Anthony J. Pennings, PhD

WRITINGS ON DIGITAL ECONOMICS, ENERGY STRATEGIES, AND GLOBAL COMMUNICATIONS

Google Fiber in Austin

Posted on | May 5, 2013 | No Comments


Austin, Texas is getting Google Fiber, the one-gigabit digital broadband service from the advertising giant. With connections to individual homes and businesses transmitting up to 1,000 Megabits per second, it is from 60 to 100 times faster than Google Fiber Box current services. What makes this Google Fiber unique is that it uses digital signals moving through glass conduits at the speed of light – speeds much, much faster than the copper lines traditionally used for telephone or the coaxial cables that became the staple for broadcasting cable television and later for connecting cable modems. Also, Google connects its fiber optic cabling directly to the home (FTTH) rather than just fiber to the neighborhood or even fiber to the curb in front of your house. Google Fiber will offer digital TV as well as a host of digital Internet services – to selected neighborhoods.[1]

Google has already begun rolling out its glass channels in Kansas, creating what have been nicknamed “fiberhoods”. On March 30, 2011, Kansas City was chosen over 1,000 US metropolitan applicants competing to be the first for the new service. Also, it recently signed a deal to buy a municipal fiber-optic system in Provo, Utah that originally cost $39 million to build. Google is buying it for one dollar because the system is costing the city money. If the Kansas City model is followed, Google Fiber’s pricing structure will include free 300K Internet (with a construction fee), 1GB Internet ($70), and 1GB Internet plus TV ($120).

googlechannels

Telecommunications systems have lagged other technological innovations, particularly in implementation. Fiber optic communication was developed in the 1970s and the first systems were installed by the mid-1980s, including Sprint’s nationwide backbone network. However, fiber is expensive to build out, especially through the “last mile” into homes and businesses. Land lines have lost some of their attraction as investment has shifted to mobile due to the demand for 4G services to feed smart phones and tablets. Verizon has scaled back its FIOS fiber-to-the-home (FTTH) services despite high consumer satisfaction claiming that “Wall Street” punished them for expanding the service.

Telecom incumbents use a variety of competitive strategies to construct barriers to entry including customer captivity through long-term contracts, strong lobbying of government regulation, and extensive investments in fixed costs that are difficult to match by any start-up. Google though, is not just any start-up. One of Google’s major competitive advantages is its investments in fixed costs capital assets. This would include data centers, proprietary advertising and “big data” technology as well as high-speed telecommunications – and with $50 billion in annual revenues – its ability to invest and build is extensive.

Fiber has been an important part of Google’s strategy to connect searchers to their data servers faster so that it feeds their primary revenue source – search advertising. Google wants to make the process incredibly fast to hold off competitors Microsoft and Yahoo! Recognizing this need, they began purchasing fiber optic cabling in the wake of the “telecom crash” in 2002. Some of it was intercity cabling from Enron’s misguided broadband strategy and some it undersea capacity from now defunct international carrier Global Crossing. Much of it was “dark fiber” that would allow Google to attach its laser transmission and termination technology. Towards this end, they began buying up key patents related to optical communications that are going into proprietary fiber optic technology. Fiber is so important for the Google strategy that they spent almost $2 billion for the old Port Authority building on 111 Eighth Avenue in Manhattan because it sits on top of a hub of fiber optic arteries that connect to the surrounding portions of New York City.

Texas assumed a national leadership role in 2005 when it took steps to make it easier for digital video services by companies such as San Antonio-based AT&T and Verizon to expand its broadband services in Texas by centralizing its cable franchising regulations.[2] The proliferation of Internet Protocol Television (IPTV), as it was called at the time, was being stalled because cable TV had existed under monopoly conditions and subject to restrictive regulations and demands by local municipalities. In 2005, Rep. Phil King was the House sponsor of Texas Senate Bill 5 that encouraged competition by allowing new entrants to obtain state-issued, statewide cable and video franchises. No longer would exclusive franchises be granted. The Bill was signed by Governor Perry on September 7, 2005 promising to bring better services and economic benefits to Texas as well as being a model for other states as well.

So will Google Fiber influence economic development in the Austin area? A number of questions are worth raising. Will it attract new companies to Austin? Will it help new and existing firms become more efficient and productive? Can it help increase the rate of innovation needed to compete with other geographical areas? Can it spur competition in the digital services field and bring down prices for 1GB broadband? How will it influence Austin’s advantages in entertainment, government services, and its growing legion of high-tech companies.

One question raised in Forbes magazine asks, “what obligations do we have to provide basic services equally, regardless of income and social circumstances?”. In “Will Poor People Get Google Fiber?” John McQuaid asks whether the Google model of broadband diffusion is the right one or should we return to telecommunications policy that brought us postal service and the telephone – universal service.

In the meantime we will assess the Google model of rolling out digital services and any associated socio-economic development in the Lone Star state’s capitol city, particularly in its cultural and creative industries.[3]

Notes

[1] The Google Fiber announcement to build out in Austin was made on Tuesday, April 12, 2013.
[2] I was following the Texas regulatory development as part of a project at NYU on broadband services and economic development. Part of which was written for a paper entitled “The Telco’s Brave New World: IPTV and the “Synthetic Worlds” of Multiplayer Online Games” for the Pacific Telecommunications Council Conference and Proceedings. January 15-18, 2005 Honolulu, Hawaii.
[3] The economic power of the creative industries has been calculated by the U.S. Bureau of Economic Analysis as part of a general revision of what produces economic growth.

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AnthonybwAnthony J. Pennings, PhD is the Professor of Global Media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He also taught at Victoria University in Wellington, New Zealand and was a Fellow at the East-West Center in Hawaii during the 1990s.

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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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