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Comcast, Time Warner take on Google Fiber in Kansas City; can the incumbents compete?

Comcast and Time Warner announced that they are increasing internet speeds for customers in Kansas City. Will it be enough to hold off Google Fiber?

fibervan.jpg
 Image: Google

The advent of Google Fiber was a breath of fresh air for consumers who were long dissatisfied with cable monopolies and bandwidth throttling. Now, it seems, the competition posed by Google's gigabit internet has finally spurred the incumbent cable providers into taking action.

On Friday, August 1, both Comcast and Time Warner Cable (TWC) announced that they would be increasing internet speeds for customers in Kansas City, among other cities, at no additional cost to the consumer. While Comcast's speed upgrades will take place over the next few days, TWC won't upgrade internet speeds until next year. Customers who pay for 25 megabits per second (mbps) service will be upgraded to 50mpbs, customer who pay for 50mpbs will get 105mpbs, and customer who were paying for 105 will now see 150mpbs.

Kansas City, Kansas was selected from a pool of applicants to be the first city for Google Fiber in 2011; and it has become the flagship territory for the network. While the service has expanded to other cities, and Google has announced plans to spread it further, Kansas City is the most familiar with the service, so it makes sense that the incumbent providers would begin their counter-attack there. Still, the speeds being offered by Comcast and TWS pale in comparison to the 1 gigabit per second offered by Google.

While the move may seem generous, the cost to increase bandwidth for existing customers is almost negligible for these cable companies. Jim Hayes, president of The Fiber Optic Association, said that these companies aren't really giving much away, especially with all of the discussions around throttling; most recently demonstrated by Verizon's spat with the FCC.

According to Jeff Hecht, author of Understanding Fiber Optics, the cable companies have to compete to stay relevant.

"The cable companies really don't have any choice but to compete because they're going to start losing the cutting edge subscribers over the top if they don't," Hecht said.

The incumbents know that, eventually, they're going to have to do fiber. Jim Hayes
As I wrote earlier, inspiring competition among incumbents by inciting demand for better service is one of the potential outcomes of the Google Fiber saga. As Google Fiber builds up its customer base, that threat is becoming a reality for the two biggest internet providers in the US.

Hecht said that whether or not the cable companies will have to actually deploy their own fiber will depend on what their customers need. If the customers are mostly using cable for video, they won't need much digital bandwidth. Hayes, on the other hand, believes that incumbents adopting fiber is inevitable.

"The incumbents know that, eventually, they're going to have to do fiber," Hayes said. "It's just going to happen."

The need for bandwidth is ever-increasing, especially with the growth in online video streaming through services such as Hulu and Netflix. That puts cable ISPs on the chopping block in more ways than one. Not only do they need to keep up with increasing demand for digital bandwidth, they also have to figure how to deal with the drop in cable TV subscribers at the same time.

Faster internet speeds and more internet traffic are good for Google regardless of the outcome. And, while the task of trying to become a national fiber ISP in the US is daunting, it's another possible endgame for Google.

Hayes initially thought that Google's plan was simply to tweak other companies and try to encourage competition. But, after Google announced the 34 additional cities for Fiber expansion, he began to take a look at the numbers and began to see Fiber as one of the few opportunities for a multi-billion dollar company like Google to grow.

"If they got like a 30% penetration in those 34 cities, they would be generating more than $6 billion a year in revenue for the service, irrespective of what they get in additional advertising for more market penetration," Hayes said.

His guess is that Fiber could end up as high as an 80% gross margin for Google, and it is no longer tweaking the market, but establishing itself as a major internet provider.

Whatever the plan, Google Fiber is shaking up the ISP industry and, with cable company satisfaction at an all time low, it's obvious that something has to give.

What do you think?

We want to know. Do you think Google is trying to push incumbents to provide better service? Or, is Google making a real play at being an ISP?

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About

Conner Forrest is a Staff Writer for TechRepublic. He covers Google and startups and is passionate about the convergence of technology and culture.

17 comments
mkeenan5
mkeenan5

Comcast and Time Warner have proven time and time again they can't compete at any level with the likes of Google Fiber.  Their service is subpar, their product overpriced especially now that Comcast is starting to charge for archaic data caps, and their speeds on their best day can't compete with Google Fiber on its worst day.  Why do you think they spend so much money lobbying to undermine competition instead of improving their products and services?  


Comcast knows that as many as 75% of their customers are ready to jump ship as soon as they're presented with a viable alternative.  The report cited below is from 2008.  God help the incumbent telecom's if it hasn't gotten worse since then.  


"Our research suggests that nearly three quarters of broadband subscribers would be willing to switch providers, and that Time Warner Cable is under greatest threat from customer churn. This survey of 1,003 US Broadband Decision Makers measures respondents’ satisfaction levels with individual BSPs, their propensity to churn, and perceived obstacles which stand in their way of defecting."


The sooner we can get competition in the broadband market the sooner we can watch Comcast and its ilk go down like the Hindenburg since the traditional cable model itself is as little as 10 years away from obsolescence.  

mkeenan5
mkeenan5

Comcast and Time Warner have proven time and time again they can't compete at any level with the likes of Google Fiber.  Their service is subpar, their product overpriced especially now that Comcast is starting to charge for archaic data caps, and their speeds on their best day can't compete with Google Fiber on its worst day.  Why do you think they spend so much money lobbying to undermine competition instead of improving their products and services?  


Comcast knows that as many as 75% of their customers are ready to jump ship as soon as they're presented with a viable alternative.  The report cited below is from 2008.  God help the incumbent telecom's if it hasn't gotten worse since then.  


"Our research suggests that nearly three quarters of broadband subscribers would be willing to switch providers, and that Time Warner Cable is under greatest threat from customer churn. This survey of 1,003 US Broadband Decision Makers measures respondents’ satisfaction levels with individual BSPs, their propensity to churn, and perceived obstacles which stand in their way of defecting."


The sooner we can get competition in the broadband market the sooner we can watch Comcast and its ilk go down like the Hindenburg since the traditional cable model itself is as little as 10 years away from obsolescence.  

austinrdr
austinrdr

That upgrade isn't very impressive. Time Warner upgraded my service to 300/20 in Austin; though, Time Warner was stuck at 50/5 for years until Google made their announcement.  Lower bandwidth plans are also more affordable with 50/5 for about $40/mo. now.  AT&T Gigapower is mostly just hype here, since they're not upgrading existing homes from copper to fiber and AT&T actually cut budgets on fiber upgrades this year.

TRgscratch
TRgscratch

" the competition posed by Google's gigabit internet has finally spurred the incumbent cable providers into taking action."


Duh.  What's we've been saying all along - the problem with Comcast, et al, is not them; it's that there is (was0=) no competition.

zolar1
zolar1

HongKong has the world's fastest internet - a mind boggling 500MB/s for LESS THAN $20 per month.


There is no excuse to pay obscene prices for low speeds.


105MB/s should cost 1/5 the $20 that people in HongKong pay or about $4/month.


And NO screwing around with blocking anything to bad DNS servers or whatever excuses they come up with.

Matthew D. Jones
Matthew D. Jones

The winner-take-all talk in tech (and just about everywhere else) is nonsense not worth keeping up on. Fanboys are a bore and acting like what company gets an advantage in a market is more important than what YOU are doing is just setting your own interests aside to become a cheerleader for an entity that doesn't know or care if you exist outside of being a consumer.

John Warren
John Warren

AOL, they still have 50million floppy disks in the wild. lolz.

Viviane Brisson
Viviane Brisson

I'll take Google over Time Warner any day of the week.

Paul Hines
Paul Hines

Now all Google Fiber has to do is to cut a deal with Hulu and Netflix to create a premium streaming deal and its a wrap.

Paul Hines
Paul Hines

They weren't ready for Google Fiber's sneak attack, its not even close.

Lisa Cochrane
Lisa Cochrane

The scripts those poor reps have to read are absolutely ridiculous! It's not like you're having a conversation with a human. They may as well get rid of the warm bodies and set up an IVR only to handle calls.

James Donelson
James Donelson

I wish they would improve the customer support and satisfaction for the products they sell. Cable companies in general are miserable.

riverasanchez
riverasanchez

Cable has met reality. There is no one in their right mind, that would switch from a Google brand to a Comcast or Time Warner brand which are now the same company. Even if I have to pay more, I would stay with Google. 


Why... the decades of abuse and neglect fromt his cable companies. But... there is one factor that directly relates to politics in the USA market.  Consumers in the USA, seem to forget easily if the Cable companies offer them a nice flavored lollipop to entertain them while the re-take their home Internet service again!!! Ironic but true! 

InfoStack
InfoStack

"the cost to increase bandwidth for existing customers is almost negligible for these cable companies."


Really?  So why is everyone making a fuss over their forcing Netflix to peer closer to the WAN core?  Seems like the FCC needs to understand the true costs of the last and mid miles.


Especially when Google might be able to generate " as high as an 80% gross margin" for only 30% market share.  Hmmmh makes one wonder what the true digital or per unit cost in the last mile really is.

dlrooky
dlrooky

Not if you have both Boardwalk and Park Place. :)

riverasanchez
riverasanchez

@InfoStack
FCC... wait! You mean the unscrupulous FCC that is manipulated by corporate America (Comcast... ups!)

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