Wednesday, February 10, 2010

Google plans open access FTTH trials

This is probably the single most exciting announcement for some time: Google plans one or more FTTH trials in the US, working with municipalities. They will be open access networks offering 1 Gbps (so that looks like a next-gen point-to-point network) at 'competitive prices', reaching 50-500k people. Google asks states, counties and cities to respond to an RfI (until March 26).

Google's goals: see what can developers and users do with it; learn new ways to build FTTH.

Some thoughts:
  • Google already has extensive infrastructure, mostly backbones and datacenters. Adding the last mile would be the final piece before Google can actually turn into the Internet.
  • There will be a lot of people worrying over Google becoming too powerful and too much in control. Hence open access, but will that be enough? Who will object? Apple perhaps. Verizon and Comcast will be worried, but not be able to cry foul.
  • Google itself is clearly frustrated with the level of competition and pricing, the speeds available, the reach of current high-speed networks, the ARRA Act and the lack of open access.
  • Once markets are chosen, community efforts may be launched because penetration makes the business case fly. To offer 100x more bandwidth effectively rules out markets where Docsis 3, FTTC/VDSL or FTTP are offered. Hence, it may stimulate Comcast, AT&T and Verizon to quickly roll out their own version of an NGA network. This will lead to a price war.
  • Google has hoards of cash. At the recent Q4 earnings it was announced that cash and equivalents stand at $24.5 billion. At 1,000 $/home, connecting 500,000 homes would cost $500m - and the network will be cash flow positive way before they burn through it all, turning the network self-financing and able to connect the entire country.
  • Saying it will be 1 Gb/s, implies point-to-point since current GPON implies 2.5 Gb/s down (and 1 Gb/s up) shared among 32, 64 or 128 subs. No explicit mentioning symmetrical connections though, but I am sure Google is going for the ultimate thing.
  • The Bill & Melinda Gates Foundation recently proposed connecting all institutions in the US to fiber. Could the arch-enemies work together to fight the cable (Docsis)/telco (FTTN or non-open FTTP) duopoly?
  • The RfI to states, counties and cities has unclear implications. Is Google asking them only to be a candidate, or could Google want deeper involvement, such as co-investment? Most likely cities that had munifiber plans in the past, which were shot down by the cable/telco lobby, will have a new chance to connect to fiber. They will be lining up. How about Palo Alto, California?
  • Google plans to experiment with the latest techniques. They can build on international experience and do things first-time-right. However, the US is a unionised country, isn't it? And you need construction firms to do the dirty work.
  • Open access, hence access to any service provider. This could mean that Google will build both the passive and active layers. In theory, Google could also be a service provider itself (after all, they say "We plan to offer service at a competitive price"), but that would mean competing with its own wholesale customers. I suppose they will need to be an ISP themselves - unless their wholesale prices are low enough to attract competing ISPs.
  • Offering open access flies in the face of the FTTH Council NA, that is supposed to protect the interests of its members. Yeah right. It was about time that somebody with a long-term view and focus on customer happiness entered the market. Now we only need Google to make a trip around the world.
  • What will the regulator do?
  • Google wants to move quite fast. The RfI runs until March 26.
  • The Google stock ended the session down just 1.5% (this by the way equates to $2.5bn). That is encouraging. Investors are not scared off by Google plans. Incumbents worldwide should take a lesson and be less afraid to 'dig in'.

No comments: