Pay TV should be “afraid, very afraid” of Google Fiber, SNL Kagan says

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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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