When Google deploys a fiber-to-the-home network in Kansas City, Kan. (and later in Kansas City, Missouri) its success for the project will not be measured in dollars but in users. And in promoting this view of broadband Google shows a keen understanding of how broadband has the potential to disrupt everything — the value isn’t in delivering broadband — it’s in delivering services over broadband.
That doesn’t mean that broadband isn’t valuable, but it’s also not the highest value — much like electricity is valuable, but it’s the air conditioning or refrigeration that it enables that people spend more money on. Which runs somewhat counter to the argument put forth by ISPs, especially those keen to meter broadband — that the value is in the access itself. Instead of viewing broadband as a gateway to the web, and trying to capitalize on that by offering faster speeds that people will eventually pay more for as Verizon is doing with FiOS, many ISPs view broadband as something that’s valuable in and of itself– and as such it might make sense to charge people by the byte.
Google believes broadband may be the alpha, but it’s not the omega
So when Matt Dunne, manager of U.S. community affairs for Google, spoke at the Greater Kansas City Chamber of Commerce 2011 Innovation Conference back in July and explained how Google feels like it will be successful when people convince their neighbors to subscribe to gigabit services and use the applications that Google and others develop for gigabit networks, he is buying into the idea that broadband is just one step in the value chain, rather than the entire value chain.
Dunne also said Google plans to make its pricing and offering for gigabit networks clear this fall with the network itself coming online in the first quarter of next year. We can expect the pricing and offering to be more consumer than business oriented, given how Milo Medin, who is in charge of the Google Fiber project, previously scoffed at other cities’ gigabit networks, which charge hundreds of dollars for access. This also fits with the idea of broadband as a gateway drug to other services.
Dunne also made Google’s point of view abundantly clear in how he answered questions posed by the community about how they could work with Google. The bottom line is they shouldn’t really want to. Dunne tried to convey that Google wants people to develop applications for this network that Google will provide, but that in order to do it, they don’t actually need Google. So most questions about creating entrepreneur centers and ways for folks to “work with Google” on creating apps, were met with what seemed like the bewildered air of someone who has the Silicon Valley mentality of entrepreneurship, where you just go out and start something. Dunne was telling the people in Kansas, that the tools were there. They just needed to use them to actually create something cool.
If broadband is only a small part in the value chain, how does a company recoup the costs?
Again, in this view broadband is a tool, rather than the solution. I’m curious how Google’s model plays itself out in terms of building and sustaining a broadband network. If it can build out the network and sell access while making money on that access, it could change the economic model for providing broadband. If it manages to build the network and capitalize on it to sell Google services and ads to subsidize the networks, that’s less revolutionary, but it does offer a competing option for broadband in both Kansas Cities. It also provides another economic model for broadband build out.
One of the best analogies for these differing views on broadband comes from the hardware industry. Hardware vendors often confuse their boxes with the value, when in today’s connected world it’s the services that matter. Look at how the Kindle platform has evolved. This isn’t a hardware business for Amazon, so much as it’s providing a service. Can broadband providers evolve to deliver services their consumers will pay for in a competitive environment? Some like Verizon, or Comcast are trying with new services offerings. However, for every step forward it seems like ISPs take another step back when they block competing services or introduced tiered plans or caps.
But in this conversation with Kansas City economic leaders Dunne offers a bit of hope for those almost 1,100 other cities who tried for Google’s gigabit network and didn’t get it. He said Google was in “active conversations with other communities right now,” to bring fiber to their areas. However, he promised the leaders of KC that because they were the first, they can expect exclusive access to Google fiber at least through the “first couple of quarters of next year” before a next area is started. Let’s see how much change Google can bring.
Related research and analysis from GigaOM Pro:
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Is broadband the gateway drug for the web or the drug itself?