That sound you heard when AT&T announced this week that it was in "advanced discussions" to bring its fiber-fed U-verse with GigaPower service to six cities in North Carolina might have been the laughter of Google and Google Fiber, which has put Raleigh-Durham and Charlotte on its list of potential sites for a proposed 34-market expansion that may or may not come to fruition in whole, or even in large part.
After all, if one of Google Fiber’s goals is to prod telcos and cable operators into deploying and upgrading networks capable of delivering speeds of 1 Gbps or more, then it’s already doing a fine job accomplishing its mission. AT&T has already begun to deploy GigaPower into parts of Austin, pre-empting Google Fiber’s anticipated entry there in mid-2014 and will roll it into Dallas this summer. And AT&T is in GigaPower-related talks with San Antonio about getting the same deal the city granted to Google Fiber.
The so-called “Google Fiber Effect” appears to be taking hold. Time will tell how Comcast will react as Google’s high-speed tentacles spread into Provo, Utah, but the MSO is already putting Google Fiber, despite its severely limited reach, in front of regulators as the sort of competition that should spur them to approve Comcast’s proposed acquisition of Time Warner Cable.
As John Eggerton reported on Tuesday, when Comcast presented its public interest filing, Comcast executive vice president David Cohen warned that Google is coming, and with global scale, and that it won’t be alone in “flooding” the multichannel marketplace.
As for AT&T’s possible GigaPower push into pockets of North Carolina, that’s not great news for Time Warner Cable, the cable incumbents in most of those areas, but “it is Google that comes out as the real winner,” Craig Moffett, senior research analyst at MoffetNathanson Research, opined in a research note.
Although AT&T’s recent fiber spasms are relatively small in scale, “[O]ne must now begin to ask whether this is simply the leading edge of a larger GigaPower expansion,” Moffett said, while also acknowledging that AT&T’s initial reasoning is to beat Google Fiber to the punch. It might also inadvertently help Comcast’s cause on the TWC front.
AT&T, meanwhile, has already heaped praise on the economics of GigaPower, particularly when cities play ball with beneficial build-out conditions and allow ISPs to use a demand-driven deployment model.
“The cost dynamics to this deployment [in Austin] have been really, really encouraging,” Randall Stephenson, AT&T’s chairman and CEO, said last month at an investor’s conference. “We are so encouraged that we want to begin taking this to other communities…[where] we can get the terms and conditions like we have in Austin."
“Perhaps we should now expect AT&T to expand GigaPower in many more markets, so long as the company can continue to negotiate franchise agreements with municipalities that allow the company to target specific neighborhoods where sufficient demand for the service exists. “here are surely more cities that would rather have some FTTH than none and will acquiesce to that requirement,” Moffett wrote, but acknowledged that not all cities will allow “cherry picking.”
But if AT&T does plow more dough into a GigaPower push, and possibly cause cable operators to deploy more FTTH networks or accelerate the deployment of DOCSIS 3.1, which is designed to support multi-Gigabit speeds, it would indeed show that Google has become adept at “spending other people’s money,” as Moffett put it.
While some believe that Google Fiber’s ambition is to build a profitable, stand-alone business, others aren’t buying it, believing that the intention is to maintain a competitive balance of power among the ISPs and to show other providers and municipalities how to pull it off.
“AT&T appears to be taking the bait,” Moffett wrote. “Google, in other words, is achieving its ambitions…on AT&T’s dime.”
That has yet to prove itself out, but how aggressivly Google Fiber pursues its proposed expansion plans this year will be telling.
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