Google Fiber should not be ignored as an experiment, says analyst firm

Google Fiber's 1 Gbps service may be only available in a small amount of markets, but a new Bernstein Research study said that large telcos like AT&T (NYSE: T) and CenturyLink (NYSE: CTL) should see the Internet giant's FTTH initiative as a credible threat.

According to door-to-door survey it conducted in Kansas City, Mo., Bernstein estimates Google Fiber has gained a penetration of nearly 20 percent of homes passed since launching the service, giving it a path to surpass 40 percent of homes and gain attractive return on investments.

What Google has been successful with is driving other large telcos, particularly AT&T, to adjust the pricing of its own 1 Gbps service in markets where it competes with the Internet search giant.

AT&T prices its 1 Gbps service differently in these areas and the lower rates appear wherever Google Fiber offers its $70 a month service. In markets such as Charlotte and Raleigh-Durham, N.C., two markets where Google Fiber is present, users play $70 per month for AT&T's GigaPower, for example.

Carlos Kirjner, a senior analyst with Bernstein, said AT&T and CenturyLink could be "particularly vulnerable to Google targeting" due to the size of their wireline footprints and the challenging of scaling further 1 Gbps deployments.

Further, Bernstein said that Google Fiber could take between 40 to 50 percent market share in the markets where it currently offers service. This is a factor that could impact the nearly dozen cities and towns where it wants to bring the service.

"We have increased conviction that Google's main motivation to deploy Google Fiber is its belief that it has a better-than-good chance to build a profitable local-access competitor," said Kirjner.

Today, Google Fiber's 1 Gbps service is available in Austin, Kansas City, Kan. and Kansas City, Mo., and Provo, Utah. It is also building out service in Charlotte, Raleigh/Durham, Nashville, Salt Lake City, Atlanta and San Antonio. The service provider also appears to be close to announcing Portland, Ore. as another market as that city's officials are now reviewing applications for 7 fiber huts it will deploy to deliver service to each home. In addition, Google Fiber has named Louisville, Ky., Irvine, Calif., and San Diego as other target markets.

Bernstein said it could see the Google Fiber "experiment" scaling to 15 million to 20 million homes within six to eight years.

For more:
- Multichannel News has this article

Related articles:
AT&T lowers 1 Gig prices in markets where it faces Google Fiber
Google's fiber hut proposals enter review process with Portland city council
Report: Google Fiber says Oregon tax bill will make serving Portland 'extremely unlikely'
CenturyLink poses new threat to Google with Portland, Ore., video franchise

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