The Slow Death of Google Fiber? CEO out, expansion halted, employees fired

Google_fiber_logoI’ve long maintained that Google isn’t in the ISP business for the long haul. I said over four years ago that the odds of your city seeing it were astronomically low. Well, now Google is basically saying the same thing. The CEO announced that they have halted expansion of the network, let go employees in towns where they haven’t build, oh yeah, and he’s leaving for “other opportunities”. I’ve had multiple first-hand reports of users in Provo who have been unable to get signed up for unspecified reasons, even after Google said they were coming. So what happened?

Google simply bit off more than they could chew. Investors do not like Google pouring money into something this capital-intensive with an ROI so far out. In every market they have attempted to deploy in, they are hit with constant roadblocks from incumbents, something any sane person with industry knowledge could have foreseen from miles away. The lack of voice and 100Mbps products lead to lower than expected adoption and even the loss of customers in Provo, something that I (among others) warned about immediately. Google eventually added these, but it seems to be too little, too late.

Google’s original promise was to form public-private partnerships with cities. Once they launched in Kansas city, it became clear that the “partnership” was reduced to operating like a standard duopolist while using brand power to extract all kinds of benefits from the city. The same thing happened in Provo when the city took a multi-million dollar bath on a network that was around break even on operating expenses and debt service. The model was “give us everything we ask for because we’re famous and fabulous”. The obvious cherry-picking and red-lining was swept under the rug with promises of “eventual” universal rollout, something that now looks increasingly unlikely.

I don’t mean this to just be a smug “I told you so” post (though I would be lying like Donald Trump if I said I wasn’t taking at least a little glee in having been right for so long as the haters yelled at me). It’s to point out that real broadband improvement starts at home. It means you, your community, your city all working together to improve the outcomes. Google was about as close as I’ve ever seen to a large scale broadband Santa Claus and it appears poised to pratfall on the stage.

My take is that we’re seeing the slow decline of Google Fiber. Cities who have it now should be working on their contingency plans for if (or, more likely, when) Google decides to pull the plug. Cities who were hoping for it (including both those who were and were not in talks with Google) need to move on to a new plan. It could be a true public-private partnership, a full-on municipal network (UTOPIA will still be happy to have you), or a privately-funded user-owner cooperative. What won’t work, be it Google or Comcast or CenturyLink, is hoping that you can just wait your way into better broadband.

Is Google Fiber playing copyright cop?

Google_fiber_logoI’m constantly amused when people project their ideal of an ISP onto Google. After abandoning open access, shutting up on net neutrality, and gorging themselves on handouts, you’d think we’d all be a little bit wiser about how this company operates. It comes as no surprise, then, that Google is apparently also dipping its toe into the copyright cop waters. This is also affecting users in Provo as shown in the below anonymized email:

From: <no-reply@google.com>
Date: Tue, Sep 23, 2014 at 10:11 AM
Subject: FWD: <redacted> Notice of Claimed Infringement from <redacted> at <redacted> – Ref. <redacted>
To: <redacted>

Google Fiber has been notified by a copyright owner or its authorized representative that your Google Fiber service has allegedly been used to access or download infringing copyrighted material. The notice that we received, identifying the copyrighted material, can be found attached to this email.

We have not shared any information about you with the complaining party, nor will we unless we receive a subpoena or are otherwise required by law to do so.

Please be aware, however, that our Terms of Service forbid the use of your Google Fiber account for unlawful activities, including copyright infringement. Repeated violations of our Terms of Service may result in remedial action being taken against your Google Fiber account, up to and including possible termination of your service. If you believe that people outside your household may have had access to your Google Fiber service (such as via an open wireless access point) and are responsible for this activity, you may want to take steps to secure your network.

If you have legal questions about this notification, you should consult with your own legal counsel. If you have any other questions about this notification, please contact the party that sent the attached notice.

So far as I know, UTOPIA providers do not enforce these kinds of terms. XMission in particular has a history of telling anyone without a court order to pound sand.

The most concerning part of these notifications is that they are generated by a private party that has no accountability for its accusations. Google may also not do any kind of investigation to test the veracity (see what I did there?) of the claims being brought to them. It’s entirely possible they’ll take the complaints at face value and, if you get enough, disconnect service without so much as a “how do you do”.

How’s that “don’t be evil” thing working out for you, Provo?

Google Fiber will leave the duopoly intact and only change the players

Google_fiber_logoThere’s a lot of talk about Google Fiber bringing competition to the marketplace, but I think it’s a lot of smoke and mirrors. In reality, Google is very good at leveraging its brand to cover up many plays it’s pulling straight out of the incumbent playbook. In the end, they’re acting a lot more like Comcast than I think many are comfortable with confronting, much less admitting. I’ll make a bold prediction: Google will be the new Comcast within 5 years. I’ll make the case as to why.

The biggest problem I see with Google Fiber is their practice of redlining and cherry-picking. Their pattern so far has been to break up neighborhoods into very small “fiberhoods” and only build if there is sufficient demand. Given that they ask for either a 2-year contract at $70/mo or $300 to install the service, it’s easy to see how low-income neighborhoods are unlikely to reap the benefits of a new vertical monopoly in town. This is the kind of practice that Comcast and CenturyLink has been dying to get into: upgrading only the most lucrative areas and letting the low-margin subsidized lines languish.

Let’s not also forget that you have a very limited time to sign up or be left behind. Google has made it very clear in their FAQs that it has no plans to reopen to new subscribers once the signup period has closed. In a rental-heavy market like Provo, this could exclude a large proportion of the user base from ever getting service. There’s also no mention on if someone can reactivate a terminated line to get service again.

So why is Google doing this? Based on the company’s history, I think it’s all about costs. Google is famous for designing hardware to meet very specific needs, a process that leads them to be extremely efficient. It’s not much of a stretch to think this same efficiency is being applied to building Google Fiber. (Warning: speculation ahead.) My theory is that they’re building the network exactly to capacity in an effort to reduce costs and maximize ROI. If you don’t have to plan for potential future additions or build the network where demand won’t meet certain profit goals, you can slash your cost per subscriber to under $1K. Assuming they make about $35 per subscriber per month in profit (which is consistent with numbers I’ve heard from UTOPIA service providers), that works out to a payback of under 2.5 years. With a 5-7 year contract, it’s not hard to see how Google is going to make money hand over fist.

This makes it all the more curious, then, as to why they need all sorts of concessions from municipal governments to make it happen. While their official checklist for the latest round of cities claims that no subsidies are expected, it’s hard to see how really going to be the case. Kansas City greased the wheels with millions in tax dollars whereas Provo literally gave away the network to get Google’s attention. This is much like CenturyLink’s hypocrisy in decrying municipal systems as unfair competition while available themselves again and again and again of available tax dollars. Google may say that they don’t want subsidies, but the unspoken understanding is that without significant municipal concessions, they’re probably going to pass you over.

With all of these behaviors that remind us of the many ways in which Google is behaving like an incumbent carrier, it doesn’t take much to connect the dots. CenturyLink is probably going to let residential wireline rot on the vine as it pursues high-margin business services. Comcast will quickly hit the end of its upgrade capacity and focus instead on entrenching its vertical monopoly between content production and distribution, replacing CenturyLink as the “cheap” provider. Google is then free to fill the void left by Comcast as the “fast” provider, and we’re right back in the non-competitive state we had before, just with different names on the door.

To be quite frank, I don’t think Google has the capacity to be a good ISP. Google has a history of very technocratic decisions, depending heavily on the technical specs, prowess of their products, and brand name to compensate for their lack of customer service and direct marketing. This is uncharted territory for them, especially since they haven’t proven to be very adroit at dealing with entrenched companies whose lobbyists have very deep government connections. While I’m willing to be proven wrong, I don’t think they’re really prepared to survive in the regulation- and politics-heavy world of telecom, especially when the margins are relatively low. Once the reality of operating a utility settles in, you have to wonder if Google is going to treat their fiber products like they did their WiFi network in Mountain View.

When cities are considering Google’s proposal, they need to look at it with clear vision. There’s a limited amount of skin they have to put in the game, but they’re also not getting the same level of benefits that they could be. Overall, Google is offering to rearrange the deck chairs, not right the telecom ship. I hope that more cities will be wise to it.

Rumor: Google Fiber is looking at SLC to block out a possible UTOPIA expansion

Sourced from Wikipedia

Still thinking that Google Fiber is your only gigabit option in SLC? Think again. I’ve heard from several reliable sources that Salt Lake City got on Google’s short list for a new round of expansion because of fears that UTOPIA would beat them to the punch (and possibly go into Provo as well). Macquarie is reportedly interested in expanding UTOPIA across the entire state and has particular interest in Salt Lake City since it’s the largest and most visible municipality. UTOPIA already has several fiber rings within the city it could use to fuel the expansion. If this rumor is true, it could mean that Utah would soon be not only the first gigabit state, but one with 17 separate companies competing for your business.

I’ve also heard rumors about details of the Macquarie deal that make it an even better deal that I possibly imagined. Once I get confirmation on some of the details, you’ll be the next to know.

Salt Lake City is About to Make a Broadband Blunder

This article is cross-posted at Beehive Startups.

I've made a huge mistakeSalt Lake City just can’t seem to make up its mind on broadband. Given the chance to join UTOPIA in 2004, Mayor Rocky Anderson turned down the offer citing “risk [to] taxpayers’ money”. His successor, Mayor Ralph Becker, similarly waffled, giving a response that neither closed the door nor endorsed the idea. In that time, much of Salt Lake City has been unable to get CenturyLink’s ADSL2+ service (with speeds up to 40Mbps down), often getting a meager 3Mbps on vanilla DSL. As a result, Comcast doesn’t offer the same high-speed packages it does in areas with better speed choices, sometimes maxing out at 25Mbps. The reluctance to make a bold choice to improve the city’s infrastructure has cost residents dearly.

Now it appears that SLC is about to double down on those past mistakes. Google revealed that they’ve been in talks with Salt Lake City to extend Google Fiber from Provo into the city. While Salt Lake City officials are claiming that “no tax dollars” will be involved, it’s well-known that Kansas City provided a lot of concessions to Google worth millions of dollars. Provo effectively gave Google an indefinite lease on the network for $1 plus $18.7M in closing costs. We don’t know what Austin provided yet, but we can probably take a guess. Google loves it some public funding but without all of that pesky partnership business.

And what does SLC get from the deal? Sure, they get gigabit, but not with great terms. If you don’t sign up during the initial push, you’re forever cut off from the network. Kind of sucks for renters and new move-ins. Don’t like how Google does things? They’ll be the only gigabit option in town. If Comcast and CenturyLink hurt enough, they could effectively withdraw from the market and leave Salt Lake City with a real monopoly. Can’t afford $70 per month? Too bad; there’s no alternative pricing plans like UTOPIA’s 100Mbps for around $35. And if history is any indication, Google won’t sign a contract with the city for longer than 7 years. They reserve the right to get bored and just turn off the network when it runs out. Compare that with the 30-year deal that UTOPIA has been working on with investment bank Macquarie Group. The only reason Google Fiber sounds good is because you’ve been in an abusive relationship with Comcast and/or CenturyLink for far too long.

Given the stark differences between how UTOPIA and Google Fiber operate, how badly Provo was jobbed on its deal, and how much better a deal UTOPIA was able to negotiate, you have to wonder how there’s even a debate about the choice between dealing with Google or joining up with UTOPIA. It seems that Salt Lake City’s elected officials, mayor and city council alike, are too cowardly to do what’s best for the city instead of what’s best for their next election.

Did UTOPIA just out-epic Provo?

There’s not a lot of details out about the proposed public-private partnership between UTOPIA and Macquarie, but it’s already looking like Provo’s deal with Google Fiber is about as raw as I thought it is. Here’s a breakdown of how the two deals differ:

UTOPIA/Macquarie iProvo/Google
Contract length 30 years 7 years
Investment per address ~$2,000 ~$500
Revenue Sharing Yes (unknown amount) None
Open Access Yes No

So, to be clear, UTOPIA’s proposed deal with Macquarie will bring a longer commitment, more money, and revenue sharing with the cities while preserving open access. In this light, Google Fiber seems like epic’s cheap knock-off. Provo, you just got punked.

Feeling the Google Heat: Comcast will bump speeds to 250Mbps/50Mbps in Provo

Competition is good, and Comcast is just now proving it. I spoke with one of their sales guys who confirmed that Comcast will be offering a package of 250Mbps/50Mbps for $70 starting in September, but only in Provo. (Sorry, everywhere else.) This is in direct response to Google Fiber coming to town and will include a new modem with a built-in 802.11ac router to take advantage of the speed bump. It’s unknown if this speed tier will land in any other cities in the future.

This is yet another story proving that having a fiber network in your town benefits everyone, not just subscribers.

Google Fiber: The Deal That Keeps Getting Worse

landoIt’s no secret I’ve soured on Google Fiber, and I was pretty loud in saying that Provo wasn’t making a very good deal with the advertising giant for iProvo. They threw open access under the bus. They killed the prospect of public-private partnerships. They gave businesses the cold shoulder. Now they’re going one further: their boilerplate ToS bans running servers just like Comcast and CenturyLink.

This matters. It matters a lot. The point of a faster upload speed isn’t just to send pictures to Facebook faster. It would let you share content directly with other users. Most ISPs go with an asymmetrical connection precisely to dissuade you from creating content, preferring to drive you to content consumption that costs them less bandwidth. A symmetrical connection is supposed to facilitate this.

What should we expect to see? Will a small business be cut off because they decided to host their own mail server? Will a start-up be scrambling to move their site to a hosting company (with additional costs) because they setup a web server? Would someone’s home Minecraft server for their friends result in a disconnection of service? The history of other ISPs suggests that it will be enforced unevenly and without explanation.

Google seems to have a habit of altering the terms of the deal in ways that favor them. It’s much easier to just have your own hosting your can rely on. Picking up a cheap server using a HostGator Cyber Monday Deal 2016 coupon is a smarter, easier decision with less mental stress in the end. Provo, you’d going to start feeling a lot like Lando Calrissian, that the deal is getting worse all the time. Don’t let Darth Google get away with it. If you can.

Learning the Wrong Lessons from iProvo and Google Fiber: A Rebuttal

I suppose this kind of response to the Google Fiber announcement was inevitable, just as it’s completely false assumptions are. The author gets a number of predictable things wrong.

[A]nd finally Provo will be out of the Telcom business.

No, it won’t. It’s still paying for the bond, it has to shell out another $1.7M to make it happen, and there’s a provision that they get the buy the network back for $1 should Google decide to pull up stakes. Granted, that may never happen, but to say that Provo has washed its hands of the matter is patently false.

[I]t’s not like there was some huge cache of potential customers waiting for join the Net.

That’s a really funny thing to say about a network with a 35% take in spite of having multiple failed private providers and mountains of negative press. Bear in mind that Verizon was thrilled to have a 18% take rate on FIOS after two years. If anything, many people were holding out while they were waiting for a less-tainted provider to be an option.

[F]iber is clearly not “future-proof” as claimed at the time.

And here’s where an inch of knowledge on telecom gets you into trouble when you try wading into the ocean. The fiber itself is fine. Most of the work is in digging trenches, attaching to poles, putting in conduit, and running the lines. The electronics, while vital, are a relatively small portion of the overall network. It’s also worth noting that the 100Mbps electronics put in place almost a decade ago are still providing a service that neither Comcast nor CenturyLink can match or beat. That’s some pretty good longevity on any network equipment.

It’s worth noting that Google is deploying 1Gbps electronics when 10Gbps, 40Gbps, even 100Gbps electronics exist. Would the author slam Google for being behind the curve over that, making the same dubious claims over “future-proof” networks? Of course not. Any network is designed to take advantage of the best you can get for the money now and plan for upgrades in the future. It’s become painfully obvious that neither incumbent has done a particularly good job of doing so.

[W]ireless networking has greatly increased its speed and range, and cellular data has moved from a novelty to a mainstay of most cell phone plans.

Again, Mr. Platt gets in trouble by talking about technical things without any technical knowledge. Wireless almost always depends on fiber backhaul. When you use microwave backhaul like Clearwire and Sprint, you end up introducing a lot of latency into the connection which renders it unsuitable for any real-time application. Wireless also hasn’t come anywhere near catching up to fiber in terms of speed. It’s just barely starting to get to a point where a wireless ISP can offer up 100Mbps speeds.

It’s also comical to cite cellular as an alternative when, again, the speeds can’t match wireline. Even the best LTE connection can barely muster a real-world speed on par with CenturyLink’s oh-so-hard-to-find top-tier ADSL2+ product. That’s only going to drop as more LTE devices get into the hands of consumers. Most of those cellular plans come replete with very low caps, high overage charges, or some kind of throttling or filtering which makes them completely unsuitable for business use and hardly an alternative for residential users.

In the long run, it’s still unclear whether and how long wired internet connections will be relevant.

I think the preceding two paragraphs lay this one to rest. If wireline was dying, why would Verizon have poured billions into it, to the chagrin of investors, especially when they own America’s largest cellular company? Why would Google be pursuing deals in various cities to promote fiber-to-the-home? Why is FTTH so explosively popular in Hong Kong, Seoul, and Tokyo? This is yet another point on which Mr. Platt falls on rhetoric as a substitute for knowledge and comes up lacking. While companies like CenturyLink who lack the will and/or ability to upgrade their wireline networks are dying a slow and painful death, that has everything to do with being a terribly run business, not the relevance of their industry.

Most importantly, Internet service is far outside the essential role of government.

This is a common refrain, and it often comes with a big dose of selective outrage. The telecom sector has been rife with government intervention and cronyism almost since its inception. AT&T was a legally-protected monopoly right up until they were broken up in 1984. The major players in the industry got huge tax breaks in the Telco Act of 1996, the price of which has surpassed $300B. Google, on whom Mr. Platt lavishes praise, has received massive tax and financial benefits from the local governments where they plan to do business. Where is the outrage here? Or is the outrage reserved for when public money isn’t being spent on private enterprise? Sir, your principles ring hollow.

[T]hank you Google for buying out network at the appropriate price of $1.

The over-simplification of what the deal actual is shows yet more layers of gross ignorance. The network had an assessed value of $25M, and much of that had to do with the negative perception created by a string of grossly incompetent private providers (HomeNet, Mstar, Broadweave). For an economics professor, he’s not doing such a great job at following the money.

But this is where Mr. Platt’s true motivation sneaks on out in all of its ugly glory:

Please, let your monthly utility bill stir thoughts about the proper role of government. If this reflection somehow prevents citizens and politicians alike from future misadventures into private enterprise, it just might be worth it.

Translation: I’m glad that you can suffer and the taxpayers can be thrown under the bus in order to prove my ideological points. I’d do it again in a moment.

This kind of attitude is far too prevalent in the discourse about both iProvo and UTOPIA. The idea that making the projects fail in order to make taxpayers suffer so that you can be vindicated on your prediction is abhorrent at best. If you see someone with this attitude trying to get into any kind of government position, you’d do best to run in the other direction. Fast.

It’s sad that there’s no shortage of people who are confident in their lack of knowledge, nor that they spend so much time trying to get their ill-informed opinions into print. Let’s just hope that they become footnotes in the debate rather than carrying any real gravitas.

How likely is it that your town gets Google Fiber next? Not very

If your neighbor won the lottery, would you quit your job right then because you’re certain that your ticket is going to pay off next? Of course you wouldn’t. Unfortunately, a lot of people are taking that same kind of attitude with regards to broadband. Even before Google announced that they would take over iProvo, a common refrain was “I’ll just sit back and wait for Google to come to me”. If you believe that you’re going to get fiber for nothing, you’re in for a very rude awakening. Let’s take a look at places Google has already announced for why.

Kansas City, KS/MO

I’m sure most folks were scratching their heads when the first Google Fiber town got named. Why would a run-down midwestern town with little more to claim that Sprint’s HQ in neighboring Overland Park be worthy of landing The Big G and its fiber project? The answer is that the “free” broadband came at a very steep price.

The development agreement between Google and Kansas City stipulates that “Google will bear all costs for the [Fiber] project.” Yet it goes on to guarantee the company:

  • Free power
  • Free office space for Google employees
  • Expedited permits and inspections (with fees waived)
  • Free marketing, including direct mail
  • Free right-of-way easements (i.e. Google can build anywhere they want without compensating the city for noise or increased traffic)
  • The right to approve or reject any public statements city city makes about Fiber

We don’t know yet what this will cost the city to essentially build a replacement monopoly (one that has already signed 90% of the city), but you can bet that the “benevolent monopoly” (as IGN called them) won’t stay that way.

Austin, TX

Long before Google had announced Fiber, Austin had been trying to form its own municipal network. Unfortunately for them, Texas is one of the states that outright banned municipal networks which may have cost them first city status. Google came back despite this because Austin had already shown that it was willing to do the work. And while the terms of their deal don’t seem to be as public as Kansas City or Provo (I couldn’t find them), you can bet that similar concessions were made.

Provo, UT

And now in our backyard, we have Provo and its iProvo network. The city started getting this network going with discussions in the late 90’s. Construction started in 2001. The city has been doing a lot of work to try and bring a world-class telecommunications platform into the city, and they still had to make Google one heck of a sweet deal to get them to take over.

Your City, UT?

Now I want you to ask yourself an honest question: what exactly has your city done to improve broadband? Other than maybe groveling at the feet of incumbent providers, I’d put my money on not a darn thing. How do you think Google will view that lack of initiative? Again, my money goes on not too favorably.

This leads to a follow-up question: if your city wasn’t willing to spend money on improving broadband before, what makes you so sure they’re ready to do it now? Did they even investigate joining UTOPIA? If they joined, did they support the UIA? If they got promises from Comcast and CenturyLink to do better, did you follow up to make sure they held up their end of the bargain? Yeah, exactly.

Like I said back in August, you need to do the work yourself. If you do, you’ll either get a network you built all on your own or Google may take notice and finish the job for you. Fortune favors the bold, and broadband is no exception. What you’ll get is equal to the effort you put in. Especially if it’s nothing.