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Is Google Fiber a Better Deal?

Daily Ticker

Austin, Texas will become the next U.S. city to get a taste of Google’s (GOOG) high-speed broadband network. The tech giant’s experimental service will be available to Austin residents by mid-2014.

“Google says it targeted Austin because we are a creative place…and we have a lot of things that blend technology and creativity in ways that I think Google would love to showcase to the world,” says Stacey Higginbotham, an Austin resident and senior writer for GigaOM, a technology news site. “We are so excited here in Austin.”

Google may be synonymous with web searching, but the company’s entrance into the broadband sphere shows that it has bigger aspirations. Some of its other pet projects like Google Glass and self-driving cars are already transforming the computer and auto industries. Google Fiber may also be self-serving – the more Americans with Internet access, the more people will use the Google site – but Higginbotham says Google is filling a customer need that the major cable operators have been ignoring.

“Google started this as a way to push the envelope on broadband in the U.S.,” she says in an interview with The Daily Ticker. “It’s very clear Google really wants people to have more broadband and didn’t see the telcos or the cable companies really rushing to provide it.”

According to Pivotal Research, a nationwide rollout of Google Fiber would require an investment of more than $100 billion. Low margins and the high costs associated with building the required infrastructure are reasons why Google Fiber may be limited in scope, according to Higginbotham. But another factor altogether could determine Google Fiber’s fate.

“The return on fiber isn’t in the profits Google makes but in the ability to control its own destiny,” she says.

Google debuted its broadband network last November in Kansas City, Mo. The company says its 1-gigabit Internet and TV connection speed is “100 times faster than today’s average broadband experience.” Google has yet to announce how much Austin residents will be charged for its Google Fiber broadband service. Broadband plans will likely resemble what's currently offered in Kansas City: $120/month for high-speed Internet and TV and $70 a month for Internet alone. Broadband customers can also choose a slower Google connection for free after paying a $300 fee.

Related: Why Your Phone, Cable & Internet Bills Cost So Much

Higginbotham says she pays Time Warner $70 a month for 30 Mbps down/5 Mbps up broadband service -- fast enough to download a 4GB movie in 15 minutes. She calculates that Google's cable offering -- based on Kansas City prices -- would save her about $60 a month versus a comparable cable plan offered by Time Warner. But Google Fiber would be $20 more than AT&T's fastest broadband and middle-of-the road cable package.

Google’s Fiber could threaten the stronghold that cable companies Time Warner (TWX) and Comcast (CMCSA) currently enjoy in the marketplace, or at least push them to innovate.

Related: Is Google Taking on the Telcos?

The day after Google revealed its decision to expand Google Fiber to Austin, cable operator AT&T (T) announced it would build fiber optic infrastructure that supports 1-gigabit Internet service for residents in the city.

“AT&T’s expanded fiber plans in Austin anticipate it will be granted the same terms and conditions as Google on issues such as geographic scope of offerings, rights of way, permitting, state licenses and any investment incentives. This expanded investment is not expected to materially alter AT&T’s anticipated 2013 capital expenditure," the company said in a statement.

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