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The author's entire argument is that you cannot possibly be excited about being purely a "dumb pipe" company that just sells commodity internet/telecom access (

The author's entire argument is that you cannot possibly be excited about being purely a "dumb pipe" company that just sells commodity internet/telecom access (unless you are a government-granted monopoly - then you are no longer a commodity and you have pricing power!). Google is so successful at the OTT/services level that it could easily build out the fiber infrastructure underneath its internet empire if it wanted to. But it doesn't want to because there's no profit in that! And it's a messy, government-regulation-filled industry that is becoming less and less profitable YoY. It boils down to: Dumb pipes are a cost center. OTT/services are a revenues center. Why build your own roads when you can use others? As long as the government keeps those roads in good repair. And Google has a lot of friends in Washington D.C. ;)

PaulHoule 10y ago
I disagree. Verizon makes $10 a gigabyte from mobile data. Multiple news articles lately have pointed out that Verizon makes orders of magnitude more money from running "dumb pipes" than does EVERYBODY else in the mobile advertising ecosystem put together, including the content companies. In fact, if Verizon rebated 5% or so of the data charges back to mobile web sites, mobile web sites would have a much more lucrative business than they have with advertising today. (And if Verizon did that, they'd have the media in their pocket, just as Google does today -- between the ad revenue Google brings in and the fact they can make your traffic go away, even the New York Times is afraid to confront Google) The mobile phone and internet business is also highly profitable. If you believe the advertising you see you might think it is competitive, but it is not. Just try using satellite internet and paying the high cost per GB. Google does not want to get into VZ's business because it is a capital intensive business. The great thing about Google, Facebook and such is that they have tiny workforces and a small amount of hardware -- if you can get your users to make content for free you don't have to pay writers, actors, directors, makeup artists, etc. Telecoms buy spectrum in auctions for the same reason why Google hires so many engineers -- to keep them away from competitors. Wireless as it is is the perfect rent-seeking industry as it has government barriers to entry. Overbuilding any kind of wired internet infrastructure is a brutal business today because of the latent competition; where I live Frontier charges $95 a month for something that makes cable look like the Jetsons. They are paying huge dividends to the stockholders because they can do that with 0 investment. They could afford to offer the same for $45 or less a month and they would if you brought in anything better. The other issue is that companies do not enter into mergers rationally. Time and time again you see that mergers destroy value.
- roymurdock 10y ago
  > Multiple news articles lately have pointed out that Verizon makes orders of magnitude more money from running "dumb pipes" than does EVERYBODY else in the mobile advertising ecosystem put together, including the content companies. Then what is the rationale for buying one of these failing content companies, Yahoo, for $4.8b? > Google does not want to get into VZ's business because it is a capital intensive business As is cloud computing, but Google is forging ahead with GCP. This also doesn't square with your previous point that the ISP business is seriously profitable - if it was, Google would be rolling fiber out nationwide, as it has the cash to spend on capital-intensive project if it sees a high NPV in doing so. But it doesn't, so it just rolls out fiber to support select Google endeavors and keep the major carriers somewhat in check.
- jldugger 10y ago
  > Google does not want to get into VZ's business because it is a capital intensive business. Lolwat? Google builds multiple datacenters full of computers, sells access to them to other people, has bought a lot of dark fiber, and sells internet to home consumers in Kansas City. These are fairly capital intensive operations, but apparently Google execs have deemed them sufficiently valuable. It's kinda interesting how Verizon FiOS and other incumbant telco offerings are incredibly unpopular, while people are lining up for Google's Fiber service. > The great thing about Google, Facebook and such is that they have tiny workforces and a small amount of hardware -- Verizon reports 177k employees, to Google's 51k. Google is smaller, but not as small as people might imagine, and if they continue rolling out Fiber and Fi, I can only imagine their footprint will grow. > The mobile phone and internet business is also highly profitable. If you believe the advertising you see you might think it is competitive, but it is not. Just try using satellite internet and paying the high cost per GB. It must be, because the only place I can think of where Google is buying not building is their cellular network offering, which multiplexes Sprint, T-Mobile, and US Cellular. MNOs have made it so easy to be a Virtual, Google would be foolish to bother rolling out their own infra until their subscriber base grows.
  - jpalomaki 10y ago
    I believe the logic behind Google Fiber is to just push the competitors to a direction that is beneficial for Google. A little bit like what they did with Chrome. To my understanding the point in Chrome was not to dominate the browser market, but affect the direction of browsers in general (fast Javascript execution, standards compliance, just a chrome for the content and not big-fat-portal-style experience).
shanacarp 10y ago
yet publishers overall struggle because it is hard to predict what content will work tomorrow and get perfect loyalty always. Man, that era wheen there was just 4 tv networks was something in comparison when thinking about this comment

PaulHoule 10y ago

I disagree. Verizon makes $10 a gigabyte from mobile data. Multiple news articles lately have pointed out that Verizon makes orders of magnitude more money from running "dumb pipes" than does EVERYBODY else in the mobile advertising ecosystem put together, including the content companies. In fact, if Verizon rebated 5% or so of the data charges back to mobile web sites, mobile web sites would have a much more lucrative business than they have with advertising today. (And if Verizon did that, they'd have the media in their pocket, just as Google does today -- between the ad revenue Google brings in and the fact they can make your traffic go away, even the New York Times is afraid to confront Google) The mobile phone and internet business is also highly profitable. If you believe the advertising you see you might think it is competitive, but it is not. Just try using satellite internet and paying the high cost per GB. Google does not want to get into VZ's business because it is a capital intensive business. The great thing about Google, Facebook and such is that they have tiny workforces and a small amount of hardware -- if you can get your users to make content for free you don't have to pay writers, actors, directors, makeup artists, etc. Telecoms buy spectrum in auctions for the same reason why Google hires so many engineers -- to keep them away from competitors. Wireless as it is is the perfect rent-seeking industry as it has government barriers to entry. Overbuilding any kind of wired internet infrastructure is a brutal business today because of the latent competition; where I live Frontier charges $95 a month for something that makes cable look like the Jetsons. They are paying huge dividends to the stockholders because they can do that with 0 investment. They could afford to offer the same for $45 or less a month and they would if you brought in anything better. The other issue is that companies do not enter into mergers rationally. Time and time again you see that mergers destroy value.

roymurdock 10y ago
> Multiple news articles lately have pointed out that Verizon makes orders of magnitude more money from running "dumb pipes" than does EVERYBODY else in the mobile advertising ecosystem put together, including the content companies. Then what is the rationale for buying one of these failing content companies, Yahoo, for $4.8b? > Google does not want to get into VZ's business because it is a capital intensive business As is cloud computing, but Google is forging ahead with GCP. This also doesn't square with your previous point that the ISP business is seriously profitable - if it was, Google would be rolling fiber out nationwide, as it has the cash to spend on capital-intensive project if it sees a high NPV in doing so. But it doesn't, so it just rolls out fiber to support select Google endeavors and keep the major carriers somewhat in check.
jldugger 10y ago
> Google does not want to get into VZ's business because it is a capital intensive business. Lolwat? Google builds multiple datacenters full of computers, sells access to them to other people, has bought a lot of dark fiber, and sells internet to home consumers in Kansas City. These are fairly capital intensive operations, but apparently Google execs have deemed them sufficiently valuable. It's kinda interesting how Verizon FiOS and other incumbant telco offerings are incredibly unpopular, while people are lining up for Google's Fiber service. > The great thing about Google, Facebook and such is that they have tiny workforces and a small amount of hardware -- Verizon reports 177k employees, to Google's 51k. Google is smaller, but not as small as people might imagine, and if they continue rolling out Fiber and Fi, I can only imagine their footprint will grow. > The mobile phone and internet business is also highly profitable. If you believe the advertising you see you might think it is competitive, but it is not. Just try using satellite internet and paying the high cost per GB. It must be, because the only place I can think of where Google is buying not building is their cellular network offering, which multiplexes Sprint, T-Mobile, and US Cellular. MNOs have made it so easy to be a Virtual, Google would be foolish to bother rolling out their own infra until their subscriber base grows.
- jpalomaki 10y ago
  I believe the logic behind Google Fiber is to just push the competitors to a direction that is beneficial for Google. A little bit like what they did with Chrome. To my understanding the point in Chrome was not to dominate the browser market, but affect the direction of browsers in general (fast Javascript execution, standards compliance, just a chrome for the content and not big-fat-portal-style experience).

shanacarp 10y ago

yet publishers overall struggle because it is hard to predict what content will work tomorrow and get perfect loyalty always. Man, that era wheen there was just 4 tv networks was something in comparison when thinking about this comment