Laying down high-speed fiber is expensive. Digging trenches in the ground and stringing cables along utility poles is expensive. Getting permission to do all that is expensive. But it turns out that all of that is a fraction of the cost of offering TV programming, according to the head of Google Fiber, Milo Medin. And it's a cost Google can't avoid paying.
Video "is the single biggest impediment" to Google Fiber's deployment, Medin told an audience at the COMPTEL telecom conference in Dallas on Monday. "It is the single biggest piece of our cost structure."
Why is Google so down on TV? Because as important as Internet access is, Americans still love their triple-play bundle. You can't sell Internet these days without also offering a TV package.
"If you're going to pull customers to your broadband and other services, you've got to lead with video," said Jeff Gardner, the chief executive of Windstream.
But in video, Google has a distinct disadvantage. Not only does it lack its own programming, in contrast to big incumbents such as Comcast that own large content production operations, but Google is also paying a lot more for programming than some other players.
"We operate at a very significant difference than incumbents we compete against," said Medin. "We may be paying in some markets double what incumbents are paying for the same programming."
Google Fiber has encouraged other carriers to increase speeds, add services or cut prices in a number of markets — particularly in Austin, Tex., which Medin said will see its first Fiber customers get online by the end of the year. But until Google can begin to strike better deals for content, there will likely be a limit to how much it can force other companies to change.