Google is ready to unfurl its fiber flag in Austin, Tex., as the second market after Kansas City to get ultrafast Internet and next-gen TV — but even if it spends billions to expand across the U.S., the initiative is unlikely to shake up the broadband landscape, according to a Wall Street analyst.
Company will host an event Tuesday morning in downtown Austin to announce a plan to bring Google Fiber to the city, according to multiple sources.
Google’s strategy is to drive much higher-speed broadband connections and determine whether it can turn a profit as an Internet and TV challenger to cable and phone companies. In Kansas City, Google Fiber offers 1-gigabit-per-second Internet and nearly 200 HD TV channels for $120 monthly.
It isn’t clear how big Google’s appetite for fiber will prove to be. But it would have to spend $11 billion on capital expenditure alone to string fiber to 20 million U.S. homes. That hefty investment would cover just 15% of the country and still have “limited impact on the global broadband access industry beyond these 20 million homes,” Sanford Bernstein senior analyst Carlos Kirjner wrote in a research note.
“We remain skeptical that Google will find a scalable and economically feasible model to extend its buildout to a large portion of the U.S., as costs would be substantial, regulatory and competitive barriers material,” Kirjner said.
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In both Kansas City and Austin, Time Warner Cable and AT&T are the primary cable and telco providers, respectively. The cable operator has said its Google Fiber exposure in KC is limited to 100,000 video and broadband subs.
Austin, the Texas state capital, has about 820,000 residents; Google would bring fiber to just a portion of the population. The city, nicknamed the Live Music Capital of the World, is home to the South by Southwest (SXSW) fest.
In the Kansas City metro area, Google will spend $84 million to pass approximately 149,000 households in the first phase of construction, Kirjner estimated, and even more to turn on service for individual subs. Austin’s population density appears to be far greater than Kansas City’s, which could cut the cost per home passed, he said.
Meanwhile, Google lists several job positions for its fiber team in Mountain View, Calif., based at its HQ.
But that doesn’t mean Silicon Valley is on deck for gigabit Internet. The centralized Google Fiber group there is supporting the rollouts in Kansas City and elsewhere, according to a company source. Google currently provides free Wi-Fi throughout its host city via an agreement with the Mountain View City Council.