Google is running an experiment in Kansas City called, "Google Fiber."
It wired up the town with high-speed internet and cable television.
Here's a sample of what blew their mind from our report on it last month:
- Google Fiber gives you 1 Gbps (as in gigabit per second) of data speed, downstream and upstream, for $70 a month. That's 75-100 times as fast as cable Internet service (at least Time Warner's) when it's operating at advertised speeds (which, in our household at least, it often is not).
- The Google installers promise to come to your house at the time of your appointment, not in some vague "window" that requires you to be home for 4 hours at a stretch (or much longer, if they don't show). For anyone who has ever screamed in rage at the lousy customer service provided by the local cable company, this will be a big selling point. It will be interesting to see if Google can actually deliver on it.
- You get a free Nexus 7 tablet (with a two-year subscription) to use as a remote control, in addition to a Google Fiber remote. The Google Fiber remote has fewer mystifying buttons than a typical TV remote. That's a very encouraging change from the "Google TV" remote of a couple of years ago, which looked more complicated than the flight deck of the Space Shuttle.
- The "TV" interface comes in a few different formats: There's a standard channel guide with DVR functionality, a "Discover" engine that recommends shows and movies to you, and the Holy Grail of TV 2.0: An interface that allows you to select what you want to watch and then lists every version of it that is available, regardless of which network or delivery service is showing it (i.e., Netflix, YouTube, CBS, etc.) The latter is the interface that most digital TV viewers have been waiting for.
It sounds awesome. And we would love to have it here in New York City. But, odds are against us getting it any time soon because it's outrageously expensive to build a cable company.
How outrageous? Well, a new report from Goldman Sachs that talks about the possibility of Google building out a cable system says it would cost over $140 billion to cover the whole country.
Google has $45 billion in cash on hand. So, if it really wanted to build out a cable company, it would need to take out a loan.
Here's an excerpt from Goldman on Google Fiber:
Building out the infrastructure will be expensive. In his September 17 report Still Bullish on Cable, although not blind to the risks, Goldman Sachs Telco analyst Jason Armstrong noted that if Google devoted 25% of its $4.5bn annual capex to this project, it could equip 830K homes per year, or 0.7% of US households. As such, even a 50mn household build out, which would represent less than half of all US homes, could cost as much as $70bn. We note that Jason Armstrong estimates Verizon has spent roughly $15bn to date building out its FiOS fiber network covering an area of approximately 17mn homes. The cost of ongoing test cases like this and the potential for significant cap ex investments also likely contributed to the company’s recent decision to issue non-voting class C shares in an effective stock split, in our view. Moreover, in the same note, Jason Armstrong also pointed out that Google’s TV offering represents the fifth (or higher) competitor in an already competitive market. All that said, while this initiative is clearly still in very early days, going direct to consumers with internet connectivity and video distribution could give Google the potential to become the end users sole channel for media consumption.
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