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Does Google’s (GOOG) Experiment Mean Anything?

July 31, 2012 | About:
Intelligent Speculator

Intelligent Speculator

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You might have heard about this. Google, the search giant, has been complaining for years about the slow internet connections offered by ISP’s and how it ended up slowing users, charging them excessive fees, etc. Part of it is easy to believe because there isn’t as much competition in that sector as we’d like to, especially in Canada. Another reason is that companies such as AT&T are not known to be the most innovative and flexible so the fact that they are offering internet on their decade old networks can certainly explain part of why they have so much trouble offering very high speed connections at decent prices.

Google’s Experiment

A few years ago, Google set a mission for itself. It was going to show users and ISP providers that it could offer what they say they can’t. It ended up running a contest to choose one location and Kansas City, Missouri won! The project moved forward and with only a few months away before the launch of Google Fibre, they released the deltails of what they are offering last week.

For a $300 installation fee, users can get access to:

-7 years (minimum) of free 5 mbs internet

-Or they can pay $70 per month and get access to a 1GB connection, more than 100 times faster than the average high speed internet connection. For $50/month more, users get access to Google’s TV offering which remains a bit unknown.

It’s An Amazing Deal… Can Google Make This Happen?

No doubt about it, this is an amazing opportunity for anyone who lives in Kansas City! The costs are reasonable and the offering, along wih bonuses such as 1TB of free cloud space are years ahead of anything else available. This is clearly a threat to established players like AT&T who did already get caught trying to get info about the service.

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The Big Question

The big question of course is what this means for Google? Is this just an attempt to show what it can do? Or is it part of a next step? Google has already went from a software based company to actually acquiring Motorola. The one missing link here for Google to be able to make a complete offering would be to offer an internet connection. This would make it possible to start getting users to switch to products such as Google Voice but also having consumers go for a Google TV setup, etc. If you think about it, it could make sense for Google to try to make a run for it. Don’t laugh just yet.. Google did bid on some airwaves a few years ago that could have made it possible for the company to start offering wireless connections. We never quite found out how serious Google was about it but this new project in Kansas City certainly makes us think there might have been something to it.

Tons Of Hurdles

It’s far from a done deal though as the infrastructure required to expand on such a project would be massive. Google could also certainly expect to face pressure regarding its intentions and how this could affect Google’s already dominant position in other products…

I’m not sure how this changes my perception of Google’s stock. It probably has very little impact in the same way that programs such as auto-driven cars do not hold much value for now. But they are certainly opportunities for the company to move quickly into new segments if that was ever proven necessary or profitable so as long as the company isn’t losing too much out of it or losing too much focus, I can’t blame them really.

Will Google be making money with Google Fibre? I’m sure they won’t. Their price point is probably quite simply what they would need to charge if this was done on a larger scale. That being said, I think the experiment is probably a solid idea that could lead to a lot more… what are your thoughts?


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