Google Fiber Spurs Telcos to Action, but Monopoly Fears Linger

5/1/13Follow @curtwoodward

Google’s foray into offering super-fast Internet and TV service sure looks like the kind of thing that could grow into a vertical monopoly. But the reactions of established service providers are proving the company’s point—that there’s not enough competition in the telecommunications industry.

This week, we saw evidence that Google Fiber—which offers TV service and 1 gigabit per second Internet connections for $70 per month—is pushing even super-small providers to upgrade their service.

In this report from the Wall Street Journal, the CEO of tiny Vermont Telephone Co. said his new plan to offer gigabit Internet for $35 per month was spurred by the tech giant’s Fiber ambitions.

In Vermont, the response was helped along by a big federal stimulus grant meant to speed up broadband access. But it’s notable that the small company, covering just 17,500 households, was spurred on at least in part by Google, the Internet search and advertising giant.

Why worry about Google coming to a small New England state? Vermont Telephone CEO Michel Guite must have noticed that Google has been taking its little Internet-and-TV-service project to smaller states, targeting Kansas City, Austin, TX, and Provo, UT so far.

The big boys of the telecom industry have certainly taken notice, too. In Austin, AT&T pledged to build an equally fast home Internet network on the same day as Google announced its Fiber expansion to Texas’ capital city.

Last Week, Time Warner Cable responded as well, albeit with a less impressive counteroffer—free WiFi service for subscribers in Austin, which it said was “in the game plan for 2013. But Google’s recent announcement encouraged us to deploy our network more aggressively now.” Time Warner also noted that it was bidding to help build a gigabit network in North Carolina.

This kind of reaction from the telecom companies is definitely good for consumers. American exceptionalism aside, this country’s broadband speeds are deplorable—the latest State of the Internet report from Akamai showed that, while they improved by nearly 30 percent last year, the U.S. is still ranked No. 8 in the world for average Internet connection speeds, behind economic twerps like Latvia and the Czech Republic.

Google has pitched Fiber as a bit of an experiment, a demonstration project that shows how more competition can improve service for consumers and result in a better Internet.

But you don’t have to squint very hard to see broadband Internet as a key step in a possible vertical monopoly. Google already makes very popular Web services (search, Gmail, YouTube), a widely used Web browser (Chrome), operating systems for mobile phones, tablets, and laptops (Android and Chrome OS), and consumer electronics themselves (Nexus smartphones and tablets, Chromebook laptops).

Controlling all of those pieces, along with the pipes into your home delivering super-fast Internet, sure looks like a play for end-to-end domination. Fiber even comes with a Nexus tablet, to use as a kind of advanced TV remote control—and Google offers a bundled deal on a Chromebook laptop along with it.

In fact, that’s exactly the scenario that one Harvard student posed in a Q & A session with Google chairman Eric Schmidt last week. At the mention of the word “monopoly,” Schmidt let loose a high-pitched, disarmed little chuckle.

“It won’t surprise you that I disagree with your framing of the word `monopoly,’” Schmidt said with a smile. But he pointed to the value of competition, particularly AT&T’s announcement in Austin, and said the company works hard elsewhere to ensure an even playing field online.

“If you look at Chrome, we work very hard to make the Web faster, and in fact our DNS servers … serve everybody equally,” he said. “In Africa, our proxy caches speed up everyone, including Facebook and so forth. We’ve taken the mission that the Internet solves most problems, and a faster Internet solves more problems.”

“Now, this is obviously in our interest because with faster Internet, broadband Internet, people click on ads more, there’s more e-commerce. But that’s a corollary effect to our primary mission,” Schmidt continued. “And one of the great things about working at Google is I can truthfully tell you that this is what we run the company for, and not particularly earnings or revenue growth. We actually believe this stuff.”

It’s a pretty delicate dance that Google is performing here. As a consumer, you can tell from history that it can be a bad idea for one company to dominate an entire stack of important technologies and services. As blogger and entrepreneur Jason Calacanis put it, “Google is a content company, a software company, a hardware company and soon an access company. They are unstoppable.”

But it also seems ridiculous that the U.S. could still be so far behind other developed countries in terms of Internet access. And it’s hard to believe that the old telecom industry will leap into action and dramatically improve things without some spurring from another competitor.

So let’s hope regulators keep an eye on this one, but don’t squash it before we get better, faster, cheaper Internet—you know, the kind of first-world technology that would make the Latvians jealous.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • Kris Roadruck

    Calling Texas a small state takes away credibility from the story… just sayin. Otherwise good piece.