Why Google Fiber Failed to Disrupt the ISPs

Why Google Fiber Failed to Disrupt the ISPs
Where’s the fiber-optic internet we were promised?
By Victor Luckerson
Jul 21 2017
https://theringer.com/google-fiber-struggles-7d2bb5399a12

This week brought more bad news for Google Fiber, the search giant’s troubled bid to become a powerful internet service provider. On Tuesday, Greg McCray stepped down as CEO of the company’s ISP business (now formally housed under Access, a subsidiary of Google parent company Alphabet). His departure comes just nine months after Craig Barratt left the same role. Meanwhile, the Access division has faced staffing cuts, and aggressive plans to expand to more cities are on hold indefinitely. Google Fiber began as an experiment, then briefly seemed poised to grow into a legitimate contender against the ISP incumbents. But today it serves as proof that providing high-speed wired internet is a losing proposition, even for one of the world’s wealthiest companies.

Early on, Google was careful to couch its ambitions as a provider of high-speed internet. The original February 2010 announcement of Fiber called it an “experiment.” Kansas City, Missouri, the first place to get Google Fiber in 2012, was thought of as a “test bed.” Journalists speculated that Fiber was largely a symbolic project meant to shame the biggest ISPs into offering faster internet speeds, thus creating an environment of ubiquitous lightning-quick internet that Google could service with its bread-and-butter products like Search and YouTube. Fiber has succeeded on that front. Companies like AT&T have raced to offer gigabit internet in specific markets before Google could, and this spring Verizon announced it would begin offering near-gigabit speeds to more than 8 million customers in East Coast cities.

Google clearly wanted Fiber to be more than a moonshot, though, and slowly revealed ambitions of building an ISP with national scale. In 2014 the company announced that it would explore expanding Fiber to nine new metro areas, up from three previously. The same year, Barratt was promoted to be a key lieutenant to Google CEO Larry Page, alongside big names like Sundar Pichai and Susan Wojcicki. Google steadily rolled out new Fiber cities and teased potential launches in others through 2016.

But burning money on a high-speed internet gambit made less sense after Google restructured into Alphabet and brought on CFO Ruth Porat. Both moves were meant to inject more fiscal responsibility in a company that prides itself on maintaining a culture of innovation. Digging up city streets to lay fiber-optic cable is wildly expensive. Last year Alphabet revealed that Fiber made up the majority of capital expenditures for its “Other Bets,” the catch-all categorization for its many far-flung businesses that are not tied to the core Google products. Getting permission to install a fiber network requires working with city leaders, which increases expense and slows deployment. Most worryingly, there’s scant evidence that consumers are willing to pay for gigabit internet en masse, despite its growing availability. Google aimed to get 5 million people to sign up for Fiber within five years but widely missed its target, according to The Information.

“Even Google can’t afford to just do projects and just lose a whole bunch of money,” says Dan Rayburn, principal analyst at Frost & Sullivan. “I think you’re stuck with the incumbents.”

These combined factors are probably why the bloodletting began in Google’s Access division last year. Barratt stepped down in October 2016, and in that same month, 9 percent of Access’ 1,500 employees were let go, and plans to expand to markets such as Los Angeles and Dallas were halted, according to Bloomberg. In February, when McCray was named the new CEO, hundreds more employees were reportedly movedfrom Access to Google. McCray’s recent ouster didn’t come with another round of downsizing (it may be tied to inappropriate office comments), but it still leaves the company rudderless for the time being.

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