Google's Fiber "Proof of Concept" Is Anything But

How many folks want fiber in their homes?

[ everyone raises their hands ]

Keep your hands up if you've looked into getting fiber.

[ everyone's hands remain up ]

Keep your hands up if you have fiber at home today?

[ 96% of hands go down ]

Everyone in our country wants fiber, but it's my belief that the evil folks at cable companies and telecoms are sabotaging fiber in order to maintain their legacy businesses: be they content in the case of Time Warner or phone calls and text messaging if it's AT&T.

As your internet gets faster you spend more time online. This is one of the core tenets of Google's success. Instead of adding features to Gmail, YouTube and Google search, they historically focused on making things faster (at least first).

Why?

Because speed drives usage.

Some of you are old enough to remember taking a sip of coffee or checking your Blackberry while the Yahoo home page loaded. In those days we would sometimes leave our computers in frustration and turn on the TV, pick up a magazine or make a phone call.

Those days of giving up on slow internet are over, and it's been brutal on traditional media. Kids don't make phone calls, and they are giving up texting for Voxer and Apple messaging. They play video games and social media over TV sometimes (in some cases all of the time).

Four out of five Gen-Y folks working for me have "just internet" at home. No cable or Direct TV. In fact, many don't have TV sets, electing instead to watch Hulu, Netflix or stolen content. Ironically, they call stolen content "bittorrented movies" or "bittorrented TV shows," as if they were distributed or produced by a Time Warner competitor called "bit torrent."

Sure, Verizon does have a couple of million folks on FiOS -- but it's a small percentage of the United States and it's absurdly expensive.

Oh yeah, a new startup called FreedomPop is coming up with an iPod Touch 4G-capable phone case.

You know what they call an iPod touch with a 4G connection?

AT&T's biggest nightmare (zing! pow!), or more simply "the iPhone" (double zing! pow!).

AT&T and Verizon refuse to give the 100% of Americans who want fiber (even if some don't know they want it yet), so Google is doing what any other visionary company would do: taking their customers.

Google Fiber, in case you don't know, is a "pilot" in Kansas City where Google is rolling out gigabit connections for $70 -- with a terabyte of Google Drive storage. Read about it here.

Right now Verizon offers its fastest service (300 Mbps down/65 Mpbs up) for $209.99/month (with a two-year contract) in its limited FiOS footprint.

1 TB from Dropbox is $795/year (for five users).

Google Fiber is $70 a month for 3x+ Verizon for 1/3rd the price (so 6x the value), and it comes with free storage worth $66 a month. That's 10x+ the value of what Verizon provides.

10x!

In version 1.0!

Oh yeah, I forgot to mention, if you don't want to pay $70/month to Google, the company will give you 5 Mpbs/1Mbps for the compelling price of $0.00/month for seven years (after you pay the $300 one-time construction fee).

Why would they give you a DSL-level connection free? Because they know you will eventually realize that $2 a day -- or one day of minimum wage work -- is well worth it for 1 gigabit.

Mark my words: Google Fiber is not a test, it's a takeover plan.

Why?

Because Google can.

And because Larry and Sergey are looking to put a dent in the universe. A big one.

They don't want to be known for Gmail or Google search. They are swinging for the fences and want to see a Google self-driving car in every driveway, Google glasses on every citizen and Google Fiber in every home.

What else is Google going to do with -- wait for it -- $2.79B in Q2 profits? Give it in a dividend to its shareholders?!

What good has that dividend done for Bill Gates' (or Steve Ballmer's) legacy over the past 10 years? Nothing.

Microsoft should have been doing this, or buying up many more startups, during its "lost decade." (In fairness, they did launch Xbox during that time, a huge hit. I wish I built Xbox during my lost decade!).  

If you add $10B+ to your bank account every year, you can spend the $2k putting each of the 115M households in the United States on fiber. Some folks say Verizon spends $1k putting in fiber, some folks say Google will spend $500.

I'm putting the cost of Google's fiber install at 2x to 4x the consensus cost -- or $2k -- just to shut up the folks who are going to argue that it isn't possible for Google to run fiber across the country. Remember, given enough resources and brass balls, anything is possible.

Also, Google doesn't need to make any money -- $0.00 is just fine -- from Fiber. Just like they don't make any money from the awesome Nexus 7 tablet that Apple loyalists "actually really like."  

There are 115M households in the United States.

$10B / $2,000 = 5M homes online per year.

115M households in the United States / 5M online per year = 23 years until everyone is on fiber.

Oh yeah, as part of the Google Fiber rollout, what if Google required that you create a secure, public wifi hub? So, in order to get this awesome deal, your router would automatically beam out a Google Public Wifi hotspot. In order to get on that, all you would need is a Gmail (aka Google account).

At that point anyone within a block of any home with Google Fiber could get free, high-speed wifi.

A global crowdsourced wifi network. Crazy idea, right?

Too bad it's not new, in fact Google invested in a company that makes a system that does it.

115M households paying $20 each a month (on average, e.g., 1 in 4 signs up @ $70 a month, three get it free) is $2.3B in revenue to fund the program. A month.

Now, people will say Google has no idea how to lay fiber or run a service organization.

Well, Google didn't know how to make self-driving cars five years ago, nor did it know how to run an advertising business when it was a search engine.

Apple didn't know how to make consumer electronics and "could never compete with Samsung and Sony!"

People said NBC could never figure out how to get everyone every minute of the Olympics digitally whenever they wanted it, right?

Never mind that last one.

Anyway, point is, things change, and Google Fiber is going to change everything.

Everyone who would pay $70 for Google Fiber, raise your hand.

[ 95% of folks raise their hands ]

Exactly.

Larry and Sergey are gangsters, and they are going to deliver a knock-out punch to Verizon and Time Warner.

There is no more important project outside of protecting the search/ad business than Google Fiber -- and Google Fiber will get you to load a LOT more YouTube videos and search results.

Fiber is not only a "moat strategy" to protect Google's massive growth businesses, it's a way to increase usage of Google services 10x over the next 20 years.

And people said Facebook was going to kill Google. Oh you silly bloggers, you amuse me.    

It's going to be an awesome future.

Thanks, Larry.

Thanks, Sergey.

Don't stop! Lean into it.

Please spend all your cash on this project, and save just a little bit for those Glasses and Cars.

best @jason

PS - If you know one of those telecom wonks who knows everything, please send this to them and ask, "What are the chances Google Fiber becomes a real offering in over 50 cities 10 years from now?" cc jason@calacanis.com -- really interested to hear what they say.