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> Their network architects are not idiots or anything Google architects aren't idiots either are they? What did Google hope to achieve? Or did they really go i

by efa 10y ago

> Their network architects are not idiots or anything Google architects aren't idiots either are they? What did Google hope to achieve? Or did they really go into this naively thinking it could be done? Serious question - I haven't followed this very closely. Was this all a test bed to see what type of apps could be built with ubiquitous high speed access?

exelius 10y ago
I don't think they were idiots; but Google's whole operating model is built around taking Very Smart People and throwing them at Hard Problems. Sometimes, a problem may seem to be ripe for disruption because it is held back by what seems like a lot of legacy overhead. The assumption is that you can come in with a different approach, and change the operating model to the point you end up with a structural cost advantage over your competitors. And sometimes that doesn't happen. What may have looked like a stodgy and ripe-for-disruption industry may actually be one with huge logistical challenges that force the industry to be stodgy and slow -- not the other way around. Still, it was a good bet for Google as part of a portfolio strategy: if you make 10 of these types of bets and only 2 of them pan out, you're still doing pretty well. It's not always obvious which industries are ripe for disruption and which ones are held back by market forces and product constraints. I think they saw it as "Maybe we can find a new model that can disrupt the market, maybe not, but at the bare minimum we can force the ISPs to do better which benefits every other service we provide." They never provided Google Fiber with the kind of investment it would have taken to be successful on a large scale -- Verizon spends more money on its network in 3 days than Google Fiber spent in its entire existence -- so I don't think they seriously thought it would end up as a success. It's also a big CapEx investment in infrastructure, which has a pretty good salvage value if sold to other telecoms (so they'll likely get a good portion of their investment in GF back). At the end of the day if they end up losing $20-30 million on the whole Fiber deal, they'd call it a success for raising the mindshare of what consumer Internet can and should be. It also won Google a lot of points in the court of public opinion against the major ISPs, so as a marketing / PR exercise it was likely a positive contribution to Google.
- efa 10y ago
  Thanks for your thoughts. Raising the mindshare sounds like they are just doing a public service out of the goodness of their heart. But you are right, it can't hurt them in the court of public opinion.
  - exelius 10y ago
    It's not even about that. Google's services are delivered over the Internet, so they're reliant on someone else to deliver their traffic (and advertisements). Their corporate strategy playbook in those cases is to either commoditize or disintermediate their market dependencies. In this case, I think they were looking at Fiber more as a "model" for other overbuilders (similar to what they did with the Nexus phones). If Fiber was as successful as Google had hoped, they'd probably open source their operational model since it would effectively commoditize the last-mile access business and give Google more negotiating power with ISPs (without having to invest a ton of money). It was never a business they wanted to be in long-term. Obviously, it didn't work out the way they had hoped. My guess is that subscribers didn't flock to them the way they had imagined. The Internet is a big echo chamber on this issue; and of course anyone commenting on an Internet forum is going to be technologically adept enough to care about Gigabit broadband. If their market analysis was done online, I can see how they might get false signals due to a sample set of "frequent Internet users" rather than "people who pay for Internet access". It's a subtle distinction, but actually quite relevant since the people who pay for but don't use Internet access often are the ones who make the whole model work. When you get out into the real world where telecom service is measured in homes passed and take rates, you realize that those "vocal Internet users" make up maybe 10-20% of the market. ISPs make the bulk of their profits from Grandma Mabel who pays $70/mo for a triple play bundle and uses 100 MB of traffic a month. Households like Grandma Mabel account for probably half of an ISPs customers, and Grandma Mabel is not going to get any additional benefit from Gigabit Internet -- so she's not going to pay any more for it. The big ISPs haven't offered gigabit residential service until recently because there was simply not enough demand for it to justify the expense. I think Google assumed that was just a negotiating position, and that there was a larger, unserved demand for high-speed residential connections. But either way, faster Internet is better for Google's core businesses (YouTube, search, etc.) When you own 70%+ of your market like Google does, you become more concerned with growing the market overall than with growing your share. And considering broadband infrastructure is a capital investment that holds its value pretty well, they honestly had very little to lose. But it's telling that they never invested more than a pittance into the Fiber project as a whole.

by efa 10y ago

exelius 10y ago

I don't think they were idiots; but Google's whole operating model is built around taking Very Smart People and throwing them at Hard Problems. Sometimes, a problem may seem to be ripe for disruption because it is held back by what seems like a lot of legacy overhead. The assumption is that you can come in with a different approach, and change the operating model to the point you end up with a structural cost advantage over your competitors. And sometimes that doesn't happen. What may have looked like a stodgy and ripe-for-disruption industry may actually be one with huge logistical challenges that force the industry to be stodgy and slow -- not the other way around. Still, it was a good bet for Google as part of a portfolio strategy: if you make 10 of these types of bets and only 2 of them pan out, you're still doing pretty well. It's not always obvious which industries are ripe for disruption and which ones are held back by market forces and product constraints. I think they saw it as "Maybe we can find a new model that can disrupt the market, maybe not, but at the bare minimum we can force the ISPs to do better which benefits every other service we provide." They never provided Google Fiber with the kind of investment it would have taken to be successful on a large scale -- Verizon spends more money on its network in 3 days than Google Fiber spent in its entire existence -- so I don't think they seriously thought it would end up as a success. It's also a big CapEx investment in infrastructure, which has a pretty good salvage value if sold to other telecoms (so they'll likely get a good portion of their investment in GF back). At the end of the day if they end up losing $20-30 million on the whole Fiber deal, they'd call it a success for raising the mindshare of what consumer Internet can and should be. It also won Google a lot of points in the court of public opinion against the major ISPs, so as a marketing / PR exercise it was likely a positive contribution to Google.

efa 10y ago
Thanks for your thoughts. Raising the mindshare sounds like they are just doing a public service out of the goodness of their heart. But you are right, it can't hurt them in the court of public opinion.
- exelius 10y ago
  It's not even about that. Google's services are delivered over the Internet, so they're reliant on someone else to deliver their traffic (and advertisements). Their corporate strategy playbook in those cases is to either commoditize or disintermediate their market dependencies. In this case, I think they were looking at Fiber more as a "model" for other overbuilders (similar to what they did with the Nexus phones). If Fiber was as successful as Google had hoped, they'd probably open source their operational model since it would effectively commoditize the last-mile access business and give Google more negotiating power with ISPs (without having to invest a ton of money). It was never a business they wanted to be in long-term. Obviously, it didn't work out the way they had hoped. My guess is that subscribers didn't flock to them the way they had imagined. The Internet is a big echo chamber on this issue; and of course anyone commenting on an Internet forum is going to be technologically adept enough to care about Gigabit broadband. If their market analysis was done online, I can see how they might get false signals due to a sample set of "frequent Internet users" rather than "people who pay for Internet access". It's a subtle distinction, but actually quite relevant since the people who pay for but don't use Internet access often are the ones who make the whole model work. When you get out into the real world where telecom service is measured in homes passed and take rates, you realize that those "vocal Internet users" make up maybe 10-20% of the market. ISPs make the bulk of their profits from Grandma Mabel who pays $70/mo for a triple play bundle and uses 100 MB of traffic a month. Households like Grandma Mabel account for probably half of an ISPs customers, and Grandma Mabel is not going to get any additional benefit from Gigabit Internet -- so she's not going to pay any more for it. The big ISPs haven't offered gigabit residential service until recently because there was simply not enough demand for it to justify the expense. I think Google assumed that was just a negotiating position, and that there was a larger, unserved demand for high-speed residential connections. But either way, faster Internet is better for Google's core businesses (YouTube, search, etc.) When you own 70%+ of your market like Google does, you become more concerned with growing the market overall than with growing your share. And considering broadband infrastructure is a capital investment that holds its value pretty well, they honestly had very little to lose. But it's telling that they never invested more than a pittance into the Fiber project as a whole.