Google Fiber in Trouble: Second Biggest Expense After Search Engine

[patrickjp93]

http://www.kitguru.net/channel/generaltech/matthew-wilson/google-fibre-might-be-in-trouble-as-service-becomes-too-expensive/#disqus_thread

 

As I have said before, if you think competition solves all problems, think again. Even Google isn't rich enough to pay for all the construction to take fiber anywhere, and the business in the U.S. does not have a subscriber count large enough to make the required ROI.

 

Cost to expand fiber into any given city: 1 billion USD.

 

Alphabet's CEO has announced that the service will change directions, but the details on how are not yet clear.

 

I honestly don't have a dog in the fight. My home back in NJ gets 100mbps+ both ways when our plan only requires 25/5 with Comcast. That said, it's not like I've been saying the costs to expand Internet infrastructure are prohibitive and Comcast/TWC provide great service in spite of local monopolies... Oh wait...

[Syntaxvgm]

takes ~ 14 million payments of 70USD (with 100% profit, not considering upkeep, service call, equipment, ect) to make that kinda money up. 

[patrickjp93]

1 minute ago, Syntaxvgm said:

takes ~ 14 million payments of 70USD (with 100% ROI) to make that kinda money up. 

14 million people per city? Good luck with that. I think the total subscriber count is still under 5 million.

[Syntaxvgm]

Just now, patrickjp93 said:

14 million people per city? Good luck with that.

I didn't edit that quick enough 

Quote

takes ~ 14 million payments of 70USD (with 100% profit, not considering upkeep, service call, equipment, ect) to make that kinda money up. 

like 1 million accounts for 14 months, idk 

point is it's definitely feasible but not quickly as that's "best case never gonna happen" scenario 

[patrickjp93]

Just now, Syntaxvgm said:

I didn't edit that quick enough 

like 1 million accounts for 14 months, idk 

point is it's definitely feasible but not quickly as that's "best case never gonna happen" scenario 

That's still 1 million people per city. Google's not getting anywhere near that.

[AresKrieger]

Yeah, honestly google fiber is unnecessary speed wise for most consumers I think their plans were impractical from the get go, however I still want the current ISPs to die out due to their blatant theift of billions that were suppose to go to country wide network grid upgrades

[Syntaxvgm]

1 minute ago, patrickjp93 said:

That's still 1 million people per city. Google's not getting anywhere near that.

my point exactly. In that perfect scenario, it takes a long time to see ROI. This kind of long term investment doesn't pair with hopping from city to city and doing this as fast as possible for a company that's new in the field. 

[Michael McAllister]

Competition solves a lot of problems.  Google is just one company.  If other companies started offering gigabit fiber at affordable prices in areas which Google doesn't serve, there would be a drastic change.  Comcast is interested in making profits.  If other companies threaten their business model, they will have to adapt in order compete within the market.

 

I've said it once and I'll say it again, ISPs are one of the areas in which true competition does not exist.  If Comcast and other large companies have the legal resources, it stands to reason they would try to find any loophole to prevent others from entering their markets.  Having the option between cable or DSL in a given area or DSL and satellite is not a true option as they are vastly different levels of service.

[unidentical]

I got a fiver says the change in direction is that the NSA will subsidize future rollouts in exchange for certain considerations. 

[SnakeDrone]

If they get 500k customer per city and let say 50% of the income ($70/month/customer) goes to upkeep, service call, equipment, ect.

Then the fibre will pay it self back in 5 years.

That's not bad at all.

[AresKrieger]

3 minutes ago, Michael McAllister said:

If other companies started offering gigabit fiber at affordable prices in areas which Google doesn't serve, there would be a drastic change.

There aren't many companies large enough to even attempt large scale fiber not to mention all the red tape created by companies adding their own BS regulations to hinder startups

[Michael McAllister]

7 minutes ago, AresKrieger said:

There aren't many companies large enough to even attempt large scale fiber products not to mention all the red tape created by companies adding their own BS regulations to hinder startups

 

 

 

I never was never under the impression that one single company could change everything.  Comcast has attempted to change the business model in areas where Google operates.  Comcast knows that they cannot offer that level of service at that price (not that they would want to anyway).

Unfortunately, "regulations" could mean anything if you haven't actually sat down to read the incredibly long bills in their entirety.  There are instances of overregulation and under-regulation.  That could be a positive or negative depending on what you're talking about.

[rattacko123]

14 minutes ago, Syntaxvgm said:

-double post what the hell LTT forums-

 

12 minutes ago, AresKrieger said:

I'm on desktop, how the hell did this double post happen ????

For whatever reason, the website doesn't say that it sends, so you click the button again, and there is 2 posts. I somehow managed to post 3 times in another thread even though I only clicked the button twice.

22 minutes ago, patrickjp93 said:

Cost to expand fiber into any given city: 1 billion USD.

google should be able to afford that, maybe the shareholders don't like it or something?

[Misanthrope]

34 minutes ago, rattacko123 said:

google should be able to afford that, maybe the shareholders don't like it or something?

They can afford it but investors are smart enough to figure out they shouldn't have to pay for all of it themselves. Everybody else doing ISP business basically inherited a great deal of the infrastructure via the 1996 telecommunications act that gave em massive tax breaks. Even if they ain't doing nothing with that they have such a major head start because of it that as a business model it doesn't really works for Alphabet to just jump through a bunch of extra hoops and invest a lot more when Comcast, if seriously threatened, can still squash them easily.

 

Their strategy is just getting people on the internet and using Google products, not necessarily becoming an ISP. And they are basically saying "This is too expensive for what we're getting out of it" so they might push for some other types of ways to get more people into their platforms instead of literally getting all the way to their homes.

[SurvivorNVL]

Unfortunately for Google, nationally they only have 200,000 subscribers, and most are apartment complexes.  

[Curufinwe_wins]

4 hours ago, Syntaxvgm said:

I didn't edit that quick enough 

like 1 million accounts for 14 months, idk 

point is it's definitely feasible but not quickly as that's "best case never gonna happen" scenario 

 

4 hours ago, Syntaxvgm said:

I didn't edit that quick enough 

like 1 million accounts for 14 months, idk 

point is it's definitely feasible but not quickly as that's "best case never gonna happen" scenario 

 

 

Expecting a 1 year ROI for stuff like this is beyond fallacious... That said, clearly they do need more base to justify this. The issue though is that until a new person steps things up, halfway decent internet isn't coming by way of current providers (hell U-verse just installed a data cap at my parents place after 4 years of service...)

[Energycore]

6 hours ago, patrickjp93 said:

14 million people per city? Good luck with that. I think the total subscriber count is still under 5 million.

Remember those $70 payments are recurrent every month.

[Energycore]

Dammit double post

 

I guess I'll use it to give my opinion that home users don't really need 100Mbps

Maybe a family of 5 if they all want to stream video at the same time

[AlwaysFSX]

If there weren't monopolies and restrictions on lines they wouldn't have such of a problem expanding.

[HalGameGuru]

That's only competition on one leg of the centipede of fiber optic Internet Service Provision. Lack of competition elsewhere keeps the costs exorbitant for the people actually competing. Right of ways, cabling, support structures and devices, heck just the leases for use of poles or existing conduit can be stupid expensive.

[Liltrekkie]

One of the problems here is Google fiber doesn't advertise at all. They just expect people to know about it. They also chose the worlds smallest areas to build into. 

 

If they would go into cities, the their suburbs outside the cities. (say st. louis and outlying places or San fran and outlying places) Obviously a lot more people will be interested and it would get a lot more press coverage. And we all know press coverage is free media. 

[Mark77]

The typical cost in North America and Australia is $10,000 per passed household. 

 

Even if all the stars align and you get 100% subscriber uptake (which is pretty aggressive since lots of people do just swell with 4G LTE as their only Internet), at a 5% interest rate, that's $600-$700 per year that has to be collected from the subscriber *just for the infrastructure*.  To say nothing of the operational costs (electricity, labour), etc.

 

So in a nutshell, you need very heavy adoption of the "triple play" packages at $150+/month to make it work.  There are only a very limited number of households who are willing to fork out that kind of money.  Especially when a lot of people have been cancelling cable and their home phone, and simply using Netflix and their cells to get down into a $50-$80 package. 

[Mark77]

Quote

If they get 500k customer per city and let say 50% of the income ($70/month/customer) goes to upkeep, service call, equipment, ect.

Then the fibre will pay it self back in 5 years.

That's not bad at all.

 

No, not even close.  The cost of putting in fiber is dramatically higher than that up-front, requiring much higher than $70/month/customer for break-even with high penetration rates. 

 

The numbers simply couldn't add up for Google.  And Google really isn't the sort of company with expertise in that area anyways. 

[AlwaysFSX]

4 minutes ago, Mark77 said:

The typical cost in North America and Australia is $10,000 per passed household. 

 

Even if all the stars align and you get 100% subscriber uptake (which is pretty aggressive since lots of people do just swell with 4G LTE as their only Internet), at a 5% interest rate, that's $600-$700 per year that has to be collected from the subscriber *just for the infrastructure*.  To say nothing of the operational costs (electricity, labour), etc.

 

So in a nutshell, you need very heavy adoption of the "triple play" packages at $150+/month to make it work.  There are only a very limited number of households who are willing to fork out that kind of money.  Especially when a lot of people have been cancelling cable and their home phone, and simply using Netflix and their cells to get down into a $50-$80 package. 

Their problem was pricing it way too aggressively honestly.

[suicidalfranco]

the one thing i would have taken from google fiber is the one time payment for adsl