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.

Beehive: We’re gonna rock fiber into The Avenues (and maybe take it further)

Beehive Broadband logoBeehive Broadband has big broadband dreams. After rolling fiber in their native service areas in Tooele County (even into the spec of nothingness that is Grouse Creek) and hitting downtown SLC with fiber rings, they’re now making a push to bring gigabit fiber into The Avenues neighborhood of Salt Lake City. Pricing is targeted around $40-50/mo for 100Mbps and $70 or so for gigabit with an install fee in the $100-200 range. They’ll also be offering up phone and TV service for those so inclined.

The strategy is simple: build fiber to commercial buildings, then target neighborhoods nearby to bring it to the home. If this sounds familiar, it’s because CenturyLink said they would do the same thing, yet they seem to be very slow to follow up on it. Beehive is also evaluating using this plan in many other cities including Draper, Herriman, Holladay, Riverton, and Lehi. Right now, they’re looking primarily at areas that are being ignored by Comcast and CenturyLink.

So what about Google Fiber’s entry into SLC? Beehive is taking a “first to market” approach and plans to start hooking people up as early as mid-January, well before Google will turn over a single shovel of dirt. They’re also planning to make service available to all addresses in the footprint, something Google hasn’t done once their initial “fiberhood” signup period closes outside of a few exceptions in Provo. My take is that this is going to be a more successful strategy that could stymie Google’s efforts to break into that neighborhood.

If you get signed up on this service, let us know in the comments how it works out.

Google is botching iProvo, but will anyone investigate?

Google_fiber_logoA lot of people tend to turn off the critical thinking the minute Google comes to town with their Magic Fiber Elixir. I’ve already spilled a lot of digital ink on why I think it’s a bum deal, so I don’t need to rehash that here. What does need to be asked is if their slick marketing campaigns and brand power are being used to avoid any level of accountability from the cities they make deals with. Right now, I think the answer is a resounding yes.

I’ve heard from multiple sources, some of them very close to Google Fiber, that take rates in Provo are not only well below Google’s expectations but below what Veracity had achieved while they still operated the network. The estimates I hear put take rates in the low-20s whereas Veracity had peaked around 30%. That giant plunge would be almost the entirely of the MDUs taking service from the last time those numbers were available. Part of this is to be expected. Google offered up a “free” tier of service for seven years to anyone who paid a pittance of a connection fee. In student-heavy Provo, it shouldn’t be much of a surprise that this ended up being a very, very popular route to getting online.

I know some people are saying “so what? The network is theirs to make flourish or fail.” That’s not quite true, though. If you look very carefully at the contracts, the city has the right of first refusal to get the network back for the $1 that Google paid to use it. The odds of the city not exercising that right are extremely low. Citizens are still paying for the bonds via a utility fee. There is an immense public interest at stake here should Google decide to pull out of the business any time after the end of their seven-year obligation. When the city handed the network over to Google, it was covering operating expenses and the bond. A 25% hit on subscribers means going right back to propping it up from city coffers.

When the city owned and managed the network, there were monthly reports on subscribers and revenues broken down into segments. Once Broadweave came in (and was later acquired by Veracity), most of the numbers were sealed up as company trade secrets and the only public data was if the payments were being made or not. Veracity was more open that Broadweave about take rates and network challenges, but there was still a lot of data left up to speculation.

Once Google came in, the meager data dried up. I have little confidence that either Google or Provo’s elected officials (looking at you, Mayor Curtis) would give anything resembling a direct answer if asked, assuming they gave any response at all. Even worse, it seems that journalists who proudly proclaim to be the public watchdog aren’t going to even ask those kinds of questions, uncritically reprinting each press release as gospel truth.

If you live, work, or have any personal interest in Provo, you should pushing for answers before the city inherits another financial mess.

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.

Not Just Copper: Is CenturyLink slowly withdrawing from the residential wireline market entirely?

CenturyLinkAlmost all of our broadband heartburn comes from uncompetitive markets. Even in areas with at least two wireline competitors (which is only about 95% of the urbanized Wasatch Front), you’re usually stuck picking between faster speeds from Comcast and cheaper speeds from CenturyLink. I’ve already written that it’s looking like CenturyLink is going to let copper die without a replacement, but it’s entirely possible they just want to get out of the residential market entirely. This would be a nightmare for competitive choice in our state.

Do you remember the last time CenturyLink upgraded their ADSL2+ product? I do; it was 2009. The year before, they stopped doing FTTN deployments entirely, occasionally lighting a new FTTN node here or there. Most of the Wasatch Front is still limited to 7Mbps ADSL with real-world performance usually coming in much less than that. I know people in Sandy that struggle to squeeze 3Mbps out of that aging copper. It makes CenturyLink’s claims of doing their own gigabit fiber seem pretty hollow and underscores that their main purpose in deploying FTTN may have been to try clubbing competitors in the kneecaps.

Just look at how CenturyLink has been not responding to competitive threats. In Provo, Comcast very quickly pushed their system to its absolute limits with a 250Mbps/50Mbps tier that price-matches Google. What did CenturyLink do? Nothing. They haven’t uttered a single word about doing any kind of upgrades in Provo at all. Who can blame them? It would cost them tens of millions of dollars to go after a customer base that hates them. The ROI would be so far out as to be disastrous. It’s noteworthy that the only places CenturyLink has announced doing FTTH have been duopoly markets, places with a more-or-less captive customer base. Given their non-response to Veracity rolling their own ADSL2+ using CenturyLink cabinets, this isn’t too surprising.

At the same time, CenturyLink has been chasing down deals to build fiber to cell towers and focusing heavily on their business services through acquisitions like Savvis. These premium services command much greater profit margins and more stable user bases than residential markets, plus they can easily convince businesses to pay the full cost of installing the latest technology. Even when the fiber to cell towers goes into residential areas, CenturyLink has been noncommittal about using it to upgrade DSL users to better speeds or technologies. It seems very strange to not want to use the investment to upgrade other services. I’d usually say they just don’t have the money, but they just approved spending $1B on a stock buyback program, money that would deploy gigabit fiber to as many as 1M homes and businesses.

This all paints a very disturbing picture for the future of telecommunications where open access systems like UTOPIA aren’t or won’t be available: Comcast will be the only real ISP for most users, and cities who go with Google Fiber will be right back into the “fast vs cheap” duopoly they hate so much right now. This is one of the many reasons why I’ve been so sour on both Provo and Salt Lake City for going with Google instead of fixing the underlying anticompetitive problems in the telecommunications space. Why would you expect Google to be any better than Comcast when they no longer really have to work for your business?

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.

Bill Alert: HB60 would ban UTOPIA construction outside member cities

In a completely ill-considered move, Rep Curt Webb is running a bill, HB60, which would restrict any municipal fiber network (but, curiously, not cable, DSL, wireless, or any other technology) from building anything outside the boundaries of member cities. This is aimed squarely at UTOPIA only, and it is meant to be a purely punitive measure.

So what prompted this? Probably the developers and companies who paid out of their own pockets to expand the network. Hamlett Homes extended it into South Salt Lake communities, and a number of businesses near the backbone but outside of member cities have done the same. These extensions help lessen the burden on taxpayers as a whole by shifting more of the costs onto subscribers, but it doesn’t cost any city a red cent.

As the bill is currently written, UTOPIA wouldn’t just be prevented from building to people willing to pay for it. They could also be required to shut down any existing services and be prohibited from maintaining their backbone that links cities together. It would effectively be a death sentence on any network that isn’t entirely within member cities AND can connect to an exchange point to reach ISPs and the rest of the Internet.

Naturally, I had to follow the money and it explains a lot. Rep. Webb has taken contributions from CenturyLink and the Utah Rural Telecom Association. What’s he got planned next? Duplicating the anti-Google Fiber bill from Kansas?

UTOPIA Goes for Cheap Gigabit

Remember the rumblings about UTOPIA’s upcoming announcement last week? Well, it’s here, and its’ huge. Starting today, seven providers will be offering gigabit service for as low as $64.95/mo. If you’ve already paid off the connection fee, this makes it the same or less than Google Fiber in Provo on six of them. Here’s the full price list:

Of note is that UTOPIA has added another provider, WebWave. They’ve been using UTOPIA for backhaul to wireless towers in Davis County since May and are now going to be a full-fledged ISP on the network. With nine total providers to choose from, UTOPIA’s offering more competition for your business than ever.

If you’re content on the lower-priced tiers, SumoFiber and XMission have already switched all customers to 100Mbps. Are you planning to pony up a little more for 10x the speed? I know I would.