Momentary stall in Overland Park puts Google Fiber on long hold
10/26/2013 4:54 PM
10/26/2013 4:54 PM
Overland Park’s momentary hesitation at signing a deal with Google has tanked a pact with the company indefinitely.
The tech giant’s Google Fiber division has moved on with plans to expand its ultra-fast Internet service elsewhere in the Kansas City market as it leaves — for now, anyway — perhaps the most lucrative customer base out of its calculations.
“We need to refocus our energy and our resources on the communities that are waiting for Fiber,” said company spokeswoman Jenna Wandres.
Earlier this fall, Google Fiber negotiated a tentative deal with Overland Park that would open the way for the company to sell its 1-gigabit-per-second Internet connections and cable-style TV service there.
The terms of the deal were highly similar to what the company negotiated across the market. It sought no direct subsidies and asked for some access to rights of way in return for free Internet service to public buildings such as schools and libraries.
Then the Overland Park City Council balked at its September meeting, concerned about whether an indemnification clause might someday leave the city with a bill to repair damage caused in the massive construction project. It put off a vote for a month.
The city’s legal staff consulted with the council on the liability issue. The council’s worries about indemnification went away. It was set to approve the Google Fiber agreement, unchanged, earlier this month.
Too late. Google was moving on.
Mayor Carl Gerlach said the council was surprised by Google’s call for an indefinite delay at the Oct. 14 meeting. Still, the council pointedly passed a resolution calling for Google Fiber to set up shop in the city.
“Overland Park wants Google Fiber,” Gerlach said this week. “The City Council is ready to sign on the dotted line. We’re willing to wait as long as it takes.”
But Wandres said the company had negotiated with Overland Park for nine months and assumed it had a deal in September. It could wait for Overland Park to come around, or move on. It’s chosen the latter.
“Speed matters. We’ve said that from the beginning,” Wandres said. “It’s all about timing.”
On Friday, she emphasized that Google Fiber still wants to eventually sell its service in Overland Park. She could not say, however, when talks with the city might resume.
In some ways, Google Fiber’s seeming impatience with the prosperous suburb mimics the firm’s broader approach to deploying in Kansas City and Kansas City, Kan. — building only in neighborhoods where demand was strong enough to justify the expense.
It could also be a signal to other cities that Google’s patience with local regulations have limits.
Milo Medin, Google’s vice president of access services, has said the company didn’t start its Google Fiber launch in California because environmental regulations made construction too pricey. Stringing fiber-optic lines directly to homes can involve stringing lines on new or existing utility poles, digging trenches and erecting small buildings to build the network.
“In general, we go where it’s easy to build,” he said in May. “If you make it hard for me to build, and there are other places where it’s easy to build, I will probably go to those other places.”
That may be the message Google is sending in its for-now snub of Overland Park.
Google Fiber is building a network in Austin, Texas, now and expects to start delivering service there in mid-2014. The company bought an existing fiber-optic network — collections of glass wires that reach directly into homes — in Provo, Utah, earlier this year. It’s already signing up customers there.
But to reap the most from its investments, Google Fiber needs to cover markets broadly. It’s done that across much of the Kansas City area. Overland Park and Independence are the last two large suburbs that haven’t made deals with the company.
Suburbs around Austin, or new markets that still hope to draw the service, could read Google Fiber’s indefinite delay on plans with Overland Park as a sign that the company won’t bother with communities that make too many demands.
“Google maybe wanted to send a louder message that they wanted faster response from other communities to come,” said Donna Jaegers, a telecommunications analyst for D.A. Davidson & Co. “A month delay would not be enough to put off a design like that.”
Steve Effros, an industry analyst who headed the Cable Telecommunications Association for two decades, sees Google looking beyond Overland Park.
“Google is sending a negotiating message to any other city: You take our terms, or we’re going to walk,” said Effros, who’s long argued that Google Fiber has negotiated better terms with cities than existing cable franchises. “They’re making an example.”
The company insists, however, that engineering work across the Kansas City market is highly integrated. Waiting for Overland Park, for instance, might mean further delaying work in parts of south Kansas City and north of the Missouri River.
“Building fiber is complicated,” said Wandres, the Google spokeswoman.
The company has backed away from saying when service might be delivered to those areas, or suburbs in Johnson and Jackson counties, after falling behind its initial schedule. It started selling service here late last year but still has yet to offer hook-ups in most of Kansas City. It may still be years before Google Fiber has its first suburban customer.
Another analyst, Carlos Kirjner of Bernstein Research, said Google has strong incentives to sell its service in Overland Park. The city’s population tops 176,000, and the median household income is more than $66,500 a year. That offers a lucrative section of the market for Google Fiber to sell its Internet and TV subscriptions, he said.
“It has apparently decided the only place in the KC metro it will not deploy is Overland Park,” Kirjner said. “I could not imagine that Google would do that out of pure spite, and I presume it has good reasons behind its decision.”
Whatever the reason, Overland Park still awaits.
“Google Fiber is going to come to Overland Park,” said city spokesman Sean Reilly. “It’s just a matter of when. The sooner, the better.”