Google’s Faster Broadband Service Pushes Competitors

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Google Fiber may be having a significant effect on the broadband industry—one with implications which go far beyond the technology’s effect on Google Inc (NASDAQ:GOOG) itself. Raymond James analysts Frank G. Louthan IV, Simon Leopold and Aaron Kessler call it “the Google Effect.”

Google's Faster Broadband Service Pushes Competitors

The effects of Google Fiber

They said the rollout of Google Fiber in the Kansas City, Kan. area is beginning to stimulate other broadband operators to begin upgrading their own broadband services. The analysts believe competitive forces from Google Inc (NASDAQ:GOOG)’s product as well as increasing consumer demand are factoring into this push by telecom companies, cable companies and equipment suppliers.

The analysts visited one of the search giant’s showrooms in Kansas City and report that they think it will “evolve its experience over time.” The customers they spoke with gave Google Fiber “rave reviews,” and they believe the service will get even better with improvements to channel lineup and additional services. The analysts said it looks like Google Inc (NASDAQ:GOOG) is focusing on more than just the product and is attempting to emphasize customer service as well. Many consumers see customer service as being an especially weak area for cable and broadband operators.

Google continues to roll out Fiber, broadband companies react

Google is starting to roll out its product to additional markets now, including Provo, Utah. It also has announced that it will be moving into Austin, Tex. about a year after launching in Kansas City. The Raymond James analysts believe the company will announce more cities by the end of the year.

They noted ripple effects that may be due to the rollout of Google Fiber. For example, AT&T Inc. (NYSE:T) announced that it will be offering a 1 gig service in Austin, Tex. and broaden its plans. Also CenturyLink, Inc. (NYSE:CTL) is replacing Qwest with a 1 gig project in Omaha, Neb.

The analysts said their checks suggest more consumers are demanding that local broadband operators offer more bandwidth. They said more than 900 communities requested the Google Fiber project which went to Kansas City and that residents are still trying to get more bandwidth.

Google solves problems

They note that there have been some problems with the rollout, but they believe Google Inc (NASDAQ:GOOG) has fixed them. They cite “several telecom contacts” which have watched the rollout firsthand. They said the search giant “has gotten the message that it is not helpful to be a helicopter member of the community” and that it now claims to be “hyper-local.”

They say Google Fiber probably will face more challenges but that the company will probably be able to overcome them. They don’t think it has a good plan for replacing broken set top boxes which have been sold to consumers. They suspect the company “will eventually conclude that renting boxes to customers isn’t as evil as it appears to believe” and will switch to some kind of rental or maintenance plan. They also note that the company has yet to experience serious storm damage with significant outages in its Google Fiber markets. Since this is aerial fiber, the weather could pose major problems.

Further implications of Google Fiber

Because of Google Inc (NASDAQ:GOOG)’s efforts, the analysts said this could open up more opportunities for companies which offer consumer broadband, like ADTRAN, Alcatel-Lucent, ARRIS and Calix. In their view, AT&T Inc. (NYSE:T), CenturyLink, Inc. (NYSE:CTL) and Time Warner Cable face the greatest pressure to increase spending on more bandwidth, while Verizon Communications Inc (NYSE:VZ) and Comcast Corporation (NASDAQ:CMCSA) face the least.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.

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