Google Fiber: Could It Be More Disruptive?

Google Fiber officially debuted last week in the Kansas City area after a long testing phase as the Internet giant has begun taking pre-registrations. In essence, Google is taking telco and cable companies head on with a value proposition to build a super fast (allegedly 100 times faster than any other U.S. ISP’s average broadband speeds) fiber infrastructure in return for a $300 installation fee, which can be paid at once or in $25 installments, per household. Google then complements the fiber solution with three service package options. The first package is a seven-year-free Internet service supporting downlink speeds of up to 5 Mbps and uplink speeds of 1 Mbps. The next package, Gigabyte Internet, offers downlink speeds of up to 1 Gbps at a monthly fee of $70. Subscribers of Gigabyte Internet will receive a gigabit-enabled network box with 1TB of storage on the Google Drive cloud service. Finally, customers who shell out an extra $50 can upgrade to the premium service that bundles Gigabyte Internet with Google Fiber TV ($120/month), which offers access to TV content and on demand HD content with 2TB of DVR storage. To sweeten the deal, Google throws in a free Nexus 7 tablet (regularly priced at $199), which can be used as a remote control device for the network/TV box. Incidentally, Google waives the $300 construction/installation fee for two-year service subscriptions on the Gigabyte Internet or the Gigabyte + Google Fiber TV.


Disruption is somewhat built in to Google’s DNA; whenever it sees opportunity, Google doesn’t hesitate to break the rules of the game and push the status quo. The Nexus MVNO initiative where it tried to bypass traditional channels and push an Android-powered smartphone without any retail presence backfired in the past. The same goes for the Google TV initiative that hasn’t taken off due to device and content related challenges. The new Google Fiber service, on the other hand, is one of those disruptive innovations that is poised to shift the market dynamics in various ecosystems across industries for good. Google’s venture-building fiber infrastructure and service offerings at these competitive rates will surely put tremendous pressure on telco and cable companies’ margins. Network infrastructure build-out is a costly venture, especially for a company like Google whose core competency is in mainly search and advertising software. The company, however, seems to have a solution for the ROI challenge, as it declared to prioritize those neighborhoods (or “fiberhoods” as Google calls it) with highest demand based on the pre-registration program. This approach will allow Google to lay infrastructure to those neighborhoods that already signed up to pay the $300 construction/installation, which is waived in return for a 2-year service commitment.

In terms of value proposition, (much) faster and cheaper Internet is unmatched; however, Google needs to be reminded that most U.S. households are highly satisfied with their current level of broadband speeds. According to NPD Connected Intelligence’s Access Adoption survey administrated in 1H 2012, the majority (64%) of consumers are unaware of the maximum data downlink speeds of the home broadband Internet service plan they subscribe to, yet 90% of them are satisfied with their current Internet speed levels at home. Gigabyte Internet + Google Fiber TV package, on the other hand, is also highly competitive, but Google’s TV content partnerships have yet to be fully revealed. Google cites that it will include the major networks as well as some premium content such as Showtime and Starz, but there is no mention of HBO or ESPN. Nevertheless, what Google revealed so far is enough to leave telco and cable execs scratching their heads.