Google’s Fiber Network Could Foil ISPs and Fuel Innovation

Google (s goog) said today it plans to build an experimental fiber-to-the-home network in select areas of the country that would offer speeds of around 1 Gigabit per second. It says it plans to serve between 50,000 and 500,000 people and will offer the service for a “competitive cost.” The company is currently seeking a response to its request for information (RFI) by March 26 from municipalities that may want such a service for their citizens, but let me be the first to put my hometown of Austin, Texas, in the running.

When asked about the characteristics of those communities, a Google spokeswoman emailed the following response:

Above all, we’re interested in deploying our network efficiently and quickly, and are hoping to identify interested community partners that will work with us to achieve this goal. To that end, we’ll use our RFI to identify interested communities and to assess local factors that will impact the efficiency and speed of our deployment, such as the level of community support, local resources, weather conditions, approved construction methods and local regulatory issues. We will also take into account broadband availability and speeds that are already offered to users within a community.

Google’s announcement, which has been five years in the making, could positively shift the telecommunications landscape if it leads to new services that galvanize the FCC, communities and consumers to start demanding faster broadband. It also creates a potential testbed for innovative services that rely on broadband as a platform to work — benefiting entrepreneurs and those who invest in them.

With its web DNA and commitment to openness, Google will likely attract entrepreneurs to its network that are willing to try something new on the services front. Presumably it will also offer a faster path to the end consumer than what an existing ISP might. I’ve always felt that much of the innovation around broadband has occurred despite the ISP or even by bypassing the ISP, so imagine what projects we might see if the pipe owner were an active contributor to that innovation.

We at GigaOM have said for years that broadband is the platform for innovation, and Google no doubt agrees. The pace of technological innovation in terms of video conferencing, telemedicine and remote education are rapidly surpassing the average American’s connection speed, which ranges from 3 Mbps to 7 Mbps depending on the study. And without the demand for such services, or a cost-effective way to get there, ISPs and entrepreneurs that want to deliver products that require fat pipes are reluctant to invest. Think of it as a chicken-and-egg issue. Google can help change this.

The network can help spur innovation, but could also become a foil to the lobbying efforts from existing ISPs, many of whom are less than up-front about how their network costs are reflected in their prices, and tend to react with hysteria when faced with regulations that will limit their ability to control the bits running over their pipes. We’ve all read stories about how the web will break under the weight of network neutrality, or how the ISPs needs to raise prices or implement tiered pricing plans because some consumers are using too many resources. What we don’t have is the data showing that there’s an economic reason for this other than profiteering in an uncompetitive market.

Google makes almost all of its money from selling ads over the Internet, not from selling the pipe itself. Therefore, if it is truly transparent about its costs and traffic demands, it could provide valuable data to the FCC and the industry that telecommunications companies do not. It wouldn’t exactly make the broadband market competitive, but it could help make the economics of operating such a network more transparent. And that could help regulators determine how competitively priced broadband is.

Om wrote about Google’s interest in controlling its own bandwidth back in 2005 for Business 2.0, laying out an economic rationale for the creation of what he called the GoogleNet:

An even more compelling reason for Google to build its own network is that it could save the company millions of dollars a month. Here’s why: Every time a user performs a search on Google, the data is transmitted over a network owned by an ISP–say, Comcast–which links up with Google’s servers via a wholesaler like AboveNet. When AboveNet bridges that gap between Google and Comcast, Google has to pay as much as $60 per megabit in IP transit fees. As Google adds bandwidth-intensive services, those costs will increase. Big networks owned by the likes of AT&T get around transit fees by striking “peering” arrangements, in which the networks swap traffic and no money is exchanged. By cutting out middlemen like AboveNet, Google could share traffic directly with ISPs to avoid fees.

It didn’t happen five years ago and my hunch is that Google was waiting for a last-mile technology that would last. DSL and cable don’t have the capacity to reach 1 Gbps (although cable can offer up to 200 Mbps), and in 2005, fiber to the home was still an expensive pipe dream. But now fiber to the premise, which has the capacity to meet bandwidth demand for decades, is a reality.

It took Verizon’s (s vz) $23 billion investment in its FiOS network to drive innovations for delivering fiber to the last mile and lowering the costs. Technologies such as bendable fiber and smaller optical network terminals that fit on desks rather than inside entire closets were pioneered for the FiOS effort. Google will surely take advantage of that with its deployment.

The fiber GoogleNet could become an indirect threat to Verizon and other ISPs because it could open the kimono on actual network costs and lead to services that would suck even more bandwidth on ISPs’ existing networks. So it’s ironic that the creation of such a network might have a large debt to Verizon at it makes its own fiber push. Personally, I can’t wait.

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