Reports of Google Fiber's Death Are Greatly Exaggerated

Google and its parent company Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have been treating the Google Fiber project like a pariah recently. The gigabit fiber service didn't expand at all for a couple of years, and new subscriptions don't include a fiber-based TV service anymore. But there's a change in the weather right now, and Google is taking its fiber-optic internet service seriously in 2020. Just this week, Google launched a new plan that doubles the download speeds on Google Fiber and comes bundled with a next-generation WiFi 6 system.

Fresh upgrades and expansions

The 2-gigabit Google Fiber plan will cost subscribers $100 per month, a $30 premium over the existing gigabit service. The service includes a WiFi 6 router and a mesh extender, which should cover up to 3,000 square feet of floor space in high-speed WiFi signals.

This plan will soon launch in all 19 of Google Fiber's current markets, including the recent additions of Millcreek, Utah, and West Des Moines, Iowa. The Millcreek project involves new construction and fiber-optic line installations. It's expected to serve its first customers in early 2021. In West Des Moines, Google is taking over the management and subscriber list from the municipal fiber network.

We're not talking about huge markets here. West Des Moines has 66,600 residents, while Millcreek has 61,300. But growth is growth, and these modest additions may be signs of a more ambitious expansion plan. Doubling the download speeds and including a modern WiFi solution for a modest additional fee also feel like forward-looking moves.

These are not the actions of a company that plans to shut down its fiber-based internet service. They point to a brighter future and a growing user base.

A handful of fiber-optic cables lit up against a black backdrop.

Image source: Getty Images.

The business case

Google Fiber remains a promising long-term business idea for Alphabet, but it isn't a profit center today. This operation is bundled in the "other bets" division when Alphabet reports quarterly results, and the venture's results are consistently printed in red ink. Other bets saw a $1.1 billion operating loss on $148 million in second-quarter revenues, primarily based on Google Fiber and the health research business known as Verily.

Keep in mind that Alphabet's "other bets" are long-term projects. Some of them will grow into profitable stand-alone businesses, while others will fail and die along the way. Critics have seen Google Fiber as a money-losing nonstarter, but I wouldn't be surprised to see Alphabet throwing its considerable weight behind promoting and expanding this business over the next few years.

I own Alphabet shares exactly because of the long-run value I expect from the "other bets," even if the results look small and painful in the short term. And Google Fiber should start pulling its weight fairly soon.

10 stocks we like better than Alphabet (A shares)
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Alphabet (A shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of August 1, 2020


Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More