Google giving away free Fiber as CapEx for the service set to increase

Google Fiber (NASDAQ: GOOG) kicked off plans to offer free or reduced-cost 1 Gbps Internet service by wiring up 100 families in the West Bluff community of Kansas City, Missouri.

In Kansas City alone, Google Fiber intends to connect 1,300 families in the metro area. In the future, Google Fiber plans to implement similar programs in all of its markets, as well as find local partners to help invest in computer labs and digital literacy courses.

The effort is part of Google's involvement with ConnectHome, a White House and U.S. Department of Housing initiative geared toward shrinking the digital divide for low-income families that cannot afford in-home broadband service.

The push to give away Google Fiber comes as Alphabet, Google's parent company, is seeing revenue growth for the service. Other Bets—Alphabet's business unit that houses Fiber, Nest, self-driving cars and other projects—saw its full-year 2015 revenue jump to $448 million, a 37-percent annual increase driven largely by Google Fiber.

But that revenue was overshadowed by full-year CapEx for Other Bets which totaled $869 million, again driven largely by Google Fiber.

Google CFO Ruth Porat expects that CapEx total, and particularly Fiber's portion, to ramp up in 2016. "In Other Bets, the majority of CapEx supports the ongoing deployment of Google Fiber. We're still operating in only a few cities, but have announced plans for additional cities, which we expect will be reflected in 2016 CapEx," Porat said during a Feb. 1 earnings call, according to a Seeking Alpha transcript.

In 2015, Google Fiber made efforts to measure as it worked in order to enhance the construction process and identify efficiencies, as well as continue developing relationships with cities and establishing protocols with construction crews, representing a streamlining of the Fiber deployment process which could help control future CapEx bloat.

Google Fiber is currently up and running in Kansas City; Austin, Texas; and Provo, Utah. The service plans to launch in Atlanta, GA; Charlotte, N.C.; Nashville, Tenn.; Raleight-Durham, N.C.; Salt Lake City, Utah; and San Antonio, Texas. Google Fiber is also eying deployment in major markets including Chicago, Los Angeles, and Phoenix.

For more:
- read this Google Fiber blog post
- see this Seeking Alpha transcript

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