AUSTIN, TX, April 30, 2014 — Dallas Miller's virtual soldier needed more firepower, and he couldn't think of a better weapon than Google Fiber. The 28-year-old Austin, Texas, native is an avid player of the shooter game Battlefield. But he was frustrated by the spotty performance of the 20Mbps connection available through his AT&T U-Verse Internet service. In the middle of an online match, his game often froze, leaving his avatar unable to move or shoot. Other times, the game would pause or buffer as he fired, his opponent suddenly popping up in another location as the game lurched forward in real time. "I had the maximum U-verse service at 20Mbps," he said. "But I never really got that speed. It was always slower." Miller was among the first in Austin to sign-up online for Google Fiber when it was announced in April 2013. His hope: that Google's $70 faster 1-Gbps service would be the answer to his problems.
But then he got a call from AT&T with an offer for its new GigaPower service. Even though the 1Gbps service wasn't yet available, AT&T offered Miller 300Mbps -- more than 15 times the speed he was paying for. The best news was that the cost of his service would drop from $208 a month to $120. When AT&T finishes upgrading the electronics on the network later this year, he expects to see a 50-fold improvement. With network speeds this fast, Miller could stream without buffering at least five high-definition videos at the same time and still have enough to play his games and surf the Web. "It was a no-brainer," he said of the switch. Call it the Google Fiber effect. Google makes a splashy announcement that it intends to build a super high-speed network in a city. Competition follows, which translates into higher-speed services and lower prices for consumers. A year after Google unveiled its plans in Austin, investments in gigabit fiber networks are being announced across the country.
Incumbent Internet providers, like AT&T, and new entrants alike are taking elements of the Google Fiber playbook and applying them to their own deployments as they try to stay ahead of Google. AT&T last week said it was talking to 21 major metropolitan areas about an expansion of its U-verse with GigaPower fiber service. Others such as regional wireless operator C-Spire, which is using the Google Fiber business plan to build a fiber broadband network in Mississippi, are creating new lines of business using existing infrastructure. How Google chooses the cities it deploys fiber to has been a mystery, but sister site TechRepublic recently attempted to bring some clarity to the selection process. Within a week of Google's declaration last spring that it planned to build a fiber network in the city of Austin, AT&T, which is based a few hours' drive away in Dallas, announced its own Austin fiber network. And in less than a year's time, AT&T and local cable operator Grande Communications have beaten Google to market with their own ultra-high speed services using newly built fiber networks.
Like Google, which offers service over its fiber network in two cities today, these companies are striving for 1Gbps speeds at affordable prices -- less than $100 a month -- making ultra high-speed broadband a much more attractive offering for consumers, who stream lots of video, play online games and want to upload photos and other files in seconds rather than hours. Even slow-moving incumbent cable operator Time Warner Cable has increased speeds on its traditional copper cable infrastructure. "Google Fiber has been the biggest driver of the fiber-to-the home movement," said Blair Levin, executive director of the Gig.U project and head of the committee that wrote the 2010 National Broadband Plan for the Federal Communications Commission. In 2008, the Organization for Economic Co-operation and Development (OECD) ranked the US as No. 15 out of 30 countries when it came to broadband penetration and speeds. With the US in the midst of a massive recession back then, prospects for investment in new broadband infrastructure looked dismal. But Google Fiber seems to have lit a fire under the feet of the broadband industry. "In 2009 when we were writing the National Broadband Plan it looked like the US was headed toward a significant under-investment in broadband infrastructure by 2020," Levin said. "Other countries were well ahead of us.
But I have to say since Google's announcements, things are a whole lot better than what we had predicted five years ago." Google says that it has also noticed an uptick in gigabit projects throughout the US, as broadband providers recognize that people have a "need for speed." "The truth is, people across America want access to faster Internet," Jenna Wandres, a spokeswoman for Google Fiber said in an email. "There's a growing demand for speed from folks, who don't want to wait for videos to buffer, and who don't want to fight their family members for bandwidth. This was really the main reason we decided to build Fiber back in 2009." Google is still going through Austin's permitting process before it begins its initial fiber deployment.
Currently, Kansas City and Provo, Utah are the only cities in which Google Fiber is available. Earlier this year, the company listed 34 cities in nine metro markets that it was considering for deployment. An ideal city Austin, a city of about 865,000 people, might be the luckiest city in the country when it comes to Internet access. Proud Austinites will rattle off a list of reasons why their city is ripe for massive capital investments in new, speedier Internet infrastructure. The once small college town, which is also home to the Texas state legislature, often makes it onto top 10 lists of best places to live in the US. This, coupled with the city's thriving tech and arts scene, has made it one of the fastest-growing cities in the country. Whole Foods and Dell are headquartered here, and Apple, Samsung, Facebook, and DropBox are opening offices. SXSW, the popular music and tech festival, also makes its home here. As a result, Austinites are particularly tech-savvy, according to AT&T's executives. Not only did the city have a higher concentration of Apple iPhone users compared to big cities like Chicago or New York when the smartphone was released in 2007, but broadband consumers in Austin often use 15 percent to 20 percent more data than the average AT&T U-verse customer, according to Dave Nichols, AT&T state president of Texas, who is a key lobbyist for the company in Texas.
"When we decided to launch our fiber service, we couldn't think of a better place than Austin," he said. "When it comes to technology it's very forward-looking." AT&T maintains it has been planning this fiber upgrade for a long time, and that Google's announcement didn't affect the timing of its network. But Rondella Hawkins, the telecommunications and regulatory affairs officer for the city of Austin, said she had never heard about AT&T's plans before Google's news came out. Hawkins was part of the original committee that put together Austin's application to become the first Google Fiber city. The city ultimately lost out to Kansas City. "Our application for Google would have been a good tip-off to the incumbents that we were eager as a community to get fiber built," Hawkins said in an interview. "But we never heard from them. Until Google announced that it was going to deploy a fiber network in Austin, I was unaware of AT&T's plans to roll out gigabit fiber to the home."
Grande Communications' CEO Matt Murphy admits that without Google in the market, his company wouldn't have moved so aggressively on offering gigabit speeds. It also wouldn't be offering its service at the modest price of $65 a month, considering that the average broadband download speed sold in the US is between 20Mbps and 25Mbps for about $45 to $50 a month. "1 gigabit per second is such a leap in terms of speeds," Murphy said. "It's nothing we would have even considered doing yet without Google in the market." Even with such a tech-centric crowd, it's hard to imagine that three companies -- AT&T, Grande and Google -- decided at roughly the same time this city should be among the first to get ultra high-speed broadband. It's even harder to believe that all three players would decide to offer service that is more than 50 to 100 times faster than what they're currently offering at a cost that's only about $20 to $30 more than their average broadband package.
This is a huge leap in speed for a very small price increase, considering that AT&T currently offers 6Mbps DSL service for $35 a month. In markets where it offers its regular U-verse broadband service, AT&T charges $45 a month for 18Mbps service and $65 for a 45Mbps service. While it's clear that Google Fiber is not coming to every community, the pressure is on. It's not surprising, then, that in every city in AT&T's 22-state footprint where Google is considering deploying fiber, AT&T also plans to bring GigaPower. That's a total of 14 markets, including Austin, the Triangle region of North Carolina, and Atlanta, home to AT&T's mobility division. Major cities not on the Google roadmap include San Francisco and Los Angeles. While AT&T refuses to acknowledge that its gigabit fiber plans are answering the competitive challenge posed by Google Fiber, others say that Kansas City may have been a wake-up call. "I think all the providers have learned some valuable lessons from Google's Kansas City deployment," said Julie Huls, president and CEO of the Austin Technology Council. Kansas City went live with Google Fiber in November 2012. "Speed to market and speed to deployment really matters and will determine the winners in a market. So it doesn't pay to be a laggard."
The lessons of Google Fiber Google wasn't the first company to use fiber to deliver high-speed broadband, but it was the first company to offer such high speeds at $70 a month. It was also the first to come up with a business plan that requires participation from the city government and community. Google specifically asked cities to cut the red tape required to make deployment more efficient and economical. And it asked communities to rally support and commit residents to subscribe to the service before it agreed to install the expensive infrastructure. "What Google recognized that others didn't is that Americans want to have the best communications infrastructure," Gig.U's Levin said. "When you say to a community, 'Who wants fiber and a chance to have the most advanced network in the country and possibly the world?' you get a whole bunch of hands going up." AT&T's executives admit that Google has made it easier for AT&T and others to work with cities where it wants to deploy its own Gigabit fiber service. "Since Google Fiber came on the scene, we've seen a significant shift in how municipalities view network operators," said Eric Boyer, senior vice president of U-verse.
"They see how Kansas City was able to work with Google and now, they're willing to do that with other providers." Specifically, cities such as Austin are trying to speed up the permit and inspections processes. "In the past, certain permitting processes cost us millions of dollars," said Eric Small, vice president of Fiber broadband planning for AT&T. "But now the city is interested in working with us to reduce those expenses." Need for speed? Maybe yes, maybe no Other broadband operators have built networks capable of delivering 1Gbps service. Cable operators, which use a different network technology, have already demonstrated download speeds at that level. Verizon Communications, which was the first major broadband provider to install a full fiber network, has stopped short of delivering 1Gbps service, even though it is capable of delivering such speeds. Cable operators and Verizon have said that customers don't need or want a service at those speeds. "We're continuing to see a growing interest for faster broadband among our customer base," Bill Kula, a spokesman for Verizon, said in an email. "However, widespread adoption of 1Gbps is not evident as of yet." Indeed, today very few Americans have connections at that speed, but demand for broadband itself is increasing.
Pew Research found in its most recent survey, conducted in September, that about 70 percent of Americans have broadband service, which is up from 66 percent the previous year. But Pew and the Federal Communications Commission have a very low benchmark for what constitutes broadband: download speeds of 4Mbps and uploads of 1Mbps. To put this in perspective: a single DVD-quality Netflix movie requires a broadband connection of about 3Mbps. You need speeds of at least 5Mbps if you want to stream that movie in high-definition. With a 1Gbps connection you could stream at least five HD videos at the same time and still have plenty of bandwidth to surf the web, check email, and upload pictures to Facebook. Also, with a 1Gbps connection you can simply do things much faster. For instance, you could download an entire HD movie in about 33 seconds. But cable operators and Verizon are skeptical about whether consumers really need to be streaming five HD movies at once. And speeds that are a tenth as fast as the gigabit service (100 Mbps) can also offer speedy downloads. These companies have a point. Even Grande CEO Murphy admits that most consumers don't need to go that fast. He added that even if they subscribe to such a service, the equipment and devices in the home aren't capable of delivering those full speeds. Few customers even subscribed to the company's highest tier of service, which previously topped out at 100Mbps, before it introduced the 1Gbps service. David Noonan, who covers broadband for consultancy IBB, said that most families couldn't consume enough online media to justify a 1Gbps connection. "But it doesn't mean that they don't want it," he said. What Google and other broadband providers are doing, then, when they tout gigabit services is this: marketing. Murphy admits that going to such speeds has been great publicity. "We've gotten an unbelievable amount of PR from raising the speeds," he said. "As a small provider we rarely have something as new and noteworthy." Getting the price right Even if 1Gbps is overkill for most consumers, speeds of 100Mbps or even 300Mbps may not be. Incumbent providers such as Comcast and Verizon offer such speeds in certain markets, but the pricing on these services is often well over $100.
For example, Comcast and Verizon each charge more than $300 a month for their 500Mbps services, which are available only in certain markets. It's little surprise that Comcast and Verizon have seen few customers sign up for these services, which has led executives, such as Brian Roberts, the CEO of Comcast, to conclude that consumers don't really see a need for these speeds. But the reality is that consumers likely don't see a need that justifies exorbitant prices. Google, however, entered the market at $70 a month, which is $20 to $25 above the average price that most customers are comfortable spending on Internet service, said Murphy. Even with that difference, some consumers may find the pricing a stretch. But the overwhelmingly higher speed can often entice customers into a higher-priced package. That's exactly what happened to Austin local David Greene. Greene, who for the past 12 years has gone without cable TV, agreed to take the U-verse TV package on top of $70 a month broadband service simply because it was only $50 more a month. Greene said he is willing to pony up the extra money for AT&T's video package because he is getting such a great deal on his 1Gbps broadband service. Even though he's paying $65 more per month, he said it's worth it for the nearly 100-fold increase in broadband speed. Execs at AT&T agree that the prices on other top-tier broadband speeds have been too high. "People aren't willing to spend five times more for the higher-speed service," said AT&T's Small. "They might spend 50 percent more, but not the multiple it has been in the last few years." Even at the $70 price point, AT&T may have to fight to retain customers once Google Fiber is up and running in Austin. Greene says he is satisfied with AT&T's GigaPower service and has been more than happy with the company's customer support, but he could be persuaded to make a change. "I'm no brand loyalist," he said. "I'd absolutely switch if Google offered a better deal." By Marguerite Reardon CNET www.cnet.com © CBS Interactive Inc. / All rights reserved.
Principal at Giant Noise