New entrants such as Google Fiber have come seemingly out of nowhere to shake up this dynamic in some markets, prompting a race among Internet service providers (ISPs) to upgrade speeds and expand access to the fastest, cheapest fiber around. But a big question is how long this push can last. Will the majority of America be served by Google Fiber when all is said and done? If not, can Google compel other providers to build out their fiber offerings — and what will that take, exactly?
I've explained before why Google Fiber is starting with smaller and mid-size cities — and why it isn't likely to show up in New York or Washington anytime soon. Negotiating permission to string fiber optic cable along telephone poles or to dig up city streets is tremendously costly, to say nothing of actually doing the labor. Those barriers effectively limit how far Google might be able to go with Fiber.
But Google may not need to put Fiber everywhere to produce lasting changes in the way Americans get their Internet — just in enough places, perhaps. We've seen this play out most competitively in Austin, where Google Fiber and AT&T have gone head-to-head and even inspired locally owned providers to start offering data speeds of 1 gigabit per second. That's about 100 times the national average.
Who stands to win in this contest is actually less important than who stands to lose — and it's not Google, according to Blair Levin, a former FCC official who authored the nation's guidebook on broadband. That's because while broadband is an increasingly important part of AT&T's business, for Google, Fiber is simply a side project compared with search and advertising.
"It's like [Google co-founder Larry Page] and [AT&T chief executive Randall Stephenson] are playing a game of chicken," Levin said, "and the two cars are coming together and all of a sudden Randall realizes Larry isn't in the car — because it's a self-driving car."
By controlling the vehicle remotely, Page has gotten the jump on Stephenson without putting himself at risk. But by announcing that it's looking at 100 new cities, Levin said, AT&T has already shown it's on the counterattack. Whether Google announces it's expanding to three new communities or 30, AT&T will be able to upstage that figure by announcing a higher one.
Now here's where it gets really interesting and/or confusing: Maybe this is all part of Google's plan.
There are two ways to think of what Google's really up to, Levin said. The first way is to say that Google wants other businesses (like AT&T) to take on most of the responsibility for building out new fiber and creating a more competitive broadband market. The second way is to say that Google really does intend to be everywhere with Fiber and wants to become a real player in the ISP space.
"Theory One only works if people think Google's operating under Theory Two," Levin said. "Theory Two only works if people think they're operating under Theory One."
Here's what that means, in plain English: If AT&T is convinced that Google Fiber wants to be everywhere (Theory Two), then it'll be incentivized to flood the zone itself (and validate Theory One). If AT&T thinks Google wants AT&T to do all the heavy lifting (Theory One), then Google will have distracted its rival while it lays the groundwork for a much larger surprise attack (Theory Two).
Of course, now that AT&T is poised to unveil fiber in many more cities than Google Fiber has hinted at, AT&T may have insulated itself from said surprise attack. Google declined to comment. AT&T said that amid its rollout of gigabit fiber in places like Austin, sales and customer satisfaction "have consistently exceeded our expectations."