FEBRUARY 11, 2010 By Stephen Hardy -- Not surprisingly, reactions to Google’s announcement that it plans to install 1-Gbps FTTH networks in partnership with selected cities and towns came quickly today.
Joe Savage, president of the Fiber to the Home Council, welcomed Google’s interest in high-speed FTTH. "Any communications company that is thinking about the future is thinking about how to build superfast Internet connections to every home. And Google has a well-earned reputation for thinking about the future. So this makes sense,” he said in a statement emailed to Lightwave. “And of course we’re delighted to see Google joining the hundreds of companies that have already invested a total of more than $30 billion in building gigabit-capable networks here in the US -- from Verizon to the smaller telecoms, municipalities, and public electric utilities that are staking their future in fiber to the home.”
Most commentators have taken Google at its word that the program it laid out represents an experiment, rather than a new line of business. “Google’s announcement yesterday that it is launching a fiber to the home (FTTH) trial should not be viewed as a move by the Internet giant to become a major transport player in the US ultra-high-speed broadband market -- at least not for the foreseeable future,” said consultancy and research firm Analysys Mason in a statement released today.
Instead, Rupert Wood, principal analyst at Analysys Mason, believes Google hopes to use the initiative to influence US telecom policy by showing how user and service provider behavior could change under “radically different conditions” from those that currently exist, as well as understand how it can monetize those changes.
“Of course, there is more than a little politicking and PR in the announcement and the trials. Google has long wanted a more open access approach from the incumbent players in the broadband market. And much remains unclear: How much end-user and service provider access is likely to cost, Google’s retail role, and the extent to which the networks will be co-funded with interested parties (such as communities, municipalities, real estate owners, and service providers),” states Wood.
Teresa Mastrangelo at broadbandtrends.com agrees that Google has no interest in becoming a broadband service provider on a large scale. “Regardless, it has the potential to be a major catalyst for change in broadband deployment models, much like how Vonage impacted fixed line voice services earlier this decade,” she wrote in a report issued today.
Mastrangelo sees Google as following through on a suggestion it made to the Federal Communications Commission in comments filed in regard to the upcoming National Broadband Plan. In these comments, Google suggested the FCC set up test beds that featured 1-Gbps connections. The test beds would uncover technology and market challenges associated with private-sector deployments, "foster greater understanding about where to place the appropriate dividing line between private sector and public sector support ," and establish benchmarks for future roll outs.
Meanwhile, Mastrangelo views the open access aspect of the trial as important. Open access, typically involving a public/private partnership, has proven popular in Europe, she pointed out. “Historically, in the United States this has been an unsuccessful model for a variety of reasons, such as lack of service provider commitment, lack of control of services, lack of available network to end users," she wrote. "However, Google’s commitment to build out the network to a fixed number of households will likely remove many of the obstacles that have hindered this type of network in the US.”
The ramifications for US broadband policy could be significant, Mastrangelo believes. “A successful, open-access model could cause the FCC take a much closer look at past decisions regarding unbundling, such as the current Covad petition. Although current FTTH deployments would likely have a grandfather clause, future deployments could be mandated to support last-mile open access,” according to Mastrangelo. “Additionally, depending on the results of municipal participation with respect to duct access, right of way, pole attachments, etc., the FCC could set specific requirements to how this infrastructure could and should be shared -- similar to rulings in France and other countries.”
Finally, Eve Griliches, managing partner, ACG Research, blogged that Google’s plan -- and its typical mode of operation -- could spell disaster for Western system vendors. “Google has already built a commodity LAN network out of components. While the routed and optical (WAN) networks are still system based, it's not the love that binds this arrangement,” she wrote. “Access equipment is notoriously margin dry, and who else to bring FTTH, but the king of commodity itself; Huawei.”
Griliches believes the main impediment to Huawei in the U.S. market so far has been security concerns, particularly on networks that carry a lot of government traffic. Google’s network would have no such limitations, which would enable it to take advantage of what Griliches surmises would be a very attractive technology price tag from the Chinese equipment vendor.
“If Google were to succeed, it would force all the other operators to examine exactly how they could reduce the cost of their networks to be on par. And how would they dramatically reduce the cost of their networks? By buying Huawei equipment as well! The next thing we'll know is that we'll have networks we work and surf on, which will ultimately be a composite of Chinese components exactly like our kitchen appliances are today,” she wrote.