Google May Spend `Hundreds of Millions' on Its Broadband Internet Project
Bloomberg
Bloomberg
Google Inc. said it may spend as much as “hundreds of millions” of dollars on an experimental broadband service that offers Internet speeds 100 times faster than current networks.
The cost of the test project, announced this month, isn’t known and will depend on demographics, the lay of the land and the number of households that use it, said Richard Whitt, Google’s Washington counsel on telecommunications and media issues. The company hasn’t determined the location or size of the network, which could serve 50,000 to 500,000 customers.
Google, after urging the Federal Communications Commission to expand broadband access, is developing the network to show the potential of high-speed Internet service. It also wants to ensure that networks are open to different software and technologies, rather than the ones picked by service providers.
“This is not a small thing,” Whitt said in an interview. “We’re trying to advance the ball on open networks. We’re hopeful this is one way to do that.”
Google, based in Mountain View, California, plans to build a fiber-optic network with speeds of 1 gigabit per second, or about 20 times faster than some of the fastest connections offered by Verizon Communications Inc. The cheapest connections run at speeds of 1 megabit or less.
Google climbed 37 cents to $526.80 at 4 p.m. New York time. The shares have fallen 15 percent this year.
‘Substantial Amount’
The investment shows that Google is serious about promoting broadband in the U.S., said Scott Kessler, an equity analyst at Standard & Poor’s in New York. He recommends buying Google’s stock, which he doesn’t own himself.
“That is absolutely a pretty substantial amount of money,” Kessler said. “Clearly, the company is pursuing this experiment in a pretty open-minded -- and I would argue pretty noteworthy -- way.”
The company plans to build the fiber-optic lines directly to consumers’ homes, much like Verizon’s $23 billion fiber network. Google’s costs could depend on whether the fiber-optic lines are strung on wires or put in the ground.
“It’s an open test bed,” Whitt said. “We will be providing regular reports back to the FCC and others interested in it. So we’re hoping that the learnings that we can generate from the engineering side and on the business model side can be useful.”
Cost Estimate
Ben Schachter, an analyst at San Francisco-based Broadpoint AmTech Inc., had estimated the cost of the network at $3,000 to $8,000 per home, with a total potential cost of $60 million to $1.6 billion. The midpoint of that projection is about $500 million, based on an estimated 20,000 to 200,000 homes, he said.
Google has asked for responses from communities that want to be part of its broadband effort by March 26. It plans to announce which areas have been chosen later this year.
Google is focused on the test project and isn’t drawing up plans for a nationwide broadband service, said Minnie Ingersoll, a product manager at Google.
“We are not planning to do a national rollout,” Ingersoll said. “There’s plenty of room for multiple companies to innovate in this space. We’re encouraging innovation in all forms.”
