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Google and the Future of FttH

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Paul Budde

Many commentators rushed into print when they heard that Craig Barratt, senior vice-president of Google's parent company Alphabet and CEO of Access (the unit of which Google Fiber is part), stated that he would quit the job and that Google would slow down or stop its fibre deployment.

So, yes, obviously something is happening at Google; but at the same time, the company has a commitment to complete the fiber deployment projects it has already started and also to build the many new networks that have been announced over the last six months. So for the foreseeable future, it doesn't look as though that there is an end to their FttH activities — to the contrary, in all some 25 networks are under construction or are in the development stage.

But certainly something is happening at the fiber end of the company, and this brings me back to analyses I have written about Google in the past—

Back in 2010 I wrote:

The company has a vested interest in making sure that the digital economy is developed and, like most others, it is frustrated by the extremely slow pace at which the telcos are upgrading their networks. They will do anything to nudge the process along, or to kick-start developments. I remain of the view that Google has no intention whatsoever of becoming a telco; that would not make any sense. So all those endless blog discussions (mainly in the USA) about what underlying business model Google will base its FttH model on, and what the cost per house will be to lay fiber, are utterly useless.

The company will want to establish a business model for high-speed telecoms infrastructure. FttH will produce this model along the lines of the trans-sector synergy that this will create, as we have been discussing in various BuddeComm reports. Many telcos insist that there is no business model for this, but Google is now placing its resources behind such investments, to show how economically viable business cases can be developed. Their projects can become demonstration sites that are able to be replicated elsewhere.

It looks as though this analysis still holds today, more than 6 years later. But the obvious question that can now be asked is has that goal been achieved? This, of course, is debatable. Most certainly the telcos have been pushed into action, and announcements have been made by AT&T and Verizon indicating that they are taking FttH more seriously. Late last year AT&T announced the rollout of FttH to 11.7 million homes, and earlier this year Verizon restarted its FttH rollout with the announcement of a $300 million FttH network for Boston.

So, while this is still a long way from being a national network, things are moving. Furthermore, an increasing number of municipalities are involved in securing FttH networks for their cities.

And so, yes, perhaps Google's job is at least partly done. It is also important to realize that, as I have also stated on many occasions, it doesn't make sense anywhere in the world to build competing FttH networks. There simply is no economic model for such an approach. Indications are that in competing markets Google doesn't get more than a 35%–40% market penetration and it is questionable whether that is enough for a sustainable FttH business model. But in my analysis of Google, this is not too critical an issue for them, as I conclude that their main interest is not becoming a large scale infrastructure company but stimulating the deployment of high-speed broadband.

So, in the end, in my view, it was never Google's intention to become a serious national telco.

By Paul Budde, Managing Director of Paul Budde Communication. Paul is also a contributor of the Paul Budde Communication blog located here.

Related topics: Access Providers, Broadband, Telecom

 
   

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