

Nationwide Google Fiber would cost $11B over five years - ari_elle
http://arstechnica.com/business/2013/04/nationwide-google-fiber-would-cost-11b-per-year-probably-will-never-happen/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+arstechnica%2Findex+%28Ars+Technica+-+All+content%29

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josh2600
Everyone that's wondering why this doesn't happen, the answer is simple:
private enterprise.

The ideal network is publicly owned and privately operated/maintained, but
that will never happen because the state would be impinging on the liberty of
corporations to profit. In a reasonable state, the gov't would connect every
home and operators would compete on service. Instead, we take the tacit
monopoly granted to early operators and extend that into the abysmal dystopia
we live in today, one where carriers control all.

You could have ubiquitous 10Gb links to every home, if only some one would let
you, and then folks start to say "well why don't we do this for every
industry. Why if everyone paid their fair share we could all have cheap
healthcare!". And therein lies the problem.

Profit and public interest are diametrically opposed in the case of utilities.
Nevermind that most carriers operate over publicly licensed spectrum, or send
cables along publicly owned land; a monopoly is the epitome of capitalism and
Telecom is printing money.

In short, ubiquitous fast internet access has never been a technical problem
or a distribution problem, it is a social problem; just like healthcare and,
to a lesser extent, power and water.

::EDIT:: I am not saying that profit or capitalism is wrong, only that in the
case of utilities, on which we all rely, it is a bit strange.

~~~
thatswrong0
> a monopoly is the epitome of capitalism and Telecom is printing money.

But you said earlier:

> Instead, we take the tacit monopoly granted to early operators and extend
> that into the abysmal dystopia we live in today, one where carriers control
> all.

So you agree that what we have in the telecom industry isn't capitalism (since
it is the government that grants these telecoms their monopolies), yet you
also think that capitalism inevitably leads to monopolies, even though this is
demonstrably not the case?

~~~
just2n
I think trust was intended, from the context. It's not a monopoly, it's an
oligopoly.

But it's also a bit wrong to argue that capitalism is at fault here. It
appears it's rather the rampant and ubiquitous corruption, greed, and
incompetence of government at every level, coupled with the fact that $$ ==
speech in the USA.

This isn't going to change into a publicly-run publicly-funded enterprise
anytime soon, so our best bet is a company that has yet to be wholly consumed
by evil (Google, in this case, though they're on the fast track to it by
trading our privacy for money from advertisers). I'd be OK with a country-wide
investment to help Google deploy Fiber as quickly as possible, but I'd want
some kind of guarantee that at some point the entire infrastructure would
revert to public control, just to prevent Comcast 2.0 from forming. It would
be rather funny to see a kickstarter hit $11B, too.

~~~
thatswrong0
> but I'd want some kind of guarantee that at some point the entire
> infrastructure would revert to public control, just to prevent Comcast 2.0
> from forming.

You want to stop a monopoly from forming... by creating a government-run
monopoly. And you trust the government to be in complete control of the
internet. Yet you agree that the government is corrupt, greedy, and
incompetent. I don't understand in the least.

~~~
just2n
I'm not proposing a government-run monopoly. I'm proposing Google be publicly
funded up front to take advantage of the current legal system to create a
monopoly by sustaining funding that gives it a supreme advantage over everyone
else (we give them money) but at the cost that the infrastructure built has to
become publicly owned (by the people, not by a government) after some period
of time.

No government is involved here. We'd be handing Google the funds to demolish
any and all competition with an agreement that they do NOT create a monopoly.

Both local and federal government have colluded to create the trust of service
providers that exists today. Public funds paid to build much of the existing
infrastructure, then exclusive control over that infrastructure has been
granted by local governments. That's fine within a state, but Comcast for
example, is operating nationally, so the federal government (in particular the
FCC) has permitted them to acquire some absurd 70%+ of all small service
providers and obtain these local monopolies all over the country. We can't
trust the government to do the right thing in this space, since even though
every wireless provider is colluding to keep prices fixed, and every consumer-
facing ISP is colluding to keep prices fixed, there has yet to be any
investigation into trusts. It's extremely obvious that the $50/mo being
required by every single competing company when the same service is $8/mo
anywhere else in the world is a fixed price. All of them should be fined some
$50B each and/or dismantled.

But we have an opportunity here: Google could completely destroy their
business. All of them. Entirely. We (and Google) understand that their
services are overpriced in excess of 500%+ of the actual cost and that they
don't actually invest more than ~5-10% of their profits in improving the
infrastructure. This leaves a LOT of room for a company with nearly unlimited
funding to step in and completely dominate. None of these companies will offer
you 1gbps, not even for $500/mo. So if Google, cooperating with the citizens
of the US at large, were to agree to build this infrastructure, demolish the
entire ISP space, and then turn over everything at some point, I'd be willing
to pay 100% of my disposable income, and I'm sure I'm not alone. The $11B it
would cost (probably closer to $100B, realistically) would be entirely worth
killing the likes of Comcast, AT&T, Verizon, Time Warner, Rogers, Sprint, etc.

We can't really win against lobbyists and every congressperson being
guaranteed a job paying in excess of $800k/yr when they retire for doing what
big interests want. We can win, however, by abusing the very system they put
in place, by massively funding a single corporation. The problem with their
logic is that they assume they will continue to have the most money to throw
around. No company in existence, in the world, can compete with even 3% of our
GDP. None. So if we really want to destroy the massive corruption that exists,
we just have to commit the resources necessary. No government required, as the
corruption has already provided the framework.

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chrisro
Hopefully I haven't messed any of the numbers up:

$11 billion per year for 20 million homes or roughly $550/home/year or
$45/home/month

And, for perspective: From 1936 to 1938, the Rural Electrification
Administration spent $210 million ($3.37 billion in 2012 dollars) to connect
100,000 rural farms to the electrical grid at a cost $950 each (over $15,000
in 2012 dollars).

Edit: Per the title update from "annually" to "over 5 years" the above, non-
historical numbers are off by a factor of 5. The costs would be $110/home/year
or $9/home/month over 5 years!

~~~
aqme28
You messed up the numbers in the sense that it's $11 billion over 5 years, not
annually. So you're over by a factor of 5.

~~~
chrisro
Oops! Thanks for the correction. I guess I missed that detail.

$9/home/month or $110/home/year for 5 years is even more manageable, though!

Edit: I see now where militiaman21 requested that the title be updated to
"over 5 years" per new information. When I posted my numbers, the title said
annually. I thought maybe I had missed something in the text.

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militiaman21
UPDATE 3:45pm CT: Kirjner wrote us to say that he had "picked up a typo in our
write-up. The $11 billion is not annual but total. I corrected it in our
files. Please do so too if you can." In other words, rather than Google
spending $11 billion annually, the analysts estimate this is what Google would
spend over five years

~~~
davorak
Could a mod correct the title which is currently misleading.

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megaman821
Only $11 billion? That's nothing (we probably spend more in month or two on
Iraq). Why can't the government roll out high speed Internet to everyone and
lease the lines to ISPs? Somehow we have gone backwards, there was more choice
and competition in the dial-up networking era than now.

~~~
gbhn
Another comparison: Yahoo Finance says Time Warner Cable's income in 2011 is
~$20B. I'm not sure I understand why $2B/year for five years is a big
obstacle. Reaching 15% of the US cable market (60M households in Q42011 per
Nielsen) is 9M subscribers, which at $120/month (current Google Fiber cable
replacement rate) is $12B/year.

Anyone else understand why this is poor ROI? Obviously network construction is
only part of the operational cost of a big network. But if it's a tiny part,
then it seems even stranger that it's being presented as an obstacle.
Internet-only rates would be ~$6B/yr, but that has substantially less overhead
cost of content associated.

~~~
warfangle
Current cable+tv price: ~$100/mo Cost to build out goog fiber competitor:
$166,666,667/mo Potential price point of fiber+tv to stay competitive with
goog fiber: $120/mo

Why would a cable company spend $166m/month in order to get little additional
revenue? No, they'd rather add Cable Box Remote Control Rental Fees - it
doesn't cost them extra, and it increases their revenue.

Only if they're at risk of losing current subscribers through losing their
monopoly status will this behavior change.

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ChuckMcM
I've had a couple of experiences in my career where the enormity of something
just sort of changed my world view. The first time was when I was working as
an intern at IBM during the summer and came across the complete list of IBM's
property holdings. Back in the 70's they would have made the largest REITs
look puny. The second time was about a month into my tenure at Google when I
discovered a tool called 'network weather' (which, appropriately, gave an
overview of what was going on across the global network). Without being
specific, I can say that Google fully appreciated the importance of network
bandwidth on their ability to operate.

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bgruber
their analysis of why Google is doing this in the first place:

"we believe Google Fiber has two related objectives: first, Google is seeking
to figure out whether or not, or under what conditions, it can make money as a
facilities-based provider of broadband and pay TV services; second, it is an
opportunity for Google to test new applications, new ad formats and delivery
models (e.g., targeted TV ads) and to get further insight into consumer
behavior."

This completely misses what I believe to be the primary reason, which is
raising the bar for internet access, regardless of who's providing it. Chrome
started out similarly, though my impression is that Google does care about
dominance for that now.

But the point is: if google fiber in 3 cities means comcast gets better in
1000, that's a win for google.

~~~
JshWright
>But the point is: if google fiber in 3 cities means comcast gets better in
1000, that's a win for google.

Unfortunately, what it means in practice is that Comcast will get better in
exactly 3 cities.

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CarlosT
A collective action startup could help solve the problem for neighborhoods
wanting FTTH. In a Groupon/Kickstarter model, each house commits ~$3,000
toward a goal. When 250 households in a neighborhood commit and collectively
commit ~$750,000 (i.e. $3,000 x ~250 homes) then sub contractors lay the fiber
in the neighborhood.

As an aside, the Australian government spent ~$4,000 per household to connect
each house to FTTH.

~~~
toomuchtodo
That's already how Google Fiber works:

<https://fiber.google.com/how/>

A neighborhood has to reach a critical mass of reservations before Google will
commit to a rollout.

~~~
wmf
Which raises the question of whether people could have their own fiber rallies
without Google as a gatekeeper.

~~~
toomuchtodo
If they can organize a non-profit org to build out the network and operate it,
and get the capital for the equipment, yes.

<https://www.google.com/search?q=community+broadband>

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pvnick
"Probably will never happen" is a phrase that has been applied to human
flight, walking on the moon, the internet, just about everything we take for
granted now. I tend to dismiss someone's opinion when they utter such words.

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yessql
How about this math 11,000 million dollars per year divided by 115 million
households, divided by $70/ month, divided by 12 months per year. That's 11%
percent of households to break even?

65% of adults already have broadband at home in the US. So will about 1 in 6
switch to 100x better for marginally more money?

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gbaygon
$11B year for 20M homes = $550/year per home = $45 monthly

Currently Google charges $70/mo for the service. The numbers doesn't look that
bad to me, am i missing something?

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seanalltogether
"we estimate the annual [capital expenditure] investment required to be in the
order of $11 billion to pass the homes, before acquiring or connecting a
single customer."

The statement is a bit ambiguous, perhaps the problem is that it costs $11B
just to reach 20M homes, regardless of whether or not they choose to purchase
the service, in which case they would be losing a lot of money.

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WesternStar
Ironically their analysis actually convinces me of the opposite proposition.
Frankly, the most neglected part of their analysis is the a can Google
actually make money from customers who only pay the initial fee and never pay
again for 7 years. Could they conceivably make money on a per customer bases
on a customer who paid nothing? I believe they can. Does Google Fiber have the
reputation of being the best ISP in the United States. I believe it does. Does
that branding offer a regulatory advantage? Will municipalities forgo revenue
for high quality utilities? That's probably the question that keeps ISP execs
up at nights.

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ippisl
What's missing is the return on investment data.If it's good , the $11B number
would be an advantage: a good investment at a huge scale, something many
companies are looking for.

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clientbiller
There is also a great by-product to going national... Google will now not only
know everything that passes through their search engine, they will also know
every customers web habbits and, unlike traditional ISPs, can capitalize on
them. This in itself has to worth a couple Billion.

Also, what if, by chance, google allowed you to reduce your monthly bill by
say $10 a month by making your default browser google.com?

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ljd
$11b to destroy a media and internet distribution monopoly?

Owning the distribution can allow them to enter markets that don't seem so
crazy when you consider that google could do offer a YouTube user an upgrade
to publish their channel to their local market for a fee.

There are probably a dozen things I can't think of that Google can do with a
media monopoly so I'm not ready to say that $11b is too much.

~~~
kvb
Destroy or create?

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apendleton
A month ago this would have seemed perfectly sensible, but if this is just a
platform for experimentation and data-gathering, why do another city? Austin
is apparently similar in demographics to Kansas City, so I'm not sure you'd
get considerably different results, and I can't imagine KC is too small to
provide a reasonable sample... seems like there has to be more going on here
than that.

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tomflack
If done by private enterprise, the spectre of blackspots in non-revenue
generating areas that would entrench rich/poor district disadvantages is what
I'm concerned about.

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gruseom
That number seems low enough that they should do it for the good will it would
generate and as part of their "do whatever spreads the web" strategy.

~~~
cheald
$11B annually is a "low" number? That's an utterly incredible amount of money.

Google doesn't have to bring fiber to everyone; they just have to exert enough
pressure on the incumbents to get them to step up their game out of fear that
Google might move into <market> next and knock them off their pedestal. Google
isn't doing this for good will - they're doing it to advance the state of
broadband in the US.

~~~
wmf
AFAIK, when Google (or any other FTTH provider) comes into a city the
incumbent ISPs improve service/lower prices _only in that city_. I don't know
how to scare them into lowering prices without actually competing.

~~~
cheald
I suspect part of that may be due to lower market penetration. At some point,
the FTTH market will reach a point of critical mass where it has to be
competed with nationally, not just regionally.

That said, the cost estimates are just infrastructure expenditure to reach 20
million homes. If 1/3rd of those subscribed to Fiber @ $70/mo, 1/3rd at
$120/mo, and 1/3rd did not subscribe, or subscribed at $0/mo, that's $15.2
billion in revenue annually, ignoring the $300/install offset from $0/mo
customers. Those are totally BS, made-up numbers with wild assumptions, but
it's a huge market and there's a lot of money to be made in it.

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rikacomet
Indian Billionaires doing the same.

[http://www.hindustantimes.com/business-
news/CorporateNews/Am...](http://www.hindustantimes.com/business-
news/CorporateNews/Ambani-brothers-bury-hatchet-sign-Rs-1-200-crore-
deal/Article1-1036119.aspx)

