Friday, September 21, 2012

Google Fiber: further analyses

A post on the Technology Liberation Front tech policy blog (mentioned in this previous post) offers an interesting analysis of Google Fiber, identifying five lessons from the project:
"Google’s first lesson for building affordable, one Gbps fiber networks with private capital is crystal clear: If government wants private companies to build ultra high-speed networks, it should start by waiving regulations, fees, and bureaucracy." 
"The second lesson Google learned from its fiber project: Specialized video services help support the costs of fiber deployment...When it initially announced its fiber project, Google did not intend to offer specialized video services at all. Little more than a year ago, Google remained focused only on Internet connectivity and still had no plans to provide video services; though it said it wanted to “hear from Kansas City residents what additional services they would find most valuable.” By the time it launched the project, Google had decided to center its highest subscription rate on a new, specialized video service (Google Fiber TV) that Google says is “designed for how you watch today and how you’ll watch tomorrow.” It appears that, after listening to Kansas City residents, Google learned that many consumers want their ISP to offer specialized video services." 
"The third lesson Google learned from its fiber project: Equipment subsidies coupled with term contracts offer benefits to consumers...Consumers who opt for “The Full Google Experience” will get four devices, including a set-top box, a network box, a storage box, and a new tablet for use as a “remote control”, subject to a two-year contract... By bundling its own, vertically integrated computing devices with its premium service, Google can leverage its fiber network to gain market share from the makers of other devices, software, and operating systems, including Apple and Microsoft." 
"The fourth lesson Google learned from its fiber project: Open access isn’t a viable business model in competitive markets...Once Google analyzed how fiber networks are financed, built, and operated, it abandoned its earlier commitment to open access and decided not to allow other ISPs on its network. According to Google Fiber project manager Kevin Lo, “We don’t think anybody else can deliver a gig the way we can.” Translation: Open access doesn’t make financial sense in a competitive environment." 
"The fifth lesson Google learned from its fiber project: Vertical integration among “edge” and “infrastructure” providers offers an alternative to the “end-to-end” principle...The end-to-end purist believes core network infrastructure should be economically severed from the “edge” of the network, i.e., that Internet access should be offered entirely separately from the services, devices, applications that use network infrastructure. Strict adherence to this principle would prohibit the subsidization of network architecture by profits derived from services (e.g., specialized video and advertising), devices, and applications. Google was thought to be an end-to-end purist, but, assuming that were once true, it appears the company’s views have shifted."
Such vertical integration potentially offers an alternative investment approach to drive the roll-out of next generation networks, freeing up capital to drive future profitability for all players:
"What if large Internet “edge” companies – Google, Apple, and Microsoft – were vertically integrated with the large infrastructure providers – Comcast, Verizon, and AT&T? If the government allowed that to happen, it’s possible that the enormous profits generated by the edge companies (Apple is one of the most valuable companies in the world) would be used to rapidly drive ultra high-speed network deployment rather than fill cash coffers in offshore banks. Google is sitting on $43 billion overseas. Apple has more than $81 billion and Microsoft has $54 billion. By comparison, Verizon currently has about $10 billion in cash, which is less than one quarter of Google’s overseas holdings."
Time Business also offers an analysis of Google Fiber, suggesting that the company is not seeking to compete with existing ISPs:
"Google’s goal, by building the fastest city-wide broadband network in the country, is not to compete with the giant national cable and telecom firms. Rather, it’s to shame these legacy giants, including Comcast, Time Warner Cable, Verizon, AT&T, and others into improving U.S. Internet performance. Why is that important to Google? Because the more people who use broadband Internet, at faster speeds, the more Google searches get executed, and the more money Google makes. So think of Google Fiber as a kind of proof-of-concept public-shaming that Google is performing in the heartland of America, demonstrating to the country — and the world — that better Internet performance is possible."
The article also sheds some light on the uses planned for the network, which include education and health applications:
"Google is working with the University of Kansas Medical Center, and local public schools to wire up the community. One of the tests that Google, working with local partners, will conduct, is high-definition “telemedicine” trials, where medical professionals try to simulate the in-person doctor-patient interaction remotely. Another test involves piping HD advanced placement (AP) classes from schools in the community where they are taught, to those where they aren’t..."
For more on this potential, see the Building the Gigabit City report, and also this BBC article. The Time Business article concludes that Google Fiber is "about serving notice to the existing U.S. broadband community, and vividly illustrating how badly we’ve fallen behind in Internet broadband speed competitiveness."

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