Google’s parent company Alphabet significantly scaled back its investment in its Google Fiber service in the third quarter. The company said it was curbing the expansion of its high-speed fiber optic internet network and reducing staff in the unit responsible for the work. Alphabet did not provide an exact number for the jobs that will be cut.
Craig Barratt, chief executive of Access, the Alphabet division containing Google Fiber, also said he planned to step down because the company was shifting to new technologies (primarily broadband wireless) of deploying high-speed internet. No replacement was announced for Mr. Barratt, who remains an Alphabet senior vice president. He said he would remain an adviser to the company.
When Google introduced Fiber in 2010, it was heralded as a sign of the company’s ambitions to compete against cable and telecommunications operators who have controlled the market for internet access. But, after years of costly investments to dig up roads and lay fiber optic cable, Google started considering alternatives, including wireless and fiber partnerships, that did not necessarily require the company to build a full network.
Author’s Note: Very sad and disappointed about this cutback at Google Fiber, as Alphabet petitioned the city of Santa Clara a couple of years ago to install fiber infrastructure to provide high-speed broadband services to residents.
The company’s fiber optic internet and television are currently available in eight metro areas, including Atlanta, Nashville and Salt Lake City. Many more cities/metro areas were planned, but never became operational.
In June, Google Fiber announced that it was acquiring Webpass, a company that beams high-speed internet into apartment buildings primarily via point-to-point wireless. This and other wireless technologies provide a quicker and less expensive way to expand access to faster web speeds.
Google Fiber is one of the units that make up Alphabet’s “Other Bets” — businesses outside Google’s core web search and internet services business. Alphabet’s earnings report stated that spending on “Other Bets” had been reduced to $77 million, compared with $324 million in the year-earlier quarter. The “other bets” category includes several Google “moonshot” projects, but most of the cuts came from Google Fiber.
Other Bets capital expenditures during the third quarter totaled $77 million, an all-time low since late 2014 (as far back as Alphabet discloses these numbers).
That $77 million covered spending on Waymo (autonomous vehicles), Loon (WiFi Internet balloons), drones, robots, airborne energy kites, two health-care efforts, the Fiber broadband internet business, the X research lab, and Sidewalk Labs, which is building a digital city in Toronto. A year ago, Alphabet spent $324 million on these efforts. The main source of the cutbacks in the latest quarter was Fiber, Alphabet CFO Ruth Porat said.
Below is a graph showing Alphabet spending on “Other Bets” declining sharply, while overall spending (on its mainstream Internet business) increasing.
2 replies on “Death Knell for Google Fiber? Parent Company Reduces Spending & Cuts Jobs”
Thanks Alan for publishing this summary of Google’s capital expenditures. Like you, I was disappointed about Google’s retrenchment in Silicon Valley and other locales, as it was a shot of competition that was badly needed. And, although they certainly weren’t the first to offer Fiber to the Home, they definitely drove the halo effect around a gigabit.
It is amazing that their capital expenditures for Other Bets was only $77M given the number of high-profile and complex ventures are part of those expenditures.
Ken, Great graph showing Google’s Internet spending increasing rapidly while Alphabet’s investment in “Other Bets” decreasing to a very small % of the parent companies revenues.
That implies Alphabet is more dependent than ever on digital advertising and Android apps. As such, it will be much more vulnerable during a recession than if it was more diversified