10 ms·

Damn, one time $300 fee for "Up to" 5 Mbps download and 1 Mbps upload. That's like getting free internet for 6 and a half years[1] from current providers after

Damn, one time $300 fee for "Up to" 5 Mbps download and 1 Mbps upload. That's like getting free internet for 6 and a half years[1] from current providers after 6 months. And if you want to upgrade you've already got the hardware. I wonder what the minimum time of undercutting at a loss service they can offer is without it being considered anti-competitive. [1] They guarantee 7 years of free service https://fiber.google.com/cities/austin/plans/#plan=free https://fiber.google.com/cities/austin/plans/#plan=free

JoshTriplett 12y ago
Once you've paid for the equipment, I suspect that price isn't actually a loss for Google. The bandwidth would be dirt cheap compared to gigabit ($0.35/month scaled down linearly from the gigabit rate of $70/month), and I wouldn't find it at all surprising if they make that much on the average Internet user.
josu 12y ago
Is there any evidence that they are operating at a loss? For 2013 Comcast reported 13.5 billion operating income on 64.6 revenue [1]. This means that they could potentially lower their prices 20% without incurring in losses. If we assume that Google is able to operate more efficiently, which isn't such a bold assumption, they could potentially undercut prices even more. On top of that, we could also assume that in terms of infraestructure the cost of offering 10mbps is simillar to offering 1 gbps. So I'm not that sure that they are operating at a loss. [1] http://files.shareholder.com/downloads/CMCSA/3686143613x0xS1193125-14-47522/1166691/filing.pdf http://files.shareholder.com/downloads/CMCSA/3686143613x0xS1...
- wmf 12y ago
  Everybody other than Google reports that installing fiber costs over $1,000 per home, but Google is selling it for $300 and saying "trust us".
  - deleted 12y ago
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  - rhino369 12y ago
    There are really two costs for installing fiber. The cost to drag it past your house, which is expensive, probably over 1000. And the cost to bring it from your curb to your house. I've heard 500 for that, but it could around 300. Or google could just think of it as an advertising cost.
    - exelius 12y ago
      The $500 figure is probably correct - I'm guessing Google is assuming a conversion rate of some of those customers at $300 turning into paying customers, and thus they'll get back part of the subsidy. 5mbit internet blows, and most people will probably want to upgrade.
    - ericd 12y ago
      I would happily pay that cost up front in exchange for a guarantee of being charged just the service cost afterwards. If only that was an option on the gigabit side.
  - runeks 12y ago
    You can't really generalize about per-installation costs. Digging fiber out to several houses is much more expensive than digging over to a 200-apartment complex, which lets you split the bill for laying fiber between 200 people. In Copenhagen, Denmark, my apartment complex just got connected for 3800 DKK per apartment. And that's in a country with fairly high wages and 25% VAT. For similar apartment complexes (large ones, close to each other), in the US (where labor is cheaper and there isn't 25% VAT), I imagine Google can easily do less $500 per apartment, and possibly reach $300. Provided Google doesn't have to pay a tonne in fees to get to lay fiber in the ground (which is probably why it's only available in select locations).
    - adventured 12y ago
      Labor is cheaper in the US? Can you provide some data on that, I understood labor was cheaper in Denmark. From what I've seen the median income in the US is about 20% higher than in Denmark.
- deleted 12y ago
  [deleted]
- rayiner 12y ago
  Comcast is reporting 20% operating income for a network that is largely already paid for. There's reasons to believe that Verizon isn't doing a great job recouping it's up-front costs on FiOS: http://www.businessweek.com/magazine/content/11_13/b4221046109606.htm http://www.businessweek.com/magazine/content/11_13/b42210461.... For the FiOS rollout, the capital costs alone are $1,000-2,000 per house: http://nypost.com/2010/04/01/why-i-think-verizon-had-to-pull-the-plug-on-fios http://nypost.com/2010/04/01/why-i-think-verizon-had-to-pull.... There's no reason to believe that Google's per-household costs are any less. These companies all likely outsource to the same local companies that put fiber in the ground. To the extent that Google has an advantage, it's with uptake rates. Verizon and Comcast have to wire whole cities, pursuant to build-out clauses in local franchises. Google refuses to accept such clauses, and only builds in neighborhoods with demonstrated interest. The economics of building fiber make this a huge advantage. Most of the cost of building the network is in passing by the house, which is a cost you pay whether or not the house subscribes. If your uptake rate is 40% versus 20%, your per-house capital cost drops dramatically.
  - pixl97 12y ago
    How is that income figured exactly. I mean, doesn't every major movie seem to lose money even after raking in billions? I just don't trust any number from Comcast without a large volume of information on how those numbers were calculated. And at that, that doesn't explain how Comcast even stayed in business till that point? Were they allowed to install their networks at a loss? Are there costs artificially high? Are they claiming TV programming costs in their figures?
    - rayiner 12y ago
      A better example is probably Charter, which doesn't have the noise of the media/movie business: http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-reportsannual http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-re.... Look at page 54 of their 2013 10-K. Their revenues were $8.15 billion (just over $100 per customer, for the whole year). $5.35 billion in operating costs, and $1.85 billion in depreciation and amortization (the loss in value of the capital in the ground). $925 million in net income on that revenue (11%). What's really shocking is that their revenue per customer relationship is under $130 per year. That's the result of something else pundits ignore: cable company franchise agreements require them to build out to neighborhoods where many subscribers just get basic cable, which is usually subject to a regulated rate of just $10-20 dollars/month. Looking at just the ISP business makes the numbers look worse. $4 billion of the revenue is from video, while $2 billion of the costs are for programming (see page F-10). If you take out the video revenue, you're down to $4.15 billion in revenue, with about $5.15 billion in expenses (i.e. you're losing a billion dollars a year). Ultimately, of course, after paying interest on debt Charter lost money for the year. The idea that cable companies are wildly profitable is an HN myth.
- exelius 12y ago
  Operating margin is a bad measure here. Net margin is a much better method because the telecom business is geographically constrained, meaning many of the tricks that technology companies use to avoid taxes (and thus boost profits) don't work in this industry. The revenue is generated in the US using assets that physically exist in the US, so it's a lot harder to dodge the taxes the way you can with IP assets. Comcast's net margin is closer to 12-14%. And I would say that it's a pretty bold assumption that Google would be able to operate more efficiently than that: Comcast is a mature company in a mature market. Comcast's RF broadcast technology has some limitations, but it also has benefits: relatively low operational costs being a big one of them. Both Verizon and AT&T tried an architectural approach that is quite similar Google's, and their deployments stalled because of platform scalability problems.z
- tim333 12y ago
  Google say they are not planning to operate at a loss. Re Kansas: "Several Google executives at the event were very clear that delivering gigabit internet access over fiber for $70 a month (and even free 5 Mbps fiber) is a business that will not only help advance Google’s consumer goals, but also make it money." I daresay it depends on what assumptions you make about future sign up rates, cost of capital and the like. https://gigaom.com/2012/07/26/the-economics-of-google-fiber-and-what-it-means-for-u-s-broadband/ https://gigaom.com/2012/07/26/the-economics-of-google-fiber-...
  - gohrt 12y ago
    Google may be factoring in their advertising revenue, averaged per website visited, or something like this. Not purely financed by connectioned fees.
tinalumfoil 12y ago
> That's like getting free internet for 6 and a half years from current providers after 6 months. Is internet in Kansas really that bad? I'm paying $50/month for 30/21 (I'm paying for 25/25 but oh well) here in New Jersey [0]. I can't imagine doing much with that internet besides basic web browsing. Even low-res video is choppy at that speed. [0] http://www.speedtest.net/my-result/3952406450 http://www.speedtest.net/my-result/3952406450
- madengr 12y ago
  Well, I'm in Overland Park, KS (KC suburb) and paying $120/month for 30/5 + static IP + phone. My provider (CCI) wired my area 10 years ago with hybrid fiber-coax, but within the last 5 years have used all fiber for up to 200/200. They'll never run run all fiber in my area unless pushed. Both Google and AT&T are wiring Overland Park with 1000/1000, so that ought to put CCI and Time-Warner's underwear in a bind.
- mayneack 12y ago
  Yes - My parents in mid-mo basically can't get anything faster than 5 down at any price. I know people who live outside city limits who can't even get that.
blueskin_ 12y ago
The main issue is finding a way to make use of 5mbit. You get what you pay for, I guess, and if you really can't afford anything better, 5mbit is probably better than anything else other ISPs offer for a similar price.
- bnt 12y ago
  As a person living and working with 600k-3mb/s - you can live with it fine.
- bluedino 12y ago
  When AT&T offers 6mbs and calls it broadband, everyone complains and wants the FCC to change the definition of broadband.

JoshTriplett 12y ago

Once you've paid for the equipment, I suspect that price isn't actually a loss for Google. The bandwidth would be dirt cheap compared to gigabit ($0.35/month scaled down linearly from the gigabit rate of $70/month), and I wouldn't find it at all surprising if they make that much on the average Internet user.

josu 12y ago

Is there any evidence that they are operating at a loss? For 2013 Comcast reported 13.5 billion operating income on 64.6 revenue [1]. This means that they could potentially lower their prices 20% without incurring in losses. If we assume that Google is able to operate more efficiently, which isn't such a bold assumption, they could potentially undercut prices even more. On top of that, we could also assume that in terms of infraestructure the cost of offering 10mbps is simillar to offering 1 gbps. So I'm not that sure that they are operating at a loss. [1] http://files.shareholder.com/downloads/CMCSA/3686143613x0xS1193125-14-47522/1166691/filing.pdf http://files.shareholder.com/downloads/CMCSA/3686143613x0xS1...

wmf 12y ago
Everybody other than Google reports that installing fiber costs over $1,000 per home, but Google is selling it for $300 and saying "trust us".
- deleted 12y ago
  [deleted]
- rhino369 12y ago
  There are really two costs for installing fiber. The cost to drag it past your house, which is expensive, probably over 1000. And the cost to bring it from your curb to your house. I've heard 500 for that, but it could around 300. Or google could just think of it as an advertising cost.
  - exelius 12y ago
    The $500 figure is probably correct - I'm guessing Google is assuming a conversion rate of some of those customers at $300 turning into paying customers, and thus they'll get back part of the subsidy. 5mbit internet blows, and most people will probably want to upgrade.
  - ericd 12y ago
    I would happily pay that cost up front in exchange for a guarantee of being charged just the service cost afterwards. If only that was an option on the gigabit side.
- runeks 12y ago
  You can't really generalize about per-installation costs. Digging fiber out to several houses is much more expensive than digging over to a 200-apartment complex, which lets you split the bill for laying fiber between 200 people. In Copenhagen, Denmark, my apartment complex just got connected for 3800 DKK per apartment. And that's in a country with fairly high wages and 25% VAT. For similar apartment complexes (large ones, close to each other), in the US (where labor is cheaper and there isn't 25% VAT), I imagine Google can easily do less $500 per apartment, and possibly reach $300. Provided Google doesn't have to pay a tonne in fees to get to lay fiber in the ground (which is probably why it's only available in select locations).
  - adventured 12y ago
    Labor is cheaper in the US? Can you provide some data on that, I understood labor was cheaper in Denmark. From what I've seen the median income in the US is about 20% higher than in Denmark.
deleted 12y ago
[deleted]
rayiner 12y ago
Comcast is reporting 20% operating income for a network that is largely already paid for. There's reasons to believe that Verizon isn't doing a great job recouping it's up-front costs on FiOS: http://www.businessweek.com/magazine/content/11_13/b4221046109606.htm http://www.businessweek.com/magazine/content/11_13/b42210461.... For the FiOS rollout, the capital costs alone are $1,000-2,000 per house: http://nypost.com/2010/04/01/why-i-think-verizon-had-to-pull-the-plug-on-fios http://nypost.com/2010/04/01/why-i-think-verizon-had-to-pull.... There's no reason to believe that Google's per-household costs are any less. These companies all likely outsource to the same local companies that put fiber in the ground. To the extent that Google has an advantage, it's with uptake rates. Verizon and Comcast have to wire whole cities, pursuant to build-out clauses in local franchises. Google refuses to accept such clauses, and only builds in neighborhoods with demonstrated interest. The economics of building fiber make this a huge advantage. Most of the cost of building the network is in passing by the house, which is a cost you pay whether or not the house subscribes. If your uptake rate is 40% versus 20%, your per-house capital cost drops dramatically.
- pixl97 12y ago
  How is that income figured exactly. I mean, doesn't every major movie seem to lose money even after raking in billions? I just don't trust any number from Comcast without a large volume of information on how those numbers were calculated. And at that, that doesn't explain how Comcast even stayed in business till that point? Were they allowed to install their networks at a loss? Are there costs artificially high? Are they claiming TV programming costs in their figures?
  - rayiner 12y ago
    A better example is probably Charter, which doesn't have the noise of the media/movie business: http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-reportsannual http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-re.... Look at page 54 of their 2013 10-K. Their revenues were $8.15 billion (just over $100 per customer, for the whole year). $5.35 billion in operating costs, and $1.85 billion in depreciation and amortization (the loss in value of the capital in the ground). $925 million in net income on that revenue (11%). What's really shocking is that their revenue per customer relationship is under $130 per year. That's the result of something else pundits ignore: cable company franchise agreements require them to build out to neighborhoods where many subscribers just get basic cable, which is usually subject to a regulated rate of just $10-20 dollars/month. Looking at just the ISP business makes the numbers look worse. $4 billion of the revenue is from video, while $2 billion of the costs are for programming (see page F-10). If you take out the video revenue, you're down to $4.15 billion in revenue, with about $5.15 billion in expenses (i.e. you're losing a billion dollars a year). Ultimately, of course, after paying interest on debt Charter lost money for the year. The idea that cable companies are wildly profitable is an HN myth.
exelius 12y ago
Operating margin is a bad measure here. Net margin is a much better method because the telecom business is geographically constrained, meaning many of the tricks that technology companies use to avoid taxes (and thus boost profits) don't work in this industry. The revenue is generated in the US using assets that physically exist in the US, so it's a lot harder to dodge the taxes the way you can with IP assets. Comcast's net margin is closer to 12-14%. And I would say that it's a pretty bold assumption that Google would be able to operate more efficiently than that: Comcast is a mature company in a mature market. Comcast's RF broadcast technology has some limitations, but it also has benefits: relatively low operational costs being a big one of them. Both Verizon and AT&T tried an architectural approach that is quite similar Google's, and their deployments stalled because of platform scalability problems.z
tim333 12y ago
Google say they are not planning to operate at a loss. Re Kansas: "Several Google executives at the event were very clear that delivering gigabit internet access over fiber for $70 a month (and even free 5 Mbps fiber) is a business that will not only help advance Google’s consumer goals, but also make it money." I daresay it depends on what assumptions you make about future sign up rates, cost of capital and the like. https://gigaom.com/2012/07/26/the-economics-of-google-fiber-and-what-it-means-for-u-s-broadband/ https://gigaom.com/2012/07/26/the-economics-of-google-fiber-...
- gohrt 12y ago
  Google may be factoring in their advertising revenue, averaged per website visited, or something like this. Not purely financed by connectioned fees.

tinalumfoil 12y ago

> That's like getting free internet for 6 and a half years from current providers after 6 months. Is internet in Kansas really that bad? I'm paying $50/month for 30/21 (I'm paying for 25/25 but oh well) here in New Jersey [0]. I can't imagine doing much with that internet besides basic web browsing. Even low-res video is choppy at that speed. [0] http://www.speedtest.net/my-result/3952406450 http://www.speedtest.net/my-result/3952406450

madengr 12y ago
Well, I'm in Overland Park, KS (KC suburb) and paying $120/month for 30/5 + static IP + phone. My provider (CCI) wired my area 10 years ago with hybrid fiber-coax, but within the last 5 years have used all fiber for up to 200/200. They'll never run run all fiber in my area unless pushed. Both Google and AT&T are wiring Overland Park with 1000/1000, so that ought to put CCI and Time-Warner's underwear in a bind.
mayneack 12y ago
Yes - My parents in mid-mo basically can't get anything faster than 5 down at any price. I know people who live outside city limits who can't even get that.

blueskin_ 12y ago

The main issue is finding a way to make use of 5mbit. You get what you pay for, I guess, and if you really can't afford anything better, 5mbit is probably better than anything else other ISPs offer for a similar price.

bnt 12y ago
As a person living and working with 600k-3mb/s - you can live with it fine.
bluedino 12y ago
When AT&T offers 6mbs and calls it broadband, everyone complains and wants the FCC to change the definition of broadband.