Google Fiber augments Alphabet's revenues, but also raises capital expenditures

Google Fiber helped increase revenue in Alphabet's (NASDAQ: GOOG) "Other Bets" business by 108 percent in the first quarter, the company said, but it also pushed up the company's capital expenditures in that division to $280 million for the period.

Executives for Alphabet -- the new umbrella corporate name for Google that covers all of the company's various businesses and experimentations -- explained that the company's capex is naturally increasing as it works to expand it fiber network across almost two dozen U.S. cities.

The rising capex is "primarily about continuing to execute on those cities," explained Ruth Porat, Alphabet's CFO, during the company's quarterly conference call yesterday, according to a transcript of the event from Seeking Alpha. "We now are up to 22 announced cities, two most recent announcements being some buildings. We're bringing fiber to like buildings in San Francisco and we're working with the City of Huntsville."

Specifically, Alphabet reported that revenue from its Other Bets unit clocked in at $166 million, up 108 percent versus last year. The company said that the revenue was generated primarily by its Nest, Verily and Fiber operations. Operating loss in that division was $657 million, and Other Bets' capex during the period was $280 million "primarily reflecting ongoing investment in our Fiber business," Porat explained.

Also during the call, Porat offered some brief but generally vague comments on Alphabet's overall Google Fiber strategy. "Our vision here is to create abundant and ubiquitous networks," he said. "We think there's a lot of opportunity to improve the experience that users have, and that's where the Fiber team is focused."

Added Porat: "And in terms of the early learnings [in Google Fiber], there have been a lot. As I talked about on the last quarter call, we've really continued to refine and enhance our go-to-market strategy, the way we're working with cities, the way we're building out those cities and really the level of technology and innovation that we can use to differentiate the offering and are pleased with the ongoing efforts there."

While Alphabet continues to push Google Fiber, some public interest groups appear to be souring on the company's approach to the fiber market. The president of the Taxpayers Protection Alliance recently accused the company of "corporate welfare" because it is getting cheap access to fiber networks initially built by cities.

"What's happening in Huntsville right now is what set off the red flags for me," TPA President David Williams told Watchdog, explaining that officials in Huntsville, Alabama, have said Google doesn't need to lay its own fiber services and can instead use the city's network. Watchdog added though that other public-interest officials don't see Google Fiber as a threat; the company itself declined to comment to the publication.

Overall, Alphabet's revenues for the first quarter came in at around $20 billion during the first quarter, primarily driven by the company's lucrative internet service business. The figure was above some analyst expectations, but the company's expenses also were higher than some predictions. Likely as a result, Alphabet's stock fell slightly after the company's quarterly report.

For more:
- see this Alphabet release
- see this transcript
- see this WSJ article
- see this Watchdog article

Related articles:
Google Fiber begins FTTH construction in San Antonio, but can't confirm service delivery timeline
Google Fiber unveils 25 Mbps broadband plan for low-income families
Google Fiber signs agreement for fiber huts in Portland, Ore., moving gigabit plans forward

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