Google apparently has some great take rates for its gigabit Google Fiber service in Kansas City, with Bernstein Research reporting Google Fiber penetration of 75% in some neighborhoods. These are take rates to ‘die for.’ Most service providers, especially competitive overbuilders, would be very happy with half of that. Of course, this is hardly an apples-to-apples comparison.
Google has successfully changed the overbuild model (and even incumbent models to some extent), and these early indications suggest it’s working. Google extracts concessions from municipalities before laying any fiber and its ‘fiberhood’ approach certainly improves penetration performance.
With ‘fiberhoods,’ Google surveys a neighborhood before committing to build and asks for deposits from would-be customers in order to bring Google Fiber to their neighborhood. Once they have received enough interest/deposits, they build the last mile to that neighborhood. In effect, Google has built in desired penetration performance before they even build the most expensive part of a FTTH network – the last mile.
These are tactics that past overbuilders and incumbents weren’t able to exercise. Pesky rules like franchise build out requirements and carrier-of-last-resort regulations prevented it. Some critics of Google Fiber and the cities that allow them to deploy it label this approach as sanctioned ‘cherry picking.’
Bernstein Research conducted a door-to-door survey in five Kansas City neighborhoods where Google has deployed. In one of these neighborhoods, Wornall Homestead, Bernstein found an 83% penetration for Google Fiber. About 15% subscribed to Google’s double play of broadband and TV, priced at $120/month (to start), and 52% opted for the 1 gig broadband-only option, priced at $70/month. An additional 15% opted for the ‘free’ Google 5 Mbps broadband offer.
Wornall Homestead is a high income neighborhood, which contrasted with lower income neighborhood performance, where Google saw 27% penetration, which is still quite reasonable for an overbuilder. Based on these results, Bernstein predicts Google could achieve 50% penetration for Google Fiber in all of Kansas City within the next 4 years.
Regardless of how Google achieved these numbers, their competitors are taking notice. Some, like AT&T, are mimicking the approach with their GigaPower FTTH project. Others, particularly cable companies, are upping broadband speeds and blanketing markets with WiFi. Smaller service providers like C Spire are also following Google’s lead, particularly with the fiberhood approach.
Google’s impact is undeniable and policy makers like to cite them as a desirable standard. What they are accomplishing is impressive. But it’s important to put it into context, especially when comparing it to historical approaches to FTTH, and overbuilding in general.