Google said Tuesday it would bring its ultra-fast Internet service to a second U.S. city, ramping up a fledgling fiber-optic business that is sending tremors through the telecom industry.
Minutes after Google announced it was expanding to Austin, AT&T pledged it would bring similar technology to the Texas capital, which has about 820,000 residents.
Google’s broadband project is being closely watched because it offers Web speeds of up to one gigabit, or 1 billion bits of information, per second. That’s 100 times faster than what most consumers — including those in the Washington area — have seen, and at lower prices.
In Kansas City, where Google first experimented with super-fast Web connections, residents quickly abandoned other options. Entrepreneurs relocated to the city to take advantage of the unique offer. Local officials saw a mini-boom in business and publicity.
In Austin, the company said it would connect schools, libraries, hospitals and other businesses to its one-gigabit service for free. It plans to offer slower Web connections to lower-income residents free of monthly charges for up to seven years.
Google declined to reveal whether it would swing similar deals with other cities. A company executive compared the business to other successes such as YouTube and Android software for smartphones, which began as small projects before they became crucial money-makers for the company.
“We believe future of Internet will be built on gigabit speeds. Remember, the Internet is still in its infancy, and there is so much potential,” Kevin Lo, general manager of Google Fiber, said at a news conference.
Even if the fiber business doesn’t take off, analysts say Google sees a lot of benefits from any increase in broadband speeds. The firm makes most of its money by tracking the behavior of users on the Web and selling ads to them. The more people use its search feature, send e-mails on Gmail or watch YouTube videos, the more the company’s advertising business keeps churning.
Perhaps the most noticeable effect of Google’s push into building physical connections has been on traditional Internet service providers.
“Just by itself, Google’s fast, cheap broadband could be a game-changer. But throw in the potential for competitive responses like AT&T’s, and you can see why so many cities want to be next for Google Fiber,” said Paul Gallant, a research analyst at Guggenheim Partners.
In Kansas City, Time Warner Cable began to offer city officials business contracts with much faster speeds than it had previously offered. In Austin, AT&T said it would spend the money to expand its technological offerings to consumers and businesses if the city offered to ease several regulatory hurdles, similar to what it is doing for Google.
“Most encouraging is the recognition by government officials that policies which eliminate unnecessary regulation, lower costs and speed infrastructure deployment can be a meaningful catalyst to additional investment in advanced networks, which drives employment and economic growth,” Randall Stephenson, AT&T’s chairman and chief executive, said in a statement.
AT&T did not say what price it would charge users for faster speeds. In Kansas City, Google charges $70 for a super-fast Internet connection and cable television. Austin is expected to get a similarly priced service by mid-2014.
Austin Mayor Lee Leffingwell welcomed the competitive response by AT&T. He said Google isn’t getting any economic incentives except for “rights of way” approvals into neighborhoods and permits to build its network.
When asked about AT&T’s insistence on getting similar permits, he said, “Certainly I would think (it is) applicable to others.”
Some analysts say Google won’t bring its fiber networks to the rest of the country and that the business is more of a way to prod telecom service providers to bring faster Web connections to consumers.
At the very least, the company has enjoyed much cooperation from Austin officials, who have been anxious to be part of the next wave of Web technology.
“Austin residents are going to be part of defining the future of the Internet because we don’t know what wonderful applications are going to come out of this additional speed,” said Laura Morrison, a city council member who lobbied Google for two years to come to the city.
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