxygen of the New Net Economy: bandwidth.
I wrote about the GoogleNET back in 2005 for the now-defunct Business 2.0 magazine and have been following this pretty closely, though not writing about as often.
The latest news from the telecom world is that Google is now looking to get into the transoceanic cable business. Transoceanic cables sit at the bottom of the sea, using capacities that run into the terabits per second to connect countries around the world.
There are rumors out there, first reported by Communications Day, that Google is heading up a new trans-Pacific undersea cable called Unity. (I guess after going to China, they can’t call it Do-No-Evil-1)
Communications Day understands that Unity would see Google join with other carriers to build a new multi-terabit cable. Google would get access to a fibre pair at build cost handing it a tremendous cost advantage over rivals such as MSN and Yahoo, and also potentially enabling it to peer with Asia ISPs behind their international gateways – considerably improving the affordability of Internet services across Asia Pacific.
Alan Mauldin, who tracks the sector for research firm TeleGeography, thinks that these are early discussions that might not turn into anything tangible. But regardless of the outcome, he notes that the talks themselves point to Google’s Godzilla-like appetite for bandwidth.
Trans-Pacific routes are among the busiest and most expensive in the world. The difference in the pricing between trans-Pacific and trans-Atlantic routes is akin to the difference between Bloomingdale’s and The Gap. Thanks to the broadband boom in Asia and growing economic trade between Asia and the U.S., the demand on trans-Pacific routes has exploded: between mid-2006 and mid-2007, Internet traffic in these routes was up 41 percent, according to TeleGeography.
At present there is 3.3 Tbps of lit capacity, but it is expensive. Google has to pay a ton of money for this bandwidth, just like everybody else. Sure there are new cables being put into place, and others like Pacific Crossing-1 and the Japan-U.S. Cable system are being upgraded, but that doesn’t solve Google’s insatiable need for bandwidth.
The Mountain View, Calif.-based company is putting a lot of resources into India, China, and South Korea as part of its global expansion. It’s also betting big on video, and has grand plans for offering more and more web-based services. All of that requires bandwidth — a lot of it.
By becoming part of the consortium, Google gets two things: wholesale prices for its bandwidth needs, perhaps preferential treatment, and the ability to still get to share the cost and risks associated with owning a sub-sea cable. Even if this does get done, it will be a few years still before Google can get its hand on all that capacity.