Technology is becoming the new religion, and the dogma is just as impenetrable. Issues of personal privacy, social equality, and economic policy are each day bound tighter to outcomes in the digital world. As technology becomes a progressively more integral part of daily life, the stakes are raised in equal measure. The broadband market is changing quickly, and America’s emotional investment in tomorrow’s winners and losers grows ever more entrenched.



Since the Federal Communications Commission ruled in 2005 that telecommunications carriers aren’t required to unbundle and share their networks, the market has become increasingly monopolized, leaving Americans with fewer and fewer options. Soon, a market dominated by a handful of companies could become even smaller, as the nation’s largest cable company, Comcast, attempts to merge with the nation’s second largest cable company, Time Warner Cable. The merger would give them more than 40 percent of the broadband market. But two new challengers have emerged, offering hope to those who want a choice.



Google is disrupting the market with Fiber, a brand of gigabit networks being built in Kansas City; Austin, Texas; and Provo, Utah. Being an innovative tech giant, flush with cash, and also a newcomer to the broadband market is allowing Google to play by a different set of rules, and the existing providers are paying close attention. Fiber offers customers connection speeds sometimes 150 times faster than what they were getting, and at just $70 a month. The idea of being freed from the incumbent providers has captured the attention of the public at large, as thousands beg for Google to build in their cities. In February, Google announced 34 cities where Fiber may build next, but experts are unsure of Google’s commitment to becoming a force that does more than just agitate the market.



Many rural and otherwise underserved regions have realized that no telecommunications provider, new or old, will soon ride in to save them and it’s up to their communities to find a way online. More than 400 municipalities around the nation have built their own high-speed networks. Sometimes the networks are profitable, and sometimes they're not, but they are always a point of fierce ideological contention, because networks are expensive. Even large metropolitan regions are examining the municipal broadband option and discovering that building a successful network like the one in Chattanooga, Tennessee, is much harder than it looks.

The Google Treatment

If Google plans to be America’s next big broadband provider, a legitimate competitor to the likes of AT&T and Comcast, they’re not saying so. A Google spokesperson was able to offer only tangential generalities about the company’s future in the broadband provider market.



“Google has a long history in investing in things that help make the web move forward,” spokesperson Jenna Wandres said.



Leaders at Google may themselves be undecided about the future of Fiber at this early stage in the company’s network rollouts, but the public remains adamant – they want alternatives to today’s limited market offerings.



The most popular technology news article ever submitted to social news website Reddit is entitled "Dear Google Fiber: Please, please, please rescue me from Comcast." The sentiment mirrors the results of an April poll, in which the readers of consumer advocacy news site The Consumerist voted Comcast “the worst company in America,” narrowly edging out agricultural firm Monsanto, with Verizon and Time Warner Cable also making the final eight.



The telecommunications industry in general has an exceptionally poor reputation with consumers. The American Customer Satisfaction Index (ACSI) released a report in May showing that not only are consumers becoming less satisfied with the telecommunications sector overall, but Internet service providers now rank last in a list of 43 industries. Comcast and Time Warner Cable are literally “the worst of the worst,” an ACSI spokesperson said. He added that a straight market comparison isn’t fair because there is such little competition in the telecom industry. Those unsatisfied with a product like toothpaste are free simply to buy a different product, so satisfaction rates will naturally be higher in those markets.



The ACSI report offers little hope for the future, and notes that “Comcast and Time Warner Cable both score lower for Internet service compared to their pay TV ratings, which suggests that a merger of the two providers will likely create even worse levels of customer satisfaction, at least in the short term.”



Gartner Research Vice President Ian Keene said he did the math, and those hoping for Google Fiber to come rescue them shouldn’t hold their breath. “It was something like about 70 years to be a significant player at their current rate of progress,” Keene said.



Google launched Fiber as an experiment, he explained, to see how many people would adopt gigabit broadband if it was made available and also to see if gigabit availability might also give birth to some new applications and technologies that weren’t possible before. No new applications have really come out of Kansas City as a result of Fiber, Keene said, but Fiber did accomplish Google’s other goal, which was to “scare the pants off AT&T and Time Warner Cable.”



Google has an unparalleled advantage in the broadband market, Keene said, which is that they don’t require themselves to turn a profit. “They can write off the costs,” he said. “It is a cost sector for them, it isn’t a profit sector for them and it never, ever will be on its own. But it doesn’t matter because it’s part of an investment to forward the aims of the Google organization. It’s not about making money off of broadband access.” That’s not at all true for the incumbent telecom providers, which have been doing business the same way for 50 years, Keene said, and it would be very difficult for them to replicate Google’s approach.



Google is breaking other rules, too. The standard process of building a network requires a telecom provider to wait in line to acquire licenses, permits, various forms of right-of-way access, and that can take years. Google builds in cities that allow them to skip all that stuff, said Teresa Mastrangelo, principal analyst for Broadbandtrends.



“In Kansas City they were basically given everything that they could ever want,” she said. “They had to pay no right-of-way fees, they had access to all the poles, they had access to all the dark fiber, and that’s not always going to be the case.” Mastrangelo agreed that it would take decades for Google to become a threat to incumbent broadband providers.



Survey results released in May by research firm Sanford Bernstein showed that Google Fiber customers generally love the service they’re getting in Kansas City and wouldn’t leave for a competitor that offered similar connection speeds. The report concluded that based on the numbers in Kansas City, Google could expand its services to an additional 30 million homes in the next several years. But those conclusions may be too optimistic, Mastrangelo said. “You’re talking about a market like Kansas City where they’re only building out to 40,000 households in total right now, and that’s pretty insignificant when there’s 120 million in the country,” she said. “They’ve been a great catalyst for the market, but is Google going to take over somebody? Not unless they buy them, they’re not going to.”



In the few areas Google does operate, though, they are forcing competition where previously there was none, and that was probably Google’s intention from the start, Mastrangelo said. “That’s why Google excites people – it gives them a choice and a really fantastic service,” she said. “It’s something that isn’t available from the competition, so they have a tremendous competitive advantage in the markets that they’ve entered.”

Since Google set its sights on Austin, Texas, AT&T and Time Warner Cable both began upgrading their networks there. It’s great for consumers that Google has created competition in the market, Mastrangelo said, but the fact that companies are building parallel fiber networks is an incredible waste of money, and a direct result of the FCC’s 2005 decision to limit network unbundling and sharing requirements.



Google has forged a path for a new way of doing business, and AT&T will benefit, said Tracy King, AT&T vice president of public affairs. “Austin is a great example,” she said. “Austin is a community that has a very big high-tech component. It’s got a large university, it’s the state capital.” There’s demand for high-speed Internet and that’s why they built there first, she said. In April, AT&T announced 100 cities where they are considering gigabit expansion.



AT&T had been trying for two years to get the permits to attach their equipment to utility poles in Austin, King explained. “Google walks in and guess what? They get to attach to the poles,” she said. “That allows us an opportunity to accelerate [our] discussions [with the city].”



King said she isn’t sure why Google sometimes gets special treatment from cities, but guessed that it has something to do with the fact that they’re new in the market and that people just like the idea of what Google is. Google’s announcement of Fiber expansion to 34 potential new cities was considered big news, while the announcement by AT&T, a market force since 1882, received far less fanfare.



“The cities play a very key role in broadband deployment,” King said. “What Google did is it basically challenged the cities to think differently about what their role could be – rather than being obstacles in creating ordinances that add cost to deployment or make deployment something that’s not economical, what can you do to incentivize it? What can you do to eliminate barriers? What can you do to create better opportunities for companies to come in and service your clients and your customers? We at AT&T are taking full advantage of that door that Google opened up.”

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