Google Fiber’s Slow Rollout & Pole Access Challenges

Introduction:

Google Fiber¹ had only 53,390 TV customers as of Dec. 31,2015, according to U.S. Copyright Office data published in a recent MoffettNathanson report. Furthermore, growth in subscribers is slowing. The report said that Google Fiber’s video customer base grew by 79 percent over the previous year. It grew at 136 percent for the last six months of 2014, and just 78.8 percent for that period in 2015. In Provo, Utah, where Google bought the municipal network three years ago, Google Fiber added just 65 video subscribers in six months.

Note 1. Backgrounder:

Alphabet hasn’t released any subscriber figures for Google Fiber. The unit of Alphabet sells high-speed Internet and TV services in four markets and has talked up its expansion plans to many other U.S. cities. Google Fiber bundles video and gigabit-per-second broadband service for $130 monthly and also sells stand-alone Internet for $70 monthly. Google Fiber is currently available in Austin, TX; Provo, UT; Kansas City, MO, and neighboring Kansas City, KS. Google announced plans early in 2015 to expand the service to San Antonio; Nashville, TN.; Atlanta. GA; Charlotte, NC; Raleigh-Durham, NC; and Salt Lake City, UT.

Alphabet, formerly Google, said in December it would consider bringing the Fiber based TV & Internet service to Los Angeles, Chicago, Portland, and Phoenix. In fact, Google Fiber signed a deal with Portland General Electric and Pacific Power this week. The companies agreed to string Google’s fiber-optic cables on their utility poles, giving Google access to tens of thousands of poles. Alphabet has also held talks with city officials in several other potential markets, including Santa Clara, CA and San Jose, CA [Google sub-contractors have been seen in San Jose].

Google Fiber’s Disappointing Growth Rate:

MoffettNathanson took a negative view of Google Fiber deployments:

“If there is a surprise here, it is perhaps that the growth rate isn’t higher. After all, there has been a steady stream of new cities announced, and they’ve now been at it for a long time in at least a handful of markets.”

The report opined that Google Fiber’s parent company Alphabet’s PR gains from the fiber optic broadband service is “wildly out of all proportion” to its actual market share gains vs. AT&T and other pay TV players. “One can’t help but feel that all of this has the flavor of a junior science fair,” the report states.

Telcos and MSOs, like AT&T, Verizon and Comcast/Xfinity have been alarmed over Alphabet-owned Google Fiber’s recent spate of announcements. AT&T in February sued Louisville, KY, over a new law that would make it easier for companies like Google Fiber to install Gigabit Internet networks using existing utility poles (see latest update below). Comcast in early February stepped up its marketing campaign in Atlanta, GA in anticipation of Google Fiber’s arrival.

MoffettNathanson analyst Craig Moffett says Google Fiber likely has more broadband customers than TV subscribers, but the firm’s study didn’t track broadband. Still, he says that Google Fiber’s relatively few TV customers, based on data from the U.S. Copyright Office, raises questions over the media hype the service has garnered.

“The addition of less than 12,000 subscribers over the span of six months for a service that has generated this kind of fanfare isn’t terribly impressive,” wrote Moffett.

Alphabet hasn’t given any subscriber figures for Google Fiber, nor any financial information. The business is grouped in its quarterly earnings into what Alphabet calls its “other bets” — basically including all businesses other than the core Google units.

“Google has made a number of splashy announcements. Taken together, they have a rather provisional feel, as if the company is still experimenting,” Moffett wrote. “Each market is different, and seemingly intentionally so. The goal doesn’t seem to be how much ground they can cover. It seems to be how many different business models they can showcase.”

“If you listen closely enough, you can hear the happy chorus of subscribers in Kansas City singing in unison. But you’d better listen awfully closely, with elephant ears… because there still aren’t that many singers. The number of subscribers to Google’s fiber service remains astonishingly low,” the MoffettNathanson report stated. The market research company said that Google Fiber accounts for “5/100ths of 1 percent” of the U.S. pay-TV market.

“As a stand-alone entity,” the firm added, “Google Fiber would be approximately 1/7th the size of the smallest distribution company in our firm’s coverage, Cable One. They are 1/15th the size of Mediacom, and just over 1/70th the size of the new U.S. Altice (assuming Altice’s deal for Cablevision successfully closes).” MoffettNathanson admits the data applies to only pay TV customers, and not just high-speed Internet access.

“We presume that Google has many more broadband subscribers than video ones,” the report added. “Still, this latest data is a useful barometer of just how slowly all this happens, and just how tiny Google Fiber remains in the grand scheme of things. Recall that the multi-city bake-off that led to their original selection of Kansas City as their first market took place way back in 2010 (not coincidentally, that was when the prior FCC administration was knee deep in its first Net Neutrality/Title II imbroglio), so they’ve been at it for six years now. Google Fiber is no longer brand new.”

AT&T vs. Louisville, KY:

Google Fiber deployment may have hit a snag in Louisville, KY. AT&T has filed a federal lawsuit against the city after local lawmakers streamlined the installation process for Fiber Internet providers. That lawsuit could have big implications for Google Fiber beyond Kentucky, according to NPR.

“Louisville Metro Council’s recently passed ‘One Touch Make Ready’ Ordinance is invalid, as the city has no jurisdiction under federal or state law to regulate pole attachments,” AT&T said in a statement to Louisville Business First. “We have filed an action to challenge the ordinance as unlawful. Google can attach to AT&T’s poles once it enters into AT&T’s standard Commercial Licensing Agreement, as it has in other cities. This lawsuit is not about Google. It’s about the Louisville Metro Council exceeding its authority.”

Chris Levendos, director of national deployment and operations for Google Fiber, expressed his support for the ordinance which the council passed unanimously. He said he believed the “One Touch Make Ready” would speed the process of getting high-speed fiber Internet service to citizens there, and he expressed his company’s “disappointment” over the AT&T lawsuit.

“Google Fiber stands with the City of Louisville and the other cities across the country that are taking steps to bring faster, better broadband to their residents,” he wrote. “Such policies reduce cost, disruption, and delay, by allowing the work needed to prepare a utility pole for new fiber to be attached in as little as a single visit — which means more safety for drivers and the neighborhood.”

AT&T has its own plans to offer fiber service in Louisville, KY and that the company would gain an advantage in doing so if it can be first to market. AT&T’s lawsuit looks to be an attempt to stall a rival.

Louisville mayor Greg Fischer, who objected to AT&T’s actions (which this author hopes other municipalities will also do). He wrote: “We will vigorously defend the lawsuit filed today by ATT; gigabit fiber is too important to our city’s future.”

Dispute over Pole Access:

A San Jose Mercury News article titled Google fights AT&T, Comcast over Bay Area Google Fiber service said that AT&T and the Cable TV Association (Comcast, TW Cable, etc) are challenging Google Fiber’s ability to use existing telephone and electric utility poles to string up its fiber cable.

“The (fiber cable based) infrastructure needs to be mostly above ground,” said MoffettNathanson Research analyst Craig Moffett. “You can’t proceed … if you don’t have pole access.”

Google has been petitioning the California Public Utilities Commission for the right to use publicly and privately owned utility poles because burying fiber cables is expensive and in places impossible. AT&T and the cable TV association representing Comcast and Time Warner Cable have told state regulators that Google has no such right. And Google contends that a group that controls many Bay Area utility poles, and includes Google competitors as members, also has been blocking access to the poles.

The city of Sunnyvale, CA and Google have signed a preliminary agreement on Google Fiber service. However, the pole association owns the majority of utility poles in Sunnyvale, according to city documents and the issue of access has not been resolved.

Conclusion & Opinion:

The only hope the U.S. has for real broadband Internet and pay TV competition is Google Fiber. Comcast, AT&T, and Verizon seem to have a strangle hold on the market and therefore can raise prices and ignore customer service because their subscribers have little or no choice. Viva Google Fiber!