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Seattle, Gigabit Squared, the Challenge of Private Sector Cable Competition

This the second in a series of posts exploring lessons learned from the Seattle Gigabit Squared project, which now appears unlikely to be built. The first post is available here and focuses on the benefits massive cable companies already have as well as the limits of conduit and fiber in spurring new competition. This post focuses on business challenges an entity like Gigabit Squared would face in building the network it envisioned. I am not representing that this is what Gigabit Squared faced but these issues arise with any new provider in that circumstance. I aim to explain why the private sector has not and generally will not provide competition to companies Comcast and Time Warner Cable. Gigabit Squared planned to deliver voice, television, and Internet access to subscribers. Voice can be a bit of hassle due to the many regulatory requirements and Internet access is comparatively simple. But television, that is a headache. I've been told by some munis that 90% of the problems and difficulties they experience is with television services. Before you can deliver ESPN, the Family Channel, or Comedy Central, you have to come to agreement with big channel owners like Disney, Viacom, and others. Even massive companies like Comcast have to pay the channel owners more each year despite its over 10 million subscribers, so you can imagine how difficult it can be for a small firm to negotiate these contracts. Some channel owners may only negotiate with a provider after it has a few thousand subscribers - but getting a few thousand subscribers without good content is a challenge. Many small firms (including most munis) join a buyer cooperative called the National Cable Television Cooperative (NCTC) that has many of the contracts available. But even with that substantial help, building a channel lineup is incredibly difficult and the new competitor will almost certainly be paying more for the same channels as a competitor like Comcast or Time Warner Cable.

White Space Pilot Project Brings Basic Internet From Library to Residents … For Free!

The Gigabit Libraries Network (GLN) has orchestrated a pilot project to optimize white space technology for connectivity in and near community libraries and schools. We discussed this approach on our most recent podcast with Don Means, coordinator of the project.

White spaces wireless, sometimes referred to as "Super Wi-Fi" or "TVWS," can provide limited access in rural areas with limited funds and limited connectivity options. The technology is still in the development stage but creative people working in community libraries are finding new ways to use it.

GLN's goal is to bring next generation connectivity to all 16,000 libraries in the U.S. The organization grew out the 2007 "Fiber to the Library" Campaign from the Community TeleStructure Initiative. The initiative is a collaboration of institutions of higher education, corporations serving the higher education technology market, and related entities. GLN advances the idea that anchor networks, like those at the library, are cost effective ways to serve populations and to create middle mile access.

"White spaces" are the unlicensed low-frequency spectrum that was reserved for television signals prior to digitization of television. (If you are REALLY old, like me, you remember the "UHF" and "VHF" dials on the ol' black-and-white.) As we transitioned to digital TV, the spectrum was abandoned. White spaces differ from traditional point-to-point wireless spectrum because they do not require a line of sight. Buildings, trees, or other obstacles do not stop the signals. Thurman, New York, and New Hanover County in North Carolina use white space technology for limited Internet access in their areas.

NATOA Keynote Panel Discusses Role of Local Governments in Improving Internet Access

In September, I joined the keynote lunch panel at the annual NATOA Conference to discuss what local governments can do to improve Internet access. Joanne Hovis moderated a discussion between Rondella Hawkins of City of Austin, Milo Medin of Google, and myself.

I have embedded the video below so it starts with the panel discussion. However, if you go back to the beginning, you will also be able to watch the annual award presentations, including one to Longmont in Colorado, as well as Milo Medin's 10 minute presentation prior to this panel discussion.

We discuss many important issues, particularly the various actions local governments can take to either build their own networks or to make the community more tempting to others who might build a network.

Comcast Reacts to Google Fiber in Provo

The sale of iProvo to Google Fiber means that Comcast now gets to compete against Google's gig - Time Warner Cable is the incumbent cable company in Kansas City and Austin. Comcast wasted little time and has improved its bundle in Provo long before any new customers are turned on. The Free UTOPIA blog recently reported that Comcast, in response to the incoming competition, is increasing speeds. Jesse writes:

Competition is good, and Comcast is just now proving it. I spoke with one of their sales guys who confirmed that Comcast will be offering a package of 250Mbps/50Mbps for $70 starting in September, but only in Provo. (Sorry, everywhere else.) This is in direct response to Google Fiber coming to town and will include a new modem with a built-in 802.11ac router to take advantage of the speed bump. It’s unknown if this speed tier will land in any other cities in the future.

This is yet another story proving that having a fiber network in your town benefits everyone, not just subscribers.

This is compelling evidence that markets with only choices between DSL and cable are not sufficiently competitive, regardless of what wireless options are available. When threatened with a competitor that it cannot harm with its legions of lobbyists in the state capital or the threat of predatory pricing, Comcast responds with investment and lower prices. Regulators should take note.

Consultant Argues Never Used Financing Mechanism Also Won't Work in Palo Alto

I was troubled to see Broadband Communities publish an odd and misleading story about Palo Alto in the May-June issue [pdf]. Authored by Stephen Blum of Tellus Venture Associates, a consultant that has been hired by Palo Alto in the past, it showed a remarkable level of ignorance about community owned fiber networks and broadband more generally. The title alone, "Can FTTP Work in Palo Alto?" is just odd. Why exactly would FTTP not work in Palo Alto? It works in hundreds of other cities and towns, most of whom are less well positioned than Palo Alto for such a venture. A more honest title would have been "Consultant Argues Never Used Financing Mechanism Also Won't Work in Palo Alto." Blum made a very good case for that narrow argument but fails to lay out any convincing evidence that a variety of other models are doomed. Parts of the article can only be called cable and DSL boosterism - such as repeating the talking point that AT&T's U-Verse and Comcast already offer "high levels of service at competitive rates." Competitive to what? Neither can deliver the speeds offered by modern fiber networks and are only "competitive" if one ignores the much slower upstream speeds, higher prices, lesser reliability, problems of oversubscription, and poor customer service one gets from those providers. Reminds me of "Slick Sam" from Lafayette and the "functional equivalence" between DSL and FTTH.
Blum apparently knows better - that Palo Alto residents are "happy" with the existing services because they have not spontaneously marched down El Camino Real demanding faster speeds at lower prices. This is the wrong measure - reminiscent of the now oft-quoted Henry Ford line that if he asked people what they wanted, they would have said "faster horses." The number of specific errors in this piece are many, and have been well documented by those familiar with the history of Palo Alto's studies. I want to focus on just a few. Let's start here:
Overall, 79 percent of households would have to pay $3,000 apiece to fully fund FTTP construction costs.
YIKES! Cue the foreboding music! Palo Alto has something like 25,000 households.

Wired Highlights Local, Public Option for Internet Networks

Klint Finley from Wired.com joined a Media Consortium press call that our own Christopher Mitchell participated in regarding community owned networks, Google Fiber, and concerns about the future of Internet access. He wrote about the event and the promise of municipal networks.

Finley referred readers to us:

But there’s no guarantee that Google Fiber will come to the rest of the United States, and many communities may want to start building an alternative right away. Mitchell said the first step towards building a municipal broadband service in your area is to get educated about what other communities have done. That’s the purpose of the site muninetworks.org, which compiles information about municipal broadband initiatives across the country. The goal is to create a comprehensive resource for community organizers. Users can explore the projects in different states through the Community Network map.

We continue to find more local governments moving forward with their own investments to improve local access, suggesting that many understand the folly of hoping some distant corporation will build the network they need to be successful in the digital economy.

 

New York Times on Internet in America, Genachowski Legacy

Eduardo Porter has an important column today in the business section of the New York Times, "Yanking Broadband From the Slow Lane." He correctly identifies some of the culprits slowing the investment in Internet networks in our communities. The last two paragraphs read:
Yet the challenge remains: monopolies have a high instinct for self-preservation. And more than half a dozen states have passed legislation limiting municipalities from building public broadband networks in competition with private businesses. South Carolina passed its version last year. A similar bill narrowly failed in Georgia. Supporting these bills, of course, are the nation’s cable and telephone companies.
Not really "supporting" so much as creating. They create the bills and move them with millions of dollars spent on lobbyists and campaign finance contributions, usually without any real public debate on the matter. Eduardo focuses on Google Fiber rather than the hundreds of towns that have built networks - as have most of the elite media outlets. Google deserves praise for taking on powerful cable and DSL companies, but it is lazy journalism broadly that has ignored the networks built by hundreds of towns - my criticism of the press generally, not Eduardo specifically. FCC Logo The person who deserves plenty of criticism is former FCC Chairman Genachowski. From the article:
According to the F.C.C.’s latest calculation, under one-third of American homes are in areas where at least two wireline companies offer broadband speeds of 10 Mbps or higher.
We have 20 million Americans with no access to broadband. The rest are lucky to have a choice between two providers and even then, most still only have access to fast connections from a single provider. When the National Broadband Plan was unveiled, we were critical of it and believed it would do little to improve our standing.

Google Buys Provo Community-Owned Network

I just left the Broadband Communities Summit in Dallas, where I ran into many people doing great work to ensure everyone has access to affordable, reliable, and fast Internet networks. Also while there, Google announced it had reached an agreement to offer Google Fiber in Provo by purchasing the municipal FTTH network. Provo has long been cited as a failure by critics of community-owned networks (even as it continued to attract jobs to the region). Though Provo originally wanted to offer television, telephone, and Internet services directly using its trusted reputation in the community, the state legislature bowed to pressure from Comcast and CenturyLink (then Qwest) to limit local authority and tilt the playing field in favor of two distant corporations (that have still largely failed to invest in the networks needed by Utah communities). Provo was forced to use a wholesale-only business model. That approach is rarely used today by communities that seek to build out the entire community at once because it is very difficult to generate enough revenue to pay the full costs of the network. Despite Provo's struggles, Google recognized a community it wanted to work with. From Google's blog post:
Provo started building their own municipal network in 2004 because they decided that providing access to high speed connectivity was important to their community’s future. In 2011, they started looking for a partner that could acquire their network and deliver an affordable service for Provoans. We’re committed to keeping their vision alive, and, if the deal is approved and the acquisition closes, we’d offer our Free Internet service (5 Mbps speeds) to every home along the existing Provo network, for a $30 activation fee and no monthly charge for at least seven years. We would also offer Google Fiber Gigabit Internet—up to 100x faster Internet than today’s average broadband speeds—and the option for Google Fiber TV service with hundreds of your favorite channels. We’d also provide free Gigabit Internet service to 25 local public institutions like schools, hospitals and libraries.

Google to Lease liNKCity Fiber in Missouri

Google Fiber is leasing fiber for transport from a small municipal FTTH network in North Kansas City. A recent Kansas City Business Journal article reports that Google finalized a deal with City Council for a 20-year agreement worth $3.2 million to lease fiber from liNKCity. This was more convenient for Google than laying (or attaching) its own fiber to get between areas it is building out.

Earlier this year, liNKCity made news by providing free gigabit service to North Kansas City Schools. The service was estimated to save the school district $500,000 over the next five years.