Why Isn't Verizon Scared of Google Fiber?
Jul 23rd 2013 7:00PM
Updated Jul 23rd 2013 7:02PM
Most wired telecom players are responding in kind to the threat that Google Fiber represents. Following a slew of announced expansions by Big G earlier this year, incumbents have been firing back.
AT&T said it would launch a similar service in Austin if it could score the same local incentives as the search giant. Regional and local operators in Vermont, Nebraska, Seattle, and Minnesota have all announced gigabit connections. At least one company isn't worried, though: Verizon .
Big Red just announced a new service level for its existing FiOS fiber optic network, but the pricing and speeds are hardly competitive with what Google Fiber promises. Verizon's new service offers a 500 Mbps connection, but that extra speed costs a whopping $310 per month. That's half of Google Fiber's speed limit and at four times the cost. Clearly, Verizon is not overly concerned with Google Fiber. Besides, the two newly announced Fiber cities aren't on Verizon's turf anyway.
There are a couple possible explanations for Verizon's lack of urgency. First, most of Verizon's growth these days comes from its wireless business, as opposed to the wired side. Verizon has a total of 5.8 million FiOS Internet subscribers, which pales in comparison to its 100.1 million retail wireless connections.
The company is more concerned with trying to buy out Vodafone's 45% stake so it can keep all that growth to itself. Verizon also stopped building out its FiOS network years ago due to intense competition, so the new service will only expand within its existing footprint. It's not like Verizon is investing heavily in FiOS like it is with its wireless infrastructure.
Furthermore, Google Fiber is highly unlikely to compete on a national level and may always be a regional player due to the extensive costs of building out infrastructure. Even if Big G were to grab 100% market share in all of its announced markets, that's still just 0.2% of the entire domestic market. Reaching everyone would cost too much.
Verizon's not the only one unperturbed by Google's overtures. Comcast has argued that people can't handle such high speeds, since most consumers don't have adequate hardware to fully tap gigabit connections. Time Warner Cable says there's no demand for blazing-fast Internet.
There might not be demand at the prices that incumbents charge for such high speeds, but the $70 that Google charges in Kansas City is a no-brainer. One of these days in the distant future, Google might be able to liberate us from cable captivity, but today is not that day -- and the cable industry knows it.
The article Why Isn't Verizon Scared of Google Fiber? originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Verizon Communications. The Motley Fool recommends Amazon.com, Google, Netflix, and Vodafone Group. The Motley Fool owns shares of Amazon.com, Google, and Netflix. 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.
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