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Summary

According to a December 31st post on the Wall Street Journal's Digits blog, Google submitted a letter to the FCC at year-end, highlighting a potential positive if it is classified as a regulated telecom service, namely access to utility-owned infrastructure. As a nonregulated telco operator, Google Fiber has enjoyed many competitive advantages, but network-build costs represent the largest piece of FTTP deployments.

Pros and cons of regulation is complex; cost savings is simple

Thorough cost-benefit analysis of the advantages and disadvantages to Google Fiber as a regulated telco operator is complex. On one hand, running fiber along existing utility poles saves significant money and time compared to trenching. The costs of building the ODN (optical distribution network) can exceed 70% of the total FTTP network, which includes central office and customer premises equipment.

On the other hand, Google Fiber has benefited from its status as a nonregulated telco operator, as highlighted in Ovum's report Google Fiber's Path to Likely Profitability. Google's fiberhood approach ensures high take-rates where it pulls fiber since it deploys in neighborhoods that achieved high sign-up rates. While this "market first, then deploy" strategy makes business sense, it could be considered unfairly discriminatory by a regulator since a household's ability to get Google Fiber is dependent on sign-up rates by neighbors.

In addition, Google Fiber has benefited as a newcomer. Google Fiber is not burdened by a legacy network, customers, or services. Its subscriber strategy, in terms of the content package and CPE (customer premises equipment), is simple – take it or leave it. As a regulated service provider, Google Fiber's services would be subject to review.

What is Google's ultimate goal regarding Google Fiber? Is it to own a future-proof wireline network, capable of supporting cloud-based applications for businesses and consumers? Is it simply a business opportunity where Google brings competitive approaches to a legacy environment?

Regardless, as a publicly traded corporation, bottom-line profitability drives actions, such as gaining access to infrastructure to reduce network build costs.

Appendix

Further reading

Google Fiber's Path to Likely Profitability, TE0017-000023 (December 2014)

Net neutrality: US president calls for Title II regulation, TE0004-001001 (November 2014)

"We are entering an intense period of public persuasion over the future of the Internet," TE0007-000829 (September 2014)

Author

Julie Kunstler, Principal Analyst, Intelligent Networks and Components

julie.kunstler@ovum.com

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