Google's fibre play – the key to NZ internet woes?

By Peter Griffin 12/02/2010

Google’s corporate blog has already been the source of one jaw-dropping announcement this year – the internet giant’s promise to stop filtering results on the Google China web domain, risking its entire business in China.

Now we have Google revealing plans to invest in a trial fibre-to-the-home network in the US that will reach 50,000 to 500,000 customers and offer connection speeds of up to 1Gbps (gigabit per second).

Anyone who has been following the company’s forays into investing in transoceanic cable infrastructure, a free city-wide wi-fi network covering its home town of Mountain View and its bid to open up mobile spectrum and unused TV frequencies won’t be too surprised by this, but the scale of Google’s plans are unprecedented. We now have a cash-rich, leading internet content company building high-capacity infrastructure designed to supply access to the internet. Microsoft has been down this path on a less ambitious scale when it put US$1 billion into cable operator Comcast back in the late nineties.

“Our vision for connecting the world of PCs and TVs has long included advanced broadband capabilities to deliver video, data and interactivity to the home,” said Microsoft founder Bill Gates at the time.

“Comcast’s integrated approach to cable distribution, programming and telecommunications complements that vision of linking PCs and TVs. Today’s announcement will enhance the integration of broadband pipes and content to expand the services offered to consumers,” he added.

Microsoft’s visions of merging the PC and TV didn’t really take off, at least until it debuted its gaming console the Xbox, which now through the Xbox Live service can supply on-demand video services to the lounges of millions of Americans. Google on the other hand has a suite of highly successful online services and a major revenue generator in its online advertising business. With Youtube, Google Earth and Streetview it has indicated a desire to deliver richer applications which require higher bandwidth speeds to access. The only limit now to Google’s ambitions (and profitability) is a lack of bandwidth, which is why the company is now getting serious about owning internet infrastructure.

Comcast and AT&T will be very nervous about this development – with US$25 billion in cash reserves, Google is far more able to invest in capital expenditure than any of the traditional telecoms players. But is Google a threat or a potential partner, particularly for less well-funded players in the US and abroad?

Innovation booster?

Google is promising to keep its network open-access so will partner with internet providers who wish to offer services over it – a similar sort of plan to what the New Zealand Government is undertaking with its next-generation broadband network which it is putting $1.5 billion into.

While Google is investing in undersea cables across the Pacific and in fibre networks linking its data centres across the US to lower its significant international bandwidth costs, its fibre-to-the-home service is being pitched as an investment to stimulate innovation in online services, rather than a desire to generate revenues from providing wholesale internet access. As such it embodies the argument that “build it and they will come” – new and existing players will innovate and create cutting-edge new services to fill the fat pipes Google lays.

Here in New Zealand, critics of the Government’s fibre plans are sceptical of this approach and suggest there isn’t really demand for the types of services that need 100Mbps (megabits per second) – the Government’s targeted speed for fibre services for the majority of the country within a decade, which incidentally, is just a tenth of the bandwidth capacity which will be incorporated into Google’s trail networks. However, Youtube and Google Earth themselves are prime examples of services that emerged to fill the capacity made available by faster internet access speeds. Who knows what could already be in the pipeline at Google and other internet companies that could revolutionise how we communicate or use the internet once higher access speeds are available.

The ultimate public-private partner?

For countries like New Zealand, which have limited funds to invest in broadband infrastructure, Google would be a dream partner. The Government will partner with potentially dozens of private players to build out its fibre network but very few that are totally focused on stimulating innovation in internet services as Google is.

New Zealand has long been a favoured testing ground for new wireless technologies. If it put up its hand to become a large-scale test scenario for a Google fibre network outside of the US, it could show the world what can be achieved when a country moves to truly high-speed internet access.

Where Google could also play a role is as an investor in a second undersea trans-Tasman cable linking Australia and New Zealand. For a modest investment, Google could ensure connectivity to millions of customers for access to its own services, but also stimulate innovation in web services on a national level by wholesaling international access across the telecoms industry – imagine the difference in web usage patterns if data caps were removed due to more competitive international bandwidth pricing. The Government or a private/public consortium could do well to put an innovative proposal to Google about this in the absence of any firm plans for construction of a second cable.