Google looks to expand its speedy Internet service

SAN FRANCISCO — Google has unveiled an ambitious plan to expand its blazing-fast Internet service to millions of people in 34 more U.S. cities in the clearest sign yet that the Internet giant plans to challenge cable and phone companies in what could become a lucrative stand-alone business.

Google said it would begin working with government officials in some of the nation's largest cities, including San Jose, Phoeniz, Atlanta and Portland, Ore., to explore extending Google Fiber there.


In all, Google is targeting nine metropolitan areas and said it would make a final decision on which new cities will get the fiber optic network by the end of the year.

The announcement comes as a debate over access to the Internet — known as network neutrality — rages in Washington.

Federal Communications Chairman Tom Wheeler said this week that his agency would craft new rules to monitor Internet traffic and to keep certain websites and services from being slowed or blocked. Last month, a federal appeals court struck down the FCC rules requiring cable and phone companies to treat all Internet traffic equally.

Bernstein Research analyst Carlos Kirjner said the timing of the announcement was probably a coincidence and not an attempt to sway regulators.

Speculation has grown in recent months on how Google would expand Fiber. The announcement of such a major rollout marks a decisive shift for the service, which began as an experiment in 2010.

Google Fiber is currently available in Kansas City, Kan.; Kansas City, Mo.; and Provo, Utah. It's expected to roll out in Austin, Texas, this year. The service delivers the Internet to consumers roughly 100 times faster than the average Internet connection.

Google's push into broadband may not immediately increase competition with Comcast Corp., which said last week it plans to buy Time Warner Cable Inc. if the deal passes antitrust scrutiny.

The proposed $45-billion acquisition would create the largest cable provider in the country, creating concern that the consolidation would drive up prices and reduce choice for broadband and cable TV customers.

Analysts say Google could pose a major competitive threat to cable and phone companies in as little as five years, a point Comcast made to government regulators.

"It could turn out to be a significant, profitable business for Google and head wind for incumbents," Kirjner said in a research note Wednesday.

As the operator of the Internet's largest and most lucrative advertising network and of some of the Web's most popular services including video-sharing service YouTube, Google has a powerful incentive to make Internet access more accessible, affordable and fast.

If more people spend time online, Google stands to make more money from online ads and other services. Google Fiber is just one of the projects the company is exploring to boost revenue as its search advertising business matures.

Google Fiber is a tantalizing proposition for consumers fed up with the slow speeds and high prices offered by cable and phone companies.

With Google Fiber, Internet speeds reach 1 gigabit per second at prices that are comparable with what they already pay for much slower service. Consumers in the Midwest pay about $70 a month for high-speed Internet. Add television service, and the cost is about $120 a month. In Provo, the costs are the same, but there is a one-time fee of $30.


"Something we have noticed is that competition is good in these local markets," said Kevin Lo, general manager of Google Fiber.

Google would not say how much it costs to roll out Google Fiber. It is using a non-union workforce to build the fiber optic networks.

Kirjner estimated the cost of making Google Fiber available to 300,000 homes in the Kansas City area at $170 million. If Google were to expand to 20 million U.S. homes, that could cost as much as $15 billion, he said.

On a conference call with reporters and analysts, Lo acknowledged that building these networks is a costly, cumbersome and often politically fraught process.

"Building a fiber optic network from the ground up across an entire city is a really big job," Lo said.

That's why Google is now taking the approach of working ahead of time with local governments to build out Fiber in a "more efficient and effective manner," he said.

Google plans to share its experiences in other markets with city officials and take an in-depth look at topography, housing density and the condition of local infrastructure before filing for permits, climbing utility poles and tearing up sidewalks and streets. Lo also cautioned that Google Fiber may not be possible in every city it has approached.

San Antonio Mayor Julian Castro said he was confident his city would "make it happen."

"We are also confident that this will be good for consumers in our city and for our local economy," he said.