As Google Fiber expands its low-cost, high-speed broadband service into new markets, the ensuing competition in the U.S. internet market could cause a nationwide ripple effect of lower prices and better services.
A recent Motley Fool article details how Google Fiber – which offers 5 Mbps broadband for free, 1 Gbps broadband for $70 per month, and a 1 Gbps and cable TV package (including 2 TB of DVR storage and a Nexus 7 tablet) for $120 – could impact major U.S. internet service providers (ISPs) if it maintains its low prices as it moves into new markets.
Comcast, in particular, appears to be on a long-term collision course with Google. Even though Comcast's acquisition of Time Warner Cable will extend its share to about 37% of the U.S. broadband market, Google Fiber's growth will force the company to react, according to the Motley Fool.
"[I]f Comcast is taking a long-term perspective, competition with Google Fiber makes more sense. Five years down the road, Google may have a presence in dozens of cities and Comcast will likely be under pressure to upgrade its older lines into faster networks. This would pitch the two companies against each other more directly."
Making matters worse for Comcast are Google's plans to move into "Comcast-held cities like Salt Lake City and Portland," the report added. With significantly faster internet speeds, a monthly discount, and just a $30 installation fee, Google Fiber has serious potential to steal Comcast customers en masse. Consumers only stand to benefit if Google forces other ISPs to meet its prices and capabilities.
The Motley Fool report, which also points out that Verizon’s recent efforts to push customers toward its fiber-optic FiOS package could protect itself from the threat of Google Fiber, goes into detail on both ISPs' financial outlook and the role it could play in the competition. Verizon can turn to its $38 billion net operating cash flow to invest in high-performance services before Fiber becomes more of a threat, whereas Google’s direct threat against valuable Comcast territories could impact the company’s earnings and inhibit its ability to invest.
However, one weapon the Motley Fool article overlooks is the cable lobby. Earlier this year, a cable lobbyist introduced legislation in Kansas that would prohibit municipalities from providing broadband as a service. The bill was largely considered a strategic move against Google Fiber, which debuted in Kansas City, Kansas, in July 2012, and included language that would prohibit partnerships between municipalities and private sector entities (such as Google) that would provide broadband services.
The bill was later withdrawn so legislators could review its language, but it was just an example of a strategy that has worked for cable lobbyists in 20 states already. Since a 2004 U.S. Supreme Court decision ruled that the Telecommunications Act of 1996 "allows states to prevent municipalities from providing telecommunications services," ISPs have increased their lobbying efforts to take protect their markets through legal means.
A price war between Comcast and Google would definitely be great for consumers, but if ISPs play the legal card and try to push this kind of legislation through, consumers may actually need to play a role to make sure it can happen.