Google Fiber: Provoking a renaissance in fixed broadband

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T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

Google Fiber: Sparking a renaissance in fixed access Technology Business Research (TBR) Webinar Series

Aug. 12, 2014

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2 TBR Webinar Series | 8.12.14 | www.tbri.com | ©2014 Technology Business Research Inc.

Chris Antlitz Telecom Senior Analyst

Email: [email protected]

Twitter: @chrisNMP

Phone: 603.758.1850

Webinar Presenter

mailto:[email protected]

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What is Google Fiber?

Source: Google Source: theweek.com

Source: wired.com

Source: chrome.com

Source: airbnb.com Source: Google Source: Google

Google Fiber is an initiative at Google centered on providing Fiber to the Premises (FTTP) internet service to the masses at affordable rates

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Though Google’s network footprint is small, it is disrupting the status quo in the fixed access business and is pushing incumbent operators to respond by investing in their own networks. This is touching off a renaissance in fiber access deployment across the U.S. We are in the very early innings of this playing out…

Where is Google Fiber deployed?

If Google deployed fiber to all 12 metros it is currently targeting, it would only cover 3% of U.S. population, but this is all it takes for the reaction

Source: Google

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Google is not in the “traditional” ISP business, it is using better access to indirectly grow its lucrative, high-margin online advertising business

Why is Google in the fiber business? What’s the point? • Faster internet = more ad dollars

• Google also able to build customer loyalty from value offerings How is Google able to provide a better offering than incumbent ISPs? • “Win the people, win the city” model

• Concession based approach to deployment NOTE: Google is likely operating access business on breakeven basis.

What is Google Fiber’s strategy and business model?

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Imagine getting up to 100 times the internet speed and a full suite of HD TV channels for a fraction of the cost of incumbent offerings

Why is Google Fiber Disruptive?

Google Fiber service offerings and prices

Source: adweek.com

Source: Google

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How are/will incumbent ISPs respond?

Incumbent ISPs need to increase value substantially in order to retain subscribers; there are two paths to take

Operators can

follow two paths:

Differentiate what

comes through the

pipe.

Compete on width

of pipe.

End result /

Implications Options to increase

value

Losing strategy long-term. Speeding

up own service and eating the cost is

not sustainable. Many ISPs will

stumble and or go bankrupt. Strategy

incurs huge capex costs and leads to

margin compression.

Viable strategy long-term. Service

differentiation enables incumbents

to provide value in ways other than

purely speed.

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Difference between winners and losers is who can provide the most value through the pipe, not the fastest speeds; the big guys get this and are already on the move

Examples of what some ISPs are doing to differentiate their services

AT&T

• Ubiquitous

multiscreen video

(DirecTV play)

• Solutions tailored

for enterprise

Verizon Comcast

• Ubiquitous

multiscreen video

(LTE Broadcast and

Intel Media play)

• Solutions tailored

for enterprise

• Leverage content

properties

• Free Wi-Fi from

CableWiFi Alliance

Differentiation

Strategy

Challenges

• Lots of legacy – will

need to maintain high

capex despite

differentiation strategy

• Not content owner

Not content owner Limited migration

options from DOCSIS

3.0

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Incumbents will have to respond to Google Fiber and provide better internet service

What will the U.S. broadband market look like in five years?

The future is substantially more fiber in U.S. networks

More fiber will be deployed across the U.S. and it will be closer to the end-point

Google Fiber has become more than just a network, it has become a movement and model for the future of internet access. It is no longer just viewed as a lab experiment; it is touching off a renaissance in fixed access across the U.S., one that will reshape the broadband footprint in the U.S. in coming years.

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Google grows its lucrative

online advertising business

indirectly from its end-users

having faster internet speeds.

Consumers, not just those

subscribing to Google Fiber,

get faster internet speeds at

lower cost.

Telecom vendors benefit from

resurgent spend on

infrastructure as Google and

incumbent ISP operators invest

in fiber.

U.S. economy stands to

benefit because faster

internet speeds means

better productivity and

quality of life. It also

means more jobs.

Implications for telecom sector and U.S. economy

The impending fixed broadband arms race stands to benefit not only Google, but the entire U.S. economy

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Google Fiber is really part of a much broader initiative at Google, which is to provide universal, low-cost, high speed access to the internet

What else is Google trying to do; what is the “Master Plan”?

Source: guardianlv.com

Source: broadbandworldforum.com

Project Loon Other Ideas

Source: dailymail.co.uk

Source: newstalkzb.co.nz

Source: businessinsider.com

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Chris Antlitz

Telecom Senior Analyst

[email protected]

@chrisNMP

Phone: 603.758.1850

Google Fiber: Sparking a renaissance in fixed access

James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166

Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel

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