FutureStructure

Google Fiber's Future Is Difficult to Predict

Reports in various tech publications have explored the likelihood of whether parent company Alphabet might sell Google Fiber.

by Scott Canon, The Kansas City Star / February 16, 2017
Photo Courtesy of Google

(TNS) -- Google Fiber has a new boss, fewer headquarters employees and a future that’s becoming harder to predict.

The company aimed to reassure customers Wednesday in its first-ever market that the TV subscriptions and internet connections it sells won’t be going away.

“Google Fiber loves Kansas City and is here to stay,” the company said in an email. “We just announced our expansion into Raymore last week.”

The statement comes after Access, the company division that includes Google Fiber, hired Gregory McCray to oversee the sale of internet service in markets such as Kansas City and the company’s exploration into other ways to deliver online connections besides fiber optic cables.

McCray is the former CEO of broadband service company Aero Communications.

“Google Fiber has been instrumental making the Web faster and better for everyone — something I’ve been passionate about my entire career,” McCray said in a statement issued Wednesday by the company.

His hiring, first reported by Business Insider, fills a vacancy that had been open for months after Craig Barratt left the company. Barratt’s departure is one of a handful of signs that’s had analysts wondering if Google will stay in the business of selling broadband.

Reports in The Information, Fortune and other publications in the tech trade press have explored the likelihood of whether Alphabet — the parent company to Google’s search division that has created hundreds of billions in stock value — would sell Google Fiber.

A source who asked to be described as “familiar with the matter” said the company has no plans to sell. In an October 2016 earnings call, Alphabet chief financial officer Ruth Porat was asked about the company’s commitment to Google Fiber.

“There’s a sizable opportunity given the need for abundant connectivity … and we do continue to be committed to that vision,” she said.

Analysts see a sale as at least plausible. Google Fiber was created, executives said when it launched the project in Kansas City almost six years ago, to make much faster internet available to home consumers. That’s happened.

Most dramatically in markets such as Kansas City where Google Fiber built networks, consumer internet connections rocketed to speeds previously available only to large businesses and institutions like hospitals and universities.

Average home internet speeds in the country ran about 5 megabits per second when Google Fiber said in 2011 it would build in Kansas City. Now the company sells internet hookups in nine markets. Its internet service moves a gigabit per second, or 200 times faster than the previous norm.

Other telecommunication and cable companies responded, selling far faster internet connections than before. Spectrum, for instance, doubled speeds without raising prices in Kansas City.

“Google Fiber accomplished their objectives, which is to get the telcos and cable providers to greatly increase their speeds,” said Glen Friedman of the Ideas & Solutions broadband consulting firm.

Meantime, Google’s Mountain View, Calif., headquarters has put increasing emphasis on its core business — the search functions that made it a tech giant.

When Google Fiber was created, it pulled employees away from some of those functions. Now, hundreds of Google Fiber workers at the California headquarters will be shifted out of the division.

The internet service division last year “paused” expansion into new markets. Instead, it’s exploring still-developing wireless technology to beam broadband to homes.

“Google Fiber remains focused on our customers and cities,” the company said in an email. “We want to bring Google Fiber to customers faster, so we’re focused on making deployment more efficient and less intrusive.”

The company’s new approach, in part, reflects the daunting cost of building a fiber optic network that reaches all the way through residential neighborhoods.

“Just being in Kansas City” — and fewer than a dozen other markets — “is an interesting experiment. But if you really want to move the dial, you have to be national,” said Larry Gerbrandt, a cable industry analyst at Media Valuation Partners. “It’s a massive undertaking to wire the country. Is this where they want to put their money?”

The job of hoisting wires on utility poles or burying them under streets and lawns “is one of the most capital-intensive things you can do,” he said. “It’s infrastructure. And that’s really expensive.”

Analysts said it’s hard to speculate about who might want to buy what Google Fiber has already built. A cable company such as Spectrum, formerly Time Warner Cable, might be reluctant to purchase the customer contracts and physical networks in markets where it can already sell service. Other companies might be reluctant to buy a network to compete so directly with Spectrum.

Yet analysts said the company has likely invested billions in Google Fiber assets across the country that would be valuable in a sale.

©2017 The Kansas City Star (Kansas City, Mo.) Distributed by Tribune Content Agency, LLC.