THE STATE OF GOOGLE FIBER: Remember Google Fiber? Way back in 2010,
Google sought to win the broadband internet market by introducing revolutionary internet
speeds of 1 Gbps. They were looking to achieve this by introducing fiber optic technology to
the general market. This was quite a bold move as the legacy players like AT&T, Comcast, and
Charter had such a stronghold on the market. But, if anyone was capable of taking on these giants,
it was someone like Google. Things started off strong for Google Fiber as they launched in
Kansas followed by Texas, Utah, and Tennessee. It seemed like Google was doing it. They were
putting legacy players to shame as people flocked to Google’s offering. But, this success didn’t
last too long. In the mid 2010s, AT&T would start hitting back and they would flex just
how powerful they truly were. While Google Fiber was expanding city by city, AT&T would announce
a nationwide rollout covering dozens of cities. And they weren’t bluffing either given that they
would spend on an eye watering $140 billion to make this vision a reality. This was obviously a
massive morale hit for Google, and they would soon announce that they were cutting their fiber staff
by half. To make things worse, AT&T and Charter would start sabotaging Google Fiber by suing
them and pulling political favors. It seems like all of this pressure was too much for CEO, Craig
Barratt to handle as he would step down during the worst of it. But, the nail in the coffin didn’t
come till the late 2010s by which point AT&T had finished much of their critical rollout. Suddenly,
Google was no longer introducing fiber to new areas. Many of the cities that they were expanding
to already had fiber thanks to AT&T. And it didn’t help that AT&T was not only cheaper but more
reputable from the general public’s perspective. With no choice left, Google would actually begin
to leave certain cities that they had pioneered like Louisville Kentucky. Since then, we haven’t
heard much news from Google. Apparently, they’re still expanding and have plans of moving into 5
new states, but it’s not clear how much of this will come to fruition especially with
the recession. Objectively speaking, it looks like Google bit off way more than they could chew and
they got put in their place. But, what if I told you that Google knew that this would happen from
the very beginning, and this wasn’t their worst case scenario. It was actually the scenario that
they were betting on. So, here’s why Google Fiber was actually Google’s most successful failure.
STAGNANT PLAYERS: To understand why Google entered the broadband
market as a whole, we’ll have to take a look back at the state of fiber internet before Google. You
see, fiber optic data transmission is by no means a new technology. It was actually demonstrated way
back in 1965 by a German physicist named Manfred Borner. And NASA even used fiber optic cables
in the cameras that they sent to the moon. At first, the technology wasn’t commercially viable
given that it required an extremely intensive manufacturing process. High quality optical
fibers could barely be manufactured at 2 meters per second. But, by 1983, this would be increased
all the way to 50 meters per second. This actually meant that producing fiber optic cables
was cheaper than producing traditional copper cables. But, despite these revolutionary findings,
the broadband industry would head in a completely different direction: Dial-up internet. If you’re
not familiar with dial up, it consists of calling a specified phone number and getting internet
connection through your phone cable. This resulted in extremely slow speeds of 56 kbps or lower. But,
this was actually for the best. When you’re introducing a new technology, you want to reduce
barriers to adoption by as much as possible. So, the fact that the internet could work through
phone lines that already existed around the world was a massive win. But, over time, this quickly
turned into the internet's biggest inhibitor as well. You see, ISPs figured, why create new
infrastructure if we don’t have to. And this led to the broadband industry becoming fixated
on two offerings: DSL and Cable. DSL was offered by telephone providers and aimed to leverage phone
lines as much as possible. Meanwhile, cable internet was offered by cable providers and
aimed to leverage cable lines as much as possible. There was also a third medium of internet which
sought to leverage satellite infrastructure, but this never really took off resulting in a duopoly
between DSL and cable providers. Sometimes, DSL providers made some sort of advancement and edged
out cable providers. Other times, cable providers made some sort of advancement and edged out DSL
providers. But, neither was radically better than the other. Also, these so called advancements were
by no means breakthroughs. They usually consisted of improvements from 1 Mbps to 2 MPBS or 2 Mbps to
4 Mbps. While these were admittedly 2X increases, they were nothing in comparison to the 100, 500,
1000x increases that were possible through fiber. There was a sort of unspoken agreement between
the DSL providers and the cable providers that they would both stick to their lanes and not do
anything to ambitious. And given that no startup could challenge their dominance, these ISPs pretty
much set the rules. But, no one really cared either. Virtually no one needed speeds of 300,
200, or even 100 Mbps in the 1990s and 2000s. I mean, all people were doing with the internet
was forums, emails, and light social media. But, all of this would change after 2010.
THE NEED FOR SPEED:
While ISPs had stuck to linear improvements, companies based on the internet were growing
exponentially and so was their need for speed. Likely the two best examples of this are streaming
and gaming. 4K TVs have become dirt cheap and basically every streaming platforms offers 4K
options whether it be YouTube or Netflix. But, the biggest bottleneck to making 4K streaming
a reality was broadband internet. To stream 480p, you only need 1.1 Mbps, but to stream 4K,
you need 20 Mbps. And that’s if you’re the only person using the internet in your household. If
you live with your family or roommates, you need speeds of 50 or 100 Mbps for everyone to be able
to use the internet comfortably. The same thing applies to gaming as well given that the industry
was moving away from physical copies. To download these new 100 or 150 GB games, you needed much
faster speeds than 4 Mbps. At that rate, it would literally take days to download these games. But,
atleast that’s a one time problem. To actually enjoy many of these online games, you need
reliable ping which simply wasn’t feasible through the traditional offerings. Clearly,
it was time for disruption, but ISPs weren’t gonna disrupt themselves. So, enter Google.
Google’s incentives for radically improving internet speeds were obvious. I mean, they’re
the largest internet company in the world. If anyone has stakes in the internet becoming better,
it’s them. And it’s not just for mindlessly watching YouTube videos in 4K. That right
there was probably the least of their concerns. Their real concern was productive applications
like video calls through Google Hangouts, virtual classrooms through Chrome OS and Google Classroom,
and most importantly the cloud through Google Cloud. If they wanted any of these applications to
take off, they needed ISPs to ditch DSL and cable and switch to fiber or something even better. And
as a result, they would step up to the plate with Google Fiber. And they went straight for
the big guns. They didn’t even bother aiming for numbers with units of Mb. They went straight for
1 Gbps internet. Keep in mind, this was during a time when most people were struggling to get
speeds of 1 Mbps. So, speeds of 1 Gbps were very much unfathomable, atleast for me. For Google,
these speeds were nothing given that it took a lot more horsepower to run their massive data centers,
networks, and servers. For perspective, Google needed 1 Pbps or 1 million Gbps to run their
Jupiter network way back in 2015. Who knows how much they need today. So,
theoretically speaking, offering fiber shouldn’t have been that difficult in terms of technology.
Google just had to make a fraction of what they were capable of available to
the end consumers. But, as we so often find, theory doesn’t always translate to reality.
SANDBAGGING FIBER: Google didn’t approach
fiber naively though. They very much knew just how difficult it would be to challenge ISPs.
That didn’t matter though because they had no intention of actually overtaking said ISPs. But
wait a minute, if Google was gonna get into the broadband game, they might as well try to grow a
new sector and displace the legacy players right? Well, the answer is actually absolutely not from
a financial perspective. Here’s the thing, it cost AT&T $140 billion to accomplish a semi nationwide
fiber rollout. And that’s despite their decades of experience, hundreds of billions of dollars worth
of existing infrastructure, and telecommunications being their primary focus and business. If Google
were to try to achieve this from scratch, it would cost them $200 or $300 billion especially
given Google’s top of the market salaries. But, even if we assumed that they were somehow able to
get it done for a $100 billion, it still makes no sense. You see, Google’s entire market cap
back in 2010 was only $300 to $400 billion. This means that if they actually took fiber seriously,
they would essentially be betting a third of their entire net worth on this market. And much
of this would probably have be paid for using debt. That itself is a pretty bad situation,
but it gets exponentially worse when you consider opportunity cost. Take YouTube for example. There
is no official marketcap for YouTube, but I think we can all agree that YouTube is worth
atleast a $100 billion. But, do you know what Google paid for YouTube? A mere $1.65 billion. An
even better example is Android. Again, I think we can all agree that Android is worth atleast a $100
billion. But, do you know what Google paid for Andoird? A disgusting $50 million. So,
with a $100 billion, Google can either bet on 60 potential YouTubes, 2000 potential Androids,
or they can try to challenge AT&T and takeover the broadband market. Even if Google Fiber grew
to become the entire size of AT&T, that’s only $135 billion. In other words, Google can either
bet on creating 60 YouTubes, 2000 Androids, or 1 AT&T. For obvious reasons, even a fool
wouldn’t choose the AT&T option. And that’s why Google created Fiber knowing that it would likely
never blow up. But, that didn’t matter. Google Fiber didn’t need to blow up to be successful.
It just needed to threaten the monopolies of ISPs, and that’s exactly what it did.
THE STATE OF THE INTERNET: The ISPs fired back so hard that they’ve
actually started to out offer Google Fiber. Google only offers up to 2 Gbps while AT&T offers up
to 5 Gbps, granted it is quite expensive. The same thing can be said about Verizon, Xfinity,
Spectrum, Century Link, Optimum, and basically any other ISP you can think of. We should also
mention that previously unthinkable breatkhroughs have come about regarding cable internet. Somehow,
the same cable providers are now able to provide speeds of up to 500 Mbps. In the end,
Google Fiber was never meant to become a household name when it comes to broadband internet. Even
if Google was capable of accomplishing something like this, it simply wouldn’t be worth the cost,
effort, and time required to actually make that vision a reality. However,
what Google could accomplish with relatively low effort was reignite the stagnant ISP industry. And
looking at the results, it appears that Google Fiber was a bigger success than their wildest
dreams. Did you realize what game Google was playing with fiber? Comment that down below. Also,
drop a like if you’re glad that ISPs are finally doing something. And of course,
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