Google Inc (GOOG)’s “High Fiber” Diet

Let’s face it: if consumer demand was the only influence on Google’s executive business choices, Google would probably be busy digging up streets to place Fiber cables this moment. AT&T and Verizon probably would be pouring money out of their coffers and racing to expand ultrafast broadband networks. Unfortunately for most highly optimistic consumers, Google is NOT in the infrastructure business; rather, Google is primarily engaged in the Internet technology sector. The reality of money has set in even for a gigantic company like Google. According to calculations, in order to expand Google Fiber into 20 million homes – which would be a little more than 20 Austin-sized cities – would cost approximately between $10 billion and $15 billion.

AT&T and Verizon, although both of them are large companies, would especially not want to foot a $10-15 billion bill to expand high-speed Internet. It would make more business sense for them to stay content with their consumers paying current rates for lower speeds – in other words, giving consumers less than what they are paying for.

Also, why should Google try to push for more Fiber integration in more cities when bureaucratic red tape stands in Google’s way? A key reason that Google chose to expand into Austin is because the city owns the power company and guaranteed access to the power lines. Many of the cities and towns across America already have exclusive large contracts with AT&T, Verizon, and various other companies to provide Internet and television services.

The Bottom Line

Google Fiber is an exciting technological innovation which appears to hold much promise for the future. However, the original intent of the Google Fiber project was to simply be a catalyst for other companies like AT&T and Verizon to get their proverbial act together. Fiber was not intended to actually be an integral part of Google’s business model. Google is not, as of yet, trying to be an Internet Service Provider – Google is a technology company whose business model is fueled by the Internet lines of other companies. Currently, looming costs and government regulations are tying down the integration of superfast Internet – but these barriers can be overcome within the next decade if the companies discussed make the right steps to please consumers and strengthen the overall Internet infrastructure.

The article Google’s “High Fiber” Diet originally appeared on Fool.com is written by Evan Buck.