Google Releases Gigabit Residential Lines, Intimidates Other ISP’s

There’s a new Internet service provider in the United States, one that has the other ISP’s scared of the competition that it will bring. Google is currently rolling out the first ever gigabit residential lines in Kansas City, Mo. over the course of 2012.

To put into perspective how fast a gigabit line is, one only needs to look at how fast a song or movie could be downloaded with that connection. An MP3 is around three MB, a standard movie is 700MB and an HD movie is anywhere from 20-30GB. A gigabit line could download the MP3 in 0.024 seconds, the movie in 5.6 seconds and the HD movie in three minutes and 20 seconds.
The fastest residential Internet connection in the country is listed on Google’s website as costing a one-time installation fee of $300 and a monthly payment of $70. Google also offers a TV package with a free Nexus 7” tablet remote for a total of $120 a month. For those who can’t afford the gigabit line, Google is offering free 5mbps Internet for seven years for the one-time installation fee of $300 which can be made in monthly installments of $25 over the course of a year.

Gizmodo reported that Time Warner Cable is so scared by the potential competition by Google that they have been offering chances to win prizes to anyone living in the Kansas City area for reporting rumors or activity made by Google or its personnel in the area.

Traditional ISP’s such as Time Warner and Verizon FIOS are right to be panicked about the new Internet services being provided by Google. They are doing a horrible job at providing their product to consumers. A study compiled by Pando Networks ranked the United States at only 26 in terms of Internet connection speed. The average speed in the United States is only five megabits per second. Countries such as Latvia, Russia and the Congo all rank higher than the U.S. in terms of connection speed. An average person living in those countries would have a faster Internet connection than they would if they were living in the United States.

Not only do consumers in the U.S. have slower Internet, on the whole they pay more as well. According to a study compiled by the OECD and ITIF Broadband Rankings, the cost for an average connection in America is $3.33 per 1mbps while costing only $0.63 in Sweden and $0.27 in Japan. The U.S. was the country that invented the Internet and it seems that we are quickly falling behind in its utilization.

The traditional ISP’s have collectively failed the U.S. in providing fast and affordable Internet. Instead of allowing more competition to bring about innovation and lower prices for better access, they have lobbied hard to turn the market into an oligopoly.

The ISP’s petitioned intensively in North Carolina in 2011 to ban municipal ISP’s. This is an Internet provider which is run by cities and towns directly. Small towns can cut out the middleman and offer Internet services directly to residents that are cheaper and faster than private providers.

Google, whose business model relies heavily on Internet connections, is tired of the current status quo and is trying to inject stiff competition into the market by starting their own ISP that is orders of magnitude better than what current providers can offer.
Competition from Google is the best thing that can happen in the current market for Internet as it will force other companies to upgrade their own networks and offer lower prices and faster speeds to consumers.

The only problem is that the current cost to Google of providing service to consumers is most likely below breaking-even. Google, however, will still make more money on the back-end as consumers who previously had slower speeds will most likely use their faster Internet to use more data-intensive Google products such as YouTube and provide precious ad revenue.
Faster speeds not only brings in more revenue to Google, it allows Internet companies in general to flourish as more people catch up in speed, and there is a lot of catching up to do. A Federal Communications Commission study in 2010 revealed that 38 percent of Americans were still relying on dial up Internet with many of these Americans living in rural towns that have no other option.

If I asked any of the CEOs of Verizon, Time Warner or Comcast whether or not competition was good for a market, they would most assuredly say that it would be. They need to revisit their economics 101 textbooks and start competing in the free market by offering the best service for the best price instead of running to the government to outlaw any competition that challenges them.

The rolling out of Google gigabit Internet connections in Kansas City is just the beginning as Google seeks to expand outwards and bring faster speeds towards other cities. Fresh competition is something that is sorely needed, and something that will ultimately benefit the consumer.

Alex Caraballo can be reached at alex.caraballo@spartans.ut.edu