TrueJournals

Google’s an ISP — Now what?

by on Jul.27, 2012, under thoughts

As most people have probably heard by now, Google is a certified ISP. Google will be providing Kansas City residents with a 1 Gbps fiber-to-the-home connection for $70/month. Add TV to that service for an extra $50/month, and you get the most awesome Internet and TV bundle for $120/month. Can’t afford that? Google’s even offering a 5 Mbps connection for free (after a $300 installation fee). All of this makes Google possibly the best ISP in the nation.

But, as some have pointed out, Google isn’t doing so with a huge profit margin. It’s not that Google is losing money on this deal, per-say, but it doesn’t seem that they’re making enough profit to survive on this business alone. Luckily, this isn’t a problem for Google, as they have plenty of other revenue streams. But, it does lead to a question of Google’s true motivation in this move.

So, I offer here my theory: Google is becoming an ISP to put pressure on existing ISPs to upgrade their infrastructure to be able to provide cheaper and faster access. Currently, there isn’t an ISP I’m aware of that can come close to the deal Google’s making in Kansas City for residential customers. If Kansas Citians realize this, they’ll flock to Google, leaving bigger ISPs (Comcast? AT&T?) in the dust.

Of course, as businesses, Comcast and AT&T should do whatever they can to keep their customers. At first, they might just offer to lower prices for customers that threaten to leave, but that really can’t maintain them long-term. They will be forced to do something to remain competitive. Especially if Google starts to move into other areas.

Remaining competitive will mean upgrading networks. That’s just a simple fact. The current residential Internet infrastructure just can’t compete with what Google’s offering. And as long as things remain as they are, the major players have no motivation to put money into upgrading their networks. I believe we’re seeing essentially the same thing with cell phone providers in the US: there isn’t enough competition to force true network infrastructure upgrades.

So, here’s my predictions for the next 10-20 years:

  • Major ISPs in Kansas City will slowly start to upgrade their infrastructure and offer lower prices in order to compete with Google’s offering.
  • Google will start to move into/threaten to move into other areas.
  • Large ISPs will (and this might be very wishful thinking) learn from the Kansas City situation and per-emptively start upgrading their infrastructure across the nation.

After all this happens, it doesn’t really matter if Google moves into other areas, or even continues to offer service. The end result is that they’ve accomplished their goal, and that’s good for all of us. If things proceed how I think they will, the US will see some major improvements in its residential Internet in the coming years.

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