Last week, Google announced that it would develop several fiber optic broadband networks to smaller municipal areas (50,000 – 500,000 people) as part of an experiment to provide Internet at up to 200 times currently offered speeds. With the federal government planning a broadband strategy for America, the question remains whether Google’s plan is an elaborate lobbying ploy or a genuine competitive strategy.
The plan, according to Google’s announcement for its fiber broadband project, seems simple enough – facilitate experimentation in the development of new applications optimized for higher speeds, foster new Web development techniques, and promote openness on its networks. The price tag to establish and maintain the networks, however – greater than $1 billion according to some experts - indicates that the company’s motivations may not be limited to altruistic curiousity.
Even in its announcement, Google made no secret of the fact that it has urged the Federal Communications Commission to look at new and creative ways to provide high speed broadband to all citizens in a country that by some estimates ranks 12th in the world for broadband speed and 15th in the world for broadband penetration. Indeed, by establishing these networks, the company could be setting the wheels in motion for a government broadband plan aligned with its own technology.
With this view of Google opening the door for exclusive contracts with government, it is possible that the cost of developing the networks are a large rent-seeking expenditure to capture future revenues. Far from being a wasteful and destructive expenditure, however, the cost of setting up the new networks would provide a value added service for many communities. Furthermore, Google may be establishing the new networks to strenghten its ability to provide more innovative Web-based services and use its brand name to compete in a new arena.
Of course a combination of these motivations may be driving the announcement, but the bottom line is that Google’s plan could ultimately benefit consumers by providing more competition in the broadband market, which is currently served by few providers for a given area. If anything, these test markets may motivate Verizon, Comcast, and other providers to drastically increase their speeds and improve quality.
Furthermore, the fact that Google is using its own resources to invest in this project, as opposed to public funding, is a welcome entrepreneurial gesture in a nation becoming more accustomed to government grants and public funding. Of course, the ultimate concern is whether this private venture will in fact become a public one, exclusively favoring Google. As for that question, perhaps only time will tell.
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