Now Google Can Say 'Been There, Done That'
Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In your school, your office or in your neighborhood, there is always a guy who is “been there, done that” about anything and everything you tell him. I am not talking about the "wannabe" category, but someone who actually has done a lot. In the technology space, Google (NASDAQ: GOOG) is that guy.
Google, a company born in 1998 with a mission to make information organized and easily available anywhere on the planet, turned out to be the world’s largest online search provider. After almost a decade of sweet success in several of its business areas, Google launched the smartphone OS platform Android in 2007 and at present it captures a share of the market as huge as 61%, according to International Data Corp., making Google the world’s most used smartphone OS maker. Smartphones, tablets, online ads, social networks, finance-related stuffs, maps -- you name it and Google has done it. And now, in 2012, the company announced its latest offering: Google Fiber. Will this prove to be another milestone for the giant? Will this taste as much success as the Android? Will this again redefine how people look at Google? Let’s see.
The latest in Google’s portfolio
Google Fiber is an ultra-high speed internet connection that the giant has developed with an aim to surpass the current market offerings. The USP of this new service is that it will provide a speed of 1Gbps, which is about 100 times faster than the average US connection speed. Though US was the country that invented the internet, at present it ranks 12th in the world when it comes to internet connection speed. With Google Fiber’s super fast speed, the company aspires to pull up US’s rank.
The value proposition
Through Google Fiber the company is offering an internet service with 1Gbps internet speed, a TV connection and a 1TB cloud storage and is going to ask a price of $120 monthly. Google will also provide only internet service without the extra facilities and for this the company has put up a service price tag of $70 monthly. With this, users will get to search live channels, record thousands of hours of TV shows and (up to eight shows at the same time), surf through Netflix and YouTube. Another attraction for users will be the choice among tablets, smartphones and voice-activated remotes to control the functioning of Google Fiber.
With more than 100 networks under its belt, Google Fiber is going to offer its customers a lot to feel excited about. The popular networks that will be available include Comcast’s (NASDAQ: CMCSA) NBC Universal, Viacom Inc. and Discovery Communications. Along with these, Fiber will also make available premium movie networks from Liberty Media’s Starz, but this will come with an additional fee. But sadly, Fiber will miss out on some pretty in-demand channels from News Corp, Time Warner Cable and Walt Disney.
At present Google doesn’t have a plan give Google Fiber an elaborate launch. Instead the company plans to launch it in a specific area. The area that will get its hands on the Fiber is Kansas City, Missouri, thanks to the pro-business environment and well-developed infrastructure. The Android maker has plans to start the installation process September onwards and till then it will just welcome registrations.
How is Google doing what it’s doing?
Google has innovated a little and has developed a new technique that makes it possible to deliver this next-generation internet connection. Google Fiber will not function like a typical broadband connection. According to Google, the new service will be based on thin fiber lines that will connect a user’s home to the US’s National Internet Backbone directly through a data center and thus will provide ultra-high speed internet by minimizing loss.
Few possible hiccups
Even though the offering seems to be pretty impressive, Google is still likely to face few small hiccups. Let’s take a look at the possible ones. To begin with, though some people may find the $120 fee to be a little high, the $70 fee is pretty competitive. It can be expected that no one will crib paying this fee for a totally new breed of internet service. However, there are two more fees that users will have to pay. Google is going to charge $300 as an installation fee that the company is referring to as "home improvement cost" to make the prospective users feel better, and another $10 as registration charge.
Secondly, Google will now also be up against Time Warner Cable (NYSE: TWX). At present, Time Warner Cable is the ruling champion in the market and provides the till-date fastest internet-only connection for $99.95. Thus, Google’s offering will be cheaper and faster than that of the TWC. But will its network be as strong, adaptable and wide as that of TWC? Google might face some stiff competition there.
Thirdly, this is going to be Google’s first attempt as a television service provider, a space that is being dominated by biggies such as Cisco (NASDAQ: CSCO) and Dish Network (NASDAQ: DISH). The volume of content available for TV viewing might create issue for the giant. Though Google is going to provide more than 100 channels, it will yet miss out on some pretty important channels such as ESPN, HBO, Disney to name a few. If I have to pay $120 a month, I surely will like to have these channels too.
Fourth, Google Fiber is likely to see a very slow growth and adoption rate though there might be huge demand. This has to do with the slow installation process. On one hand there are companies such as Cisco, TWC and Dish who are already widespread and well established. On the other hand is Google, which is dividing Kansas City into small segments called “fiberhoods” and then analyzing which fiberhood to begin with based on registration density and then gradually expand. Google will need a minimum of 50 registrations from each area to make the area eligible for installation services. The company expects to cover the entire Kansas City by the end of 2013, thus creating a huge waiting period for subscribers. Though it’s a long-term project and Google will take time to fully launch it, isn’t it too slow?
Concluding thoughts
The response Google got after it announced its next generation internet-cum-television offering was overwhelming and the company received invitations from as many as 200,000 individuals and 1,100 communities. And why will it not? Google is doing something special for the early birds to make them register quickly for the service. These early birds are going to get a Galaxy Nexus 7 tablet with Google TV app. What more can you ask for! The giant has done brilliantly in its recent quarter and posted a 35% surge in the top line and with projects such as this, the company is also likely to post huge results in the future. Though there may be initial hiccups, I have faith in Google and I know it will surely tackle those. According to the Google Fiber commercial “the next chapter starts here.” It surely does!
analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
