AT&T might challenge Google Fiber with high-speed Internet service in KC
04/22/2014 12:16 AM
04/22/2014 12:16 AM
AT&T Inc. took a swing at Google Inc. on Monday.
The telecommunications behemoth announced it may challenge the Internet search titan on turf that is new to both — the sale of industrial-strength Internet hookups to the home.
Both might soon fight over bandwidth-hungry customers in Kansas City. AT&T said the market is one of 24 it is considering for expansion of broadband speeds reaching 1 gigabit per second. That would be nearly 100 times faster than the national average for home consumers.
The two companies had already begun a low-stakes tussle over the fledgling market for high-speed household Internet connections in Austin, Texas.
AT&T’s move Monday signaled a push to nationalize the market, possibly leapfrogging Google Fiber.
For years, the home Internet business has been the domain of phone and cable TV companies that typically said they saw little evidence that ordinary consumers wanted so much broadband.
Google Fiber was seen as an attempt to goad those companies into offering swifter Internet connections. If AT&T takes such a service nationwide, upgrading its U-verse into a service called GigaPower, the rest of the industry could follow suit.
“The scope of this effort simply takes your breath away,” said technology industry analyst Jeff Kagan. “This is the most ambitious plan we have seen to date.”
Cities that want AT&T, the company suggested, should consider cutting regulatory red tape the way thatKansas City-area communities have for Google Fiber.
“We’re interested in working with communities that appreciate the value of the most advanced technologies and are willing to encourage investment by offering solid investment cases and policies,” Lori Lee, an AT&T senior executive vice president, said in a news release.
AT&T did little to clarify how it would decide whether markets meet its standard for the high-tech service. Company officials phoned many of the mayors in the cities AT&T had on its list for possible expansion. Yet city officials said those talks yielded few details.
Kansas City officials said they spoke briefly with AT&T executives Monday and told them that the same deals made for Google Fiber would be available to make U-verse more robust. Cities in the market granted Google easy access to right-of-way property and often promised to expedite building permits and, sometimes, waive the fees that come with them.
Councilwoman Cindy Circo was instrumental in securing the deal that brought Google Fiber to Kansas City. Circo said the addition of gigabit service from AT&T would build on that win.
“This was the whole concept: to bring more choices to our constituents,” she said.
AT&T already is selling its GigaPower product in Austin, the second significant market where Google is building the service it debuted in Kansas City, Kan., in late 2012.
While Google had to build its network from scratch, AT&T would enter the race with some advantages.
U-verse networks typically bring high-capacity fiberoptic cables into neighborhood “nodes.” From there, they run copper lines to homes. By replacing the last-mile copper with glass-fiber cables, AT&T would seem to catch up to Google.
More than 100,000 customers in Kansas City already subscribe to AT&T’s U-verse service, which sells cablelike television, Internet access and landline phone service.
Google Fiber does not sell telephone service. It has largely completed construction to Kansas City, Kan., and a central swath of Kansas City. It now is recruiting more customers in northern and southern thirds of the city and in Grandview, Raytown and Gladstone. Google says it expects to complete installations in those areas by year’s end.
AT&T said it will decide where to take GigaPower based on where demand for the faster Internet justifies the investment and where regulation eases that construction.
Likewise, Google has only been willing to sell its fiber-based service in neighborhoods where it was convinced enough customers would buy. Previous Internet service providers typically worked under franchise agreements that required them to offer the connections across an entire city.
AT&T suggested in its news release that it will sell a service to businesses. Last week, Google Fiber said it planned to launch a pilot program testing its service for small businesses in Kansas City.
AT&T said it will consult with officials in Kansas City, Kansas City, Kan., Overland Park, Leawood, Shawnee and Independence. Google Fiber has not yet made agreements to expand into either Overland Park or Independence.
Google’s experience in Overland Park has been troubled. First, the company thought it had a deal, but questions at a City Council meeting caused a delay. A month later, city officials were ready to agree to the previous terms. But Google walked away, saying it would return, but not saying when.
That could mean AT&T might beat Google to the lucrative Overland Park customer base, much of which already subscribes to U-verse.
“It could mean more competition for us,” said Sean Reilly, a city spokesman. “That’s good.”
Time Warner Cable, AT&T and Consolidated Communications (the former SureWest) already sell Internet service in Overland Park.
Google Fiber has so far expanded from Kansas City to two other markets. It purchased an existing network in Provo, Utah, that reaches directly to homes with high-capacity fiberoptic lines. Its service is already being sold there. It announced plans to build fiber-to-the-home network in Austin, with pricing identical to what it offers in Kansas City.
As soon as Google Fiber said it would hunt for customers in Austin, AT&T announced plans to piece together a similar network there. The telecommunications giant is based in Texas. Its U-verse system already brought fiberoptic lines to individual neighborhoods in the Texas capital. Building the GigaPower system meant extending the fiber optic wires directly to homes. AT&T has already begun selling the service. Google has not, and its construction in Austin has fallen behind schedule.
So far, Austin’s U-verse customers can only purchase Internet access at speeds of 300 megabits per second. While that is slower than what Google Fiber offers, it still is far faster bandwidth than most American households can buy.
AT&T would not say how much it would charge for GigaPower in Kansas City or the 20 other potential markets. But in Austin, the company charges about $100 a month for standalone mega-bandwidth. It discounts that cost to $70 a month to customers who let the company monitor Internet behavior to produce more targeted advertising.
Google offers three plans in Kansas City and Austin. For a $300 installation fee, or $25 a month over the first year, it sells relatively slow Internet connections and with a promise of service but no further charges for the first seven years.
For $70 a month, on a one-year contract, Google sells its gigabit hook-ups. They are distinctive because they deliver massive broadband connections at a household price.
For $120 a month on two-year contracts, Google bundles the faster Internet with a conventional TV subscription. In Austin, AT&T charges the same amount for a similar package, although it throws in premium channels for the first 36 months.
Earlier this spring, Google Fiber said it was exploring expansion to nine more markets. AT&T is now looking to test the waters in all of those markets except for Portland, Ore., Phoenix and Salt Lake City. Notably, AT&T is considering some larger markets than Google, including Chicago and Los Angeles.
Google, an advertising giant that profits the more people use the Internet, issued an encouraging statement Monday in response to the AT&T news.
“The more people who have access to faster Internet, the better,” Google said in an email. “More competition and choice in cities across America should help keep prices low and speeds high.”