November 17, 2016
No free lunch – that is what happened here!
Let us go to the basics – Profit = Revenue per customer * Number of customers – Cost of the solution
As a new comer to the Gigbit networking market, Google had three basic challenges. Of course, other than the mundane issues such as,
selecting the right deployment technology, creating internal organization, acquiring talent, setting aside couple of billion dollars
for starting the venture etc.
-How to price the solution?
-How to attract the customers?
-How to contain the solution costs and time to market?
Pricing: Of course, they need to be cheaper than the incumbent. Hence the $70 per Gig symmetrical speeds. The question is – can the competition match it with the same or a better solution? The answer turned out to be yes. Both Telcos and MSOs bounced back and offered Fiber To The Home solutions with exactly the same PON technology at the same price. Comcast even announced a 2 Gbps symmetrical solution (independent of whether they deployed it on a large scale or not).
Customer acquisition: Kansas was a good success for Google. They could get by Time Warner Cable. But AT&T, Cox, Comcast and others fought back to retain their customer base through by offering competitive bundled services and locking high valued customers sooner than Google can acquire them – point in case, MDU customers.
Cost of the solution: This is another major pitfall. Fiber based solution for new entrants are very expensive both from deployment time and from cost of the solution points of view. The time: On one side we have a well oiled machine with the Telcos and MSOs (the permitting, the established crew, pole rentals etc.) while the new comer have an uphill battle. The cost: The drop costs to reach the customers, the construction costs of the trunk side, the central office/MTC costs etc. are not favorable to a new comer.
Why did Google get into this fiber business again? This is a discussion for some other time.
Final outcome: So, who are the winners here? Customers. Whatever may be Goggle’s ultimate goal is, they successfully created a Gigbit storm. They even brought the pricing to a decent $70 per month. But, now that they are not actively pursuing the Fiber To The Home solution, what next? A millimeter wave based drop solution? If so – how are they going to achieve Gig symmetrical speeds? Do the customers need symmetrical speeds at all?
Who says Gigabit Networking is not sexy anymore : )