Google’s fiber effect: Fuel for a broadband explosion

• by Marguerite Reardon 
   @maggie_reardon 

• 

  Jack Maher, a senior market manager for AT&T's U-verse with GigaPower service shows off one of the company's fiber-to-the-home utility cabinets in Austin, Texas.Marguerite Reardon/CNET

  AUSTIN, Texas -- Dallas Miller's virtual soldier needed more firepower, and he couldn't think of a better weapon than Google Fiber.
  The 28-year-old Austin, Texas, native is an avid player of the shooter game Battlefield. But he was frustrated by the spotty performance of the 20Mbps connection available through his AT&T U-Verse Internet service. In the middle of an online match, his game often froze, leaving his avatar unable to move or shoot. Other times, the game would pause or buffer as he fired, his opponent suddenly popping up in another location as the game lurched forward in real time.
  "I had the maximum U-verse service at 20Mbps," he said. "But I never really got that speed. It was always slower."
  Miller was among the first in Austin to sign-up online for Google Fiber when it was announced in April 2013. His hope: that Google's $70 faster 1-Gbps service would be the answer to his problems.
  But then he got a call from AT&T with an offer for its new GigaPower service. Even though the 1Gbps service wasn't yet available, AT&T offered Miller 300Mbps -- more than 15 times the speed he was paying for. The best news was that the cost of his service would drop from $208 a month to $120. When AT&T finishes upgrading the electronics on the network later this year, he expects to see a 50-fold improvement. With network speeds this fast, Miller could stream without buffering at least five high-definition videos at the same time and still have enough to play his games and surf the Web.
  "It was a no-brainer," he said of the switch.
  Call it the Google Fiber effect. Google makes a splashy announcement that it intends to build a super high-speed network in a city. Competition follows, which translates into higher-speed services and lower prices for consumers.

  "When you say to a community, 'Who wants fiber and a chance to have the most advanced network in the country and possibly the world?' you get a whole bunch of hands going up."

  Blair Levin, executive director,Gig.U project

  A year after Google unveiled its plans in Austin, investments in gigabit fiber networks are being announced across the country. Incumbent Internet providers, like AT&T, and new entrants alike are taking elements of the Google Fiber playbook and applying them to their own deployments as they try to stay ahead of Google. AT&T last week said it was talking to 21 major metropolitan areas about an expansion of its U-verse with GigaPower fiber service. Others such as regional wireless operator C-Spire, which is using the Google Fiber business plan to build a fiber broadband network in Mississippi, are creating new lines of business using existing infrastructure.
  Within a week of Google's declaration last spring that it planned to build a fiber network in the city of Austin, AT&T, which is based a few hours' drive away in Dallas, announced its own Austin fiber network. And in less than a year's time, AT&T and local cable operator Grande Communications have beaten Google to market with their own ultra-high speed services using newly built fiber networks.
  Like Google, which offers service over its fiber network in two cities today, these companies are striving for 1Gbps speeds at affordable prices -- less than $100 a month -- making ultra high-speed broadband a much more attractive offering for consumers, who stream lots of video, play online games and want to upload photos and other files in seconds rather than hours. Even slow-moving incumbent cable operator Time Warner Cable has increased speeds on its traditional copper cable infrastructure.
  "Google Fiber has been the biggest driver of the fiber-to-the home movement," said Blair Levin, executive director of the Gig.U project and head of the committee that wrote the 2010 National Broadband Plan for the Federal Communications Commission.
  In 2008, the Organization for Economic Co-operation and Development (OECD) ranked the US as No. 15 out of 30 countries when it came to broadband penetration and speeds. With the US in the midst of a massive recession back then, prospects for investment in new broadband infrastructure looked dismal. But Google Fiber seems to have lit a fire under the feet of the broadband industry.
  "In 2009 when we were writing the National Broadband Plan it looked like the US was headed toward a significant under-investment in broadband infrastructure by 2020," Levin said. "Other countries were well ahead of us. But I have to say since Google's announcements, things are a whole lot better than what we had predicted five years ago."
  Google says that it has also noticed an uptick in gigabit projects throughout the US, as broadband providers recognize that people have a "need for speed."

  

  The 4-foot-high utility cabinet can serve up to about 400 customers with ultra high-speed broadband.Marguerite Reardon/CNET

  "The truth is, people across America want access to faster Internet," Jenna Wandres, a spokeswoman for Google Fiber said in an email. "There's a growing demand for speed from folks, who don't want to wait for videos to buffer, and who don't want to fight their family members for bandwidth. This was really the main reason we decided to build Fiber back in 2009."
  Google is still going through Austin's permitting process before it begins its initial fiber deployment. Currently, Kansas City and Provo, Utah are the only cities in which Google Fiber is available. Earlier this year, the company listed 34 cities in nine metro markets that it was considering for deployment.

  An ideal city

  Austin, a city of about 865,000 people, might be the luckiest city in the country when it comes to Internet access.
  Proud Austinites will rattle off a list of reasons why their city is ripe for massive capital investments in new, speedier Internet infrastructure.
  The once small college town, which is also home to the Texas state legislature, often makes it onto top 10 lists of best places to live in the US. This, coupled with the city's thriving tech and arts scene, has made it one of the fastest-growing cities in the country. Whole Foods and Dell are headquartered here, and Apple, Samsung, Facebook, and DropBox are opening offices. SXSW, the popular music and tech festival, also makes its home here.
  As a result, Austinites are particularly tech-savvy, according to AT&T's executives. Not only did the city have a higher concentration of Apple iPhone users compared to big cities like Chicago or New York when the smartphone was released in 2007, but broadband consumers in Austin often use 15 percent to 20 percent more data than the average AT&T U-verse customer, according to Dave Nichols, AT&T state president of Texas, who is a key lobbyist for the company in Texas.

  "Since Google Fiber came on the scene, we've seen a significant shift in how municipalities view network operators."

  Eric Boyer, senior vice president, AT&T U-verse

  "When we decided to launch our fiber service, we couldn't think of a better place than Austin," he said. "When it comes to technology it's very forward-looking."
  AT&T maintains it has been planning this fiber upgrade for a long time, and that Google's announcement didn't affect the timing of its network.
  But Rondella Hawkins, the telecommunications and regulatory affairs officer for the city of Austin, said she had never heard about AT&T's plans before Google's news came out. Hawkins was part of the original committee that put together Austin's application to become the first Google Fiber city. The city ultimately lost out to Kansas City.
  "Our application for Google would have been a good tip-off to the incumbents that we were eager as a community to get fiber built," Hawkins said in an interview. "But we never heard from them. Until Google announced that it was going to deploy a fiber network in Austin, I was unaware of AT&T's plans to roll out gigabit fiber to the home."
  Grande Communications' CEO Matt Murphy admits that without Google in the market, his company wouldn't have moved so aggressively on offering gigabit speeds. It also wouldn't be offering its service at the modest price of $65 a month, considering that the average broadband download speed sold in the US is between 20Mbps and 25Mbps for about $45 to $50 a month.
  "1 gigabit per second is such a leap in terms of speeds," Murphy said. "It's nothing we would have even considered doing yet without Google in the market."

  

  Grande Communications' 1Gbps broadband service costs $65 a month and delivers speeds that are very close to 1Gbps.Marguerite Reardon/CNET

  Even with such a tech-centric crowd, it's hard to imagine that three companies -- AT&T, Grande and Google -- decided at roughly the same time this city should be among the first to get ultra high-speed broadband. It's even harder to believe that all three players would decide to offer service that is more than 50 to 100 times faster than what they're currently offering at a cost that's only about $20 to $30 more than their average broadband package.
  This is a huge leap in speed for a very small price increase, considering that AT&T currently offers 6Mbps DSL service for $35 a month. In markets where it offers its regular U-verse broadband service, AT&T charges $45 a month for 18Mbps service and $65 for a 45Mbps service.
  While it's clear that Google Fiber is not coming to every community, the pressure is on.
  It's not surprising, then, that in every city in AT&T's 22-state footprint where Google is considering deploying fiber, AT&T also plans to bring GigaPower. That's a total of 14 markets, including Austin, theTriangle region of North Carolina, and Atlanta, home to AT&T's mobility division.
  Major cities not on the Google roadmap include San Francisco and Los Angeles.
  While AT&T refuses to acknowledge that its gigabit fiber plans are answering the competitive challenge posed by Google Fiber, others say that Kansas City may have been a wake-up call.
  "I think all the providers have learned some valuable lessons from Google's Kansas City deployment," said Julie Huls, president and CEO of the Austin Technology Council. Kansas City went live with Google Fiber in November 2012. "Speed to market and speed to deployment really matters and will determine the winners in a market. So it doesn't pay to be a laggard."

  The lessons of Google Fiber

  Google wasn't the first company to use fiber to deliver high-speed broadband, but it was the first company to offer such high speeds at $70 a month. It was also the first to come up with a business plan that requires participation from the city government and community.
  Google specifically asked cities to cut the red tape required to make deployment more efficient and economical. And it asked communities to rally support and commit residents to subscribe to the service before it agreed to install the expensive infrastructure.
  "What Google recognized that others didn't is that Americans want to have the best communications infrastructure," Gig.U's Levin said. "When you say to a community, 'Who wants fiber and a chance to have the most advanced network in the country and possibly the world?' you get a whole bunch of hands going up."
  AT&T's executives admit that Google has made it easier for AT&T and others to work with cities where it wants to deploy its own Gigabit fiber service.
  "Since Google Fiber came on the scene, we've seen a significant shift in how municipalities view network operators," said Eric Boyer, senior vice president of U-verse. "They see how Kansas City was able to work with Google and now, they're willing to do that with other providers."
  Specifically, cities such as Austin are trying to speed up the permit and inspections processes.
  "In the past, certain permitting processes cost us millions of dollars," said Eric Small, vice president of Fiber broadband planning for AT&T. "But now the city is interested in working with us to reduce those expenses."

  

  Cable operator Grande Communications is running fiber directly into subscribers' homes to deliver 1Gbps Internet service.Marguerite Reardon/CNET

  Need for speed? Maybe yes, maybe no

  Other broadband operators have built networks capable of delivering 1Gbps service. Cable operators, which use a different network technology, have already demonstrated download speeds at that level. Verizon Communications, which was the first major broadband provider to install a full fiber network, has stopped short of delivering 1Gbps service, even though it is capable of delivering such speeds.
  Cable operators and Verizon have said that customers don't need or want a service at those speeds.
  "We're continuing to see a growing interest for faster broadband among our customer base," Bill Kula, a spokesman for Verizon, said in an email. "However, widespread adoption of 1Gbps is not evident as of yet."
  Indeed, today very few Americans have connections at that speed, but demand for broadband itself is increasing. Pew Research found in its most recent survey, conducted in September, that about 70 percent of Americans have broadband service, which is up from 66 percent the previous year. But Pew and the Federal Communications Commission have a very low benchmark for what constitutes broadband: download speeds of 4Mbps and uploads of 1Mbps.
  To put this in perspective: a single DVD-quality Netflix movie requires a broadband connection of about 3Mbps. You need speeds of at least 5Mbps if you want to stream that movie in high-definition. With a 1Gbps connection you could stream at least five HD videos at the same time and still have plenty of bandwidth to surf the web, check email, and upload pictures to Facebook. Also, with a 1Gbps connection you can simply do things much faster. For instance, you could download an entire HD movie in about 33 seconds.
  But cable operators and Verizon are skeptical about whether consumers really need to be streaming five HD movies at once. And speeds that are a tenth as fast as the gigabit service (100 Mbps) can also offer speedy downloads.
  These companies have a point. Even Grande CEO Murphy admits that most consumers don't need to go that fast. He added that even if they subscribe to such a service, the equipment and devices in the home aren't capable of delivering those full speeds. Few customers even subscribed to the company's highest tier of service, which previously topped out at 100Mbps, before it introduced the 1Gbps service.
  David Noonan, who covers broadband for consultancy IBB, said that most families couldn't consume enough online media to justify a 1Gbps connection.
  "But it doesn't mean that they don't want it," he said. What Google and other broadband providers are doing, then, when they tout gigabit services is this: marketing.
  Murphy admits that going to such speeds has been great publicity. "We've gotten an unbelievable amount of PR from raising the speeds," he said. "As a small provider we rarely have something as new and noteworthy."

  Getting the price right

  Even if 1Gbps is overkill for most consumers, speeds of 100Mbps or even 300Mbps may not be. Incumbent providers such as Comcast and Verizon offer such speeds in certain markets, but the pricing on these services is often well over $100. For example, Comcast and Verizon each charge more than $300 a month for their 500Mbps services, which are available only in certain markets.
  It's little surprise that Comcast and Verizon have seen few customers sign up for these services, which has led executives, such as Brian Roberts, the CEO of Comcast, to conclude that consumers don't really see a need for these speeds.
  But the reality is that consumers likely don't see a need that justifies exorbitant prices.
  Google, however, entered the market at $70 a month, which is $20 to $25 above the average price that most customers are comfortable spending on Internet service, said Murphy. Even with that difference, some consumers may find the pricing a stretch. But the overwhelmingly higher speed can often entice customers into a higher-priced package.
  That's exactly what happened to Austin local David Greene. Greene, who for the past 12 years has gone without cable TV, agreed to take the U-verse TV package on top of $70 a month broadband service simply because it was only $50 more a month.
  Greene said he is willing to pony up the extra money for AT&T's video package because he is getting such a great deal on his 1Gbps broadband service. Even though he's paying $65 more per month, he said it's worth it for the nearly 100-fold increase in broadband speed.
  Execs at AT&T agree that the prices on other top-tier broadband speeds have been too high.
  "People aren't willing to spend five times more for the higher-speed service," said AT&T's Small. "They might spend 50 percent more, but not the multiple it has been in the last few years."
  Even at the $70 price point, AT&T may have to fight to retain customers once Google Fiber is up and running in Austin. Greene says he is satisfied with AT&T's GigaPower service and has been more than happy with the company's customer support, but he could be persuaded to make a change.
  "I'm no brand loyalist," he said. "I'd absolutely switch if Google offered a better deal."

What’s Google really up to in wireless? Might not be what you think.

Is Google really considering taking on the wireless industry? According to The Information, the company has talked to Verizon and Sprint about leasing wireless capacity to launch a mobile service.

Earlier this week, the news Web site cited unnamed sources who claimed Google has had talks with Verizon and Sprint over leasing access to their mobile networks in markets where Google has already deployed its Google Fiber 1Gbps broadband service. So far, Google has launched service in Kansas City. And it's building Google Fiber in Austin, Texas, and Provo, Utah. And it recently announced plans to expand the broadband service to several more cities.

Some blogs have speculated, based on these rumors, that Google may be interested in becoming a mobile virtual network operator, or MVNO, that allows Google to buy access to these established wireless networks at wholesale rates and resell the service to customers, thus competing directly against wireless operators.

I know what you're thinking. How could Google be so stupid? Didn't the big cable companies try to do the same thing twice and didn't they fail both times?

Yes, you're correct. But before you start jumping to conclusions about the type of service Google may be offering, let me start by saying the people in charge of Google's broadband strategy are not dumb. The reports speculating that Google may try to enter the wireless market to compete directly with mobile operators, such as AT&T or Verizon may be overstated. My theory is that Google is exploring its options and is much more likely to develop a strategy that looks more like what its cable rivals are doing today rather than rehashing the cable industry's failed attempts to become traditional wireless resellers.

Not surprisingly, neither Google nor either of the wireless carriers would comment on the rumors.

Why a Google MVNO is a bad idea
Building a wireless business as an MVNO that uses another wireless operators' business is a tough one in which to make money, even for a company like Google. For one, the very fact that you have to rely on another company's wireless network is risky. What's more, even though Google would likely get access to a far more extensive wireless network than it could build itself in a short period of time, the network assets that major wireless carriers offer MVNOs is typically limited.

For example, Verizon does not offer access to its 4G LTE network to any of its wireless reseller partners. The only MVNOs that get access to Verizon's LTE network are the ones involved in its LTE Rural America project. This project allows rural operators to use Verizon 700MHz spectrum market to build out LTE infrastructure in parts of the country where Verizon doesn't find it cost effective to build a network. Then those operators become partners with Verizon and their customers can roam onto Verizon and Verizon customers roam onto their networks.

Sprint also limits the coverage it's reseller partners can use to only the Sprint territory. It does not include access to any of Sprint's roaming partnres, which reduces the overall footrpint the reseller has access to. Still, Sprint does offer access to its 4G LTE network.

And of course, there is the problem of competing with a company whose infrastructure you lease. If the bursting of the telecom bubble in the early 2000s taught the communications industry anything, it's that building a business around someone else's infrastructure just isn't a good idea.

What's more, Google has made it clear that it has no interest in selling traditional voice services. While the cable operators and telephone companies it competes against with Google Fiber all offer phone services as part of a "triple play" bundle, Google decided not to include telephone service as part of its offering because it didn't want to have to comply with all the regulatory requirements. My guess is that they would be equally averse to complying with wireless voice service requirements.

The last thing to point out here is that selling wireless service doesn't even really make sense for Google since it's unlikely to help the company's fiber broadband business. This was the starkest lesson the cable companies learned during their foray into the cellular market.

"When we started down this path eight years ago we believed that if you didn't have a cellular service for the quad play that we'd be at a huge disadvantage," Comcast senior vice president of strategic initiatives, Tom Nagel said in a recent interview discussing Comcast's wireless strategy. "But what we learned was that the 'quad' play wasn't really necessary."

Nagle said that the quad play sounds good on paper but the reality is that people buy mobile phone and cable services very differently.

"Wireless may be sold as a family plan," he said. "But each person signs up for the service at different times. Cable and broadband are household services."

What happened with cable anyway?
Nearly a decade ago, some of the biggest cable operators around including Comcast, Time Warner Cable and Cox Communications, formed a joint venture with Sprint called Pivot, which was supposed to deliver what everyone was calling the "quad play" of services -- TV, home phone, broadband, and mobile phone service. The cable operators planned to use this joint venture to resell Sprint wireless service and bundle it with their other services. The idea was to create an even bigger package that would help cable operators retain customers.

But the joint venture was a miserable failure. Two and half years after it was formed, Pivot was dissolved when Comcast and Time Warner Cable pulled out. In 2008, the cable companies came together again to bankroll another joint wireless deal between Sprint and Clearwire with the expectation that they again would be able to resell wireless service. That was also a flop and the cable companies pulled out of the joint venture, leaving Sprint as the only stakeholder.

These same cable operators also paid $2.4 billion for licensed wireless spectrum in a 2006 FCC auction. They later sold this spectrum in 2011 to Verizon for $3.6 billion.

Even though the cable operators made a nice little profit from their spectrum sale to Verizon, overall they learned some difficult lessons over the past decade of wireless experimentation.

The biggest lesson was that reselling a wireless operator's mobile phone service was unnecessary and difficult. The second lesson was that having a mobile play is important, but not in the manner you'd expect.

"We realized that licensed spectrum was not critical," Nagel said. "Yet we still believe that making our products mobile is very important. Our mobile strategy today is taking this awesome high-speed data product and extending it. It's like taking your coax cable with you."

Indeed, Comcast, Time Warner, Cablevision, Cox and Bright House Networks have pooled their assets together to build CableWiFi, the largest Wi-Fi network in the country. The network, which uses unlicensed wireless spectrum, consists of 200,000 indoor and outdoor hotspots. Today, the network is mostly concentrated on the east and west coasts as well as in big cities in the midwest. But the network is growing quickly. And with a recent FCC vote to free up additional unlicensed spectrum in the 5GHz band, these cable operators say they will be able to do even more with their Wi-Fi network.

Lessons for Google
So what does all of this mean for Google and it's potential plans to launch a wireless service? My guess is that Google is likely looking at developing a mobile strategy that fits more along the lines of what the cable operators are doing rather than becoming a mobile carrier that directly competes with the wireless giants.

This makes sense for a few reasons. First, with Google Fiber, Google already has the necessary high-capacity backhaul in the ground that is necessary to support an extensive mobile network that acts as an extension of its Google Fiber service. And let's not forget that Google also has experience delivering community based Wi-Fi. The company launched a citywide Wi-Fi project in its hometown of Mountain View, Calif., and it has been operating a free community Wi-Fi network in New York City in the neighborhood surrounding its office in Manhattan.

If Google is indeed talking to Verizon and Sprint about leasing licensed wireless network capacity, my guess is that the company only hopes to use these networks to act as back-up in areas where Wi-Fi may not be able to reach. This type of service could end up looking a lot like the service that some interesting new MVNOs, such as Republic Wireless and Ting, are offering.

These companies are offering alternative and very cheap wireless phone and mobile data service. Republic has voice and data plans starting as low as $10 a month. The way the company is able to keep prices so low is that they use Wi-Fi as the main form of network connection and then they license Sprint's network capacity to handle voice calls and data session in areas where Wi-Fi is not available. The idea is that customers will spend a majority of their time on the free Wi-Fi network and only a fraction of their time on Sprint's network, which Republic pays for by the megabyte.

While the cable industry hasn't yet partnered with a company like Republic or Ting, they are intrigued by their business model and the use of Wi-Fi to provide a low cost alternative wireless service.

"We know of Republic Wireless," Nagel said during our discussion about Comcast's wireless ambitions. "We've talked to them. There are a number of players in that space. And I think it's interesting. It's all about learning and exploring what's possible with Wi-Fi."

As for partnering with a mobile carrier --yet again-- to further their mobile broadband strategy, Nagel admitted that Comcast has considered it.

"We look at 4G LTE all the time and evaluate how it might be used," he said. "It's not front and center for us right now. We definitely aren't sitting around saying, 'Boy I wish we had an MVNO.' But you never know what will happen in the future. The one thing we do know is that Wi-Fi will be the foundation of whatever we do in mobile."

Maybe just maybe, that's what Google is thinking, too.

Google Fiber copycat to deliver 1Gbps broadband in Mississippi

C Spire is copying the Google Fiber business model by pre-registering residents in neighborhoods that will get its fiber to the home service.

(Credit: C Spire)

They say that imitation is the sincerest form of flattery. If that's true, Google should be very flattered by the efforts of a regional wireless provider to bring a 1Gbps fiber network to Mississippi.

C Spire is using the Google Fiber business plan that the search giant has employed in building 1 Gpbs fiber networks in Kansas City; Provo, Utah; and Austin, Texas. C Spire is using the plan as a blueprint for building its own fiber-to-the-home network that the company hopes will eventually blanket Mississippi.

For a state such as Mississippi, an ultra high-speed fiber optic network, could be transformative. Mississippi ranks last nationally in many categories, such as education and health care. And it also has the lowest median household income, making it the poorest state in the nation.

What's more, Mississippi's economy is still struggling to recover from the last decade's recession, which has hurt the state's credit rating, making it even more difficult for the state to fund projects and programs that could help improve education, health care, and the economy.

C Spire executives are hopeful that a high-speed fiber broadband network could help improve Mississippi's credit rating and help turn things around for the Magnolia state.Last November, credit ratings agency Fitch Ratings Service downgraded Mississippi's bond rating from stable to negative. The agency noted Mississippi's reliance on manufacturing as well as its poor record in education and high rate of poverty for the downgrade.

Google's chief financial officer, Patrick Pichette, has already been singing the praises of what a Google Fiber network can do for communities. Speaking at the Goldman Sachs Technology and Internet Conference last month, he said that Kansas City has received a higher bond rating as a result of Google's investment in an ultra-high-speed network in the city, according to the website Telecompetitor.com.

But Ben Moncrief, director of government relations for C Spire, said that Mississippi can't afford to wait for Google to come to town.

"Chances are that Google wasn't going to come to Mississippi anytime soon," Moncrief admitted. So he said that C Spire, a homegrown Mississippi company, needed to take matters into its own hands.

"We are a Mississippi company. And we wanted to make a difference in our own community."

Google Fiber as inspiration
Currently, Google is only committed to building its network in three cities. And even though the company said last month that it's considering building its fiber gigabit network in 34 other cities in nine separate regions across the nation, the truth is that Google Fiber will never be in every city or community in the US. It may not even offer its super fast fiber network in every state. And yet, President Obama and the Federal Communications Commission have emphasized the importance of building such high speed networks in more communities.

Despite the fact that Google can't build fiber everywhere, it has changed the conversation about these networks. And if the company is able to make money from its high-speed networks, Google could provide a roadmap for success that other companies can use to build their own networks, which might result in a Gigabit fiber renaissance.

"Google has been a change agent in the discussion about ultra high-speed broadband and fiber networks," said Heather Burnett Gold, president of the Fiber to the Home Council of North America. "Even if Google doesn't build its network in 34 cities, the fact that they are building a roadmap that other cities or companies can follow is just as valuable as the networks themselves."

C Spire's move to build a fiber network using the business plan outlined by Google is an example of how Google's broadband ambitions are having a much wider effect on the broadband market than the few cities it's chosen to deploy its network.

Indeed, last year at a Fiber to the Home Council event in Kansas City, where Google deployed its first fiber network, Milo Medin, vice president of access services for Google who is heading up Google's fiber projects, encouraged other cities and other companies to take a look at Google's business and replicate it elsewhere.

"We expect to make money from Google Fiber," he said in May. "This is a great business to be in."

Moncrief attended this meeting and walked away inspired. He said he already knew that C Spire had the assets to build such a network. But what the company lacked at that point was a strong business plan.

C Spire is a regional wireless operator that owns its own infrastructure. Since 2003, the company has invested more than $1 billion in network infrastructure improvements, including upgrading its cellular backhaul network with fiber to support 4G wireless services. As a result, C Spire has access to more than 4,000 route miles of fiber deployed to some 1,800 cell sites around the state, most of which are located in large population centers.

"We already had most of the fiber in the ground," Moncrief said. "What we needed was a business model that took enough of the risk out of building that last mile portion of the network. And that's what I came away with from my time in Kansas City talking to Google and others. The crowd-sourcing model can work."

The Google Playbook
The heart of Google's strategy is simple: Find communities that really see the value in an ultra high-speed broadband network. While this may sound rather elementary, in the past companies deploying capital intensive infrastructure such as these fiber networks, almost had to guess where demand for their services would be.

But Google has changed the way new entrants address markets. The company doesn't just research consumer demand, it actually asks city governments and citizens themselves to commit to the network as a condition of its construction.

C Spire is offering competitively priced 1 Gbps broadband, phone service, and TV packages.

(Credit: C Spire)

The second major piece of Google's strategy is to forgo offering several different tiers of service. Instead it offers a single tier of service: 1Gbps downloads. And the company offers this service at the affordable price of $70 a month with increased pricing for adding TV service.

This is the exact same strategy that C Spire is employing as it builds its fiber network in communities throughout Mississippi. Like Google, the C Spire service has a single broadband speed: 1Gbps for $80 a month or $70 a month if you're also a C Spire wireless customer. With a basic TV package the price goes up to $140 or $130 with a C Spire wireless contract. And since C Spire's roots are in the wireline phone business, the company also offers an IP telephony service over the fiber connection. All three services cost $160 a month or $150 if you subscribe to the company's wireless service.

"We took some of the things we like about the Google model, such as the crowd-sourcing information, and we applied it to our business," Moncrief said.

In many instances, the pricing for the broadband service is more than the average American pays for high-speed data service and a TV package. But the fact that people are getting 1Gpbs, which is often 100 times faster than service they'd get for a slightly lower price from a competitor, as well as the same, if not improved selection of TV channels, is the key to the offer, said Jared Baumann, who is heading up the C Spire fiber project.

"We've gone to town meetings where residents say, 'I pay more than that for the crappy service I get today,'" he said. "We've seen no resistance at all to the pricing."

How does Google do it?
The cornerstone of Google's business model is ensuring that the communities that are selected for Google Fiber are true partners in the deployment of the network. Specifically, Google looks to the city leadership for guarantees that access to public rights-of-way and permits needed for construction will be a quick and easy process.

C Spire has done the same thing in the communities where it's deploying its fiber network.

"We wanted to know that the city and town leadership would partner with us," Baumann said.

He said the top priority was ensuring that the cities would provide a streamlined permitting process. Baumann explained that in the past when it has laid fiber for its wireless network, C Spire has experienced permitting delays of more than a year.

Those kind of delays would kill the economics of this type of project, he said. To ensure a smooth process for its fiber-to-the-home build, C Spire negotiated a five-day permitting process with each city that was chosen to get the fiber network. In the case of disputes, C Spire's contracts with the cities require the issues to be resolved within a total of 15 days.

In another move adopted from the Google Fiber playbook, C Spire went directly to residents and asked them to commit to the service before construction even began. Each neighborhood or so-called "fiberhood" is required to sign up between 35 percent and 45 percent of households for the service in order to "greenlight" the project. Residents can sign up at "rallies" in person or online. And a $10 fee is required as part of a non-refundable deposit.

C Spire Fiber offers download speeds that are 100 times faster than competing broadband services.

(Credit: C Spire)

While a commitment of 35 percent of residents may not sound too hard to reach, let's put this in perspective. In New York City, which is considered Verizon Fios's biggest growth market, the company has 30 percent to 35 percent penetration in areas where it offers the service. And Verizon negotiated its Fios deal with the city back in 2008.

Having 35 percent or 45 percent of a market committed to a service, even before the company starts building it, is an impressive feat. And it should help ensure the success of the service.

Fiber networks are expensive to build, even when a company already has fiber in the ground, as C Spire had.

"You have to get creative about how you determine where the demand is for your service," Baumann said.

Nine cities in Mississippi will be getting C Spire Fiber as part of its initial roll-out. And C Spire has already qualified several "fiberhoods." The company expects to begin building the network in those cities this summer.

C Spire is not the only company that is exploring the Google Fiber business model. Baumann said he has received several calls from community leaders and businesses in other states that are also considering replicating the Google Fiber business model. He said he's confident that C Spire will make money from the service eventually. But he said it takes more than a business model to get such an ambitious project off the ground. And he credits the leadership at C Spire for taking the plunge.

"This is a long term investment in the community," he said. "It could take 10 years before we start to see a return on our investment. But our leadership is local, and we think it is important enough to Mississippi and our community to make this happen."

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