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Why Investors Should Care About Google Fiber

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Google Inc. ( GOOGL ) - the multinational conglomerate with services and products a vast number of individuals depend on each and every day. The company is so ingrained into the global social consciousness that we have turned this noun into a verb meaning "to search for a piece of information on the internet."

Google provides the world free search engine usage, free email services, free 15 GB of cloud storage for files, a free office suite, free unlimited storage of 16 megapixel or less photos, free directions, free internet browser, and so much more, all because of the success of their "funnel" business model .

Of the select services I mentioned, the one that is not known or widely recognized by the public at large, excluding the social media punching bag that is Google+, is Google Fiber .

The broadband internet and cable television services section of Google is not widely recognized because Google Fiber is currently available in only 3 US cities - Austin, Kansas City, and Provo, Utah - officially expanding into 6 US cities - Atlanta, Charlotte, Nashville, Raleigh-Durham, North Carolina, Salt Lake City, and San Antonio - and potentially expanding into another 6 US cities - Irvine, California, Louisville, Phoenix, Portland, Oregon, San Diego, and San Jose.

The details of the services Google Fiber is providing are rather intriguing for investors, especially because there is a strong possibility for the internet and cable provider to become a serious player in the industry.

The division began back in 2010 as an experiment to develop " new ways to make broadband better, faster, and more available " to the populous. This experiment became a business plan back in 2011 when Google officially announced its plans to develop a broadband infrastructure in Kansas City . In 2012, Google Executive Chairman Eric Schmidt announced the company's desire to expand its Fiber services at TheNew York TimesDealbook Conference .

Since then, the service has been rather niche for only a select few Americans in non-major markets. The upcoming and potential markets of Atlanta, San Antonio, San Diego, and San Jose are relatively large metropolitan areas - especially compared to Kansas City and Provo, Utah. But if Google wants to be serious with its expansion efforts, the company needs to begin infrastructure construction in the major US metropolitan areas of New York, Los Angeles, and Chicago.

Back in March of this year, MoffettNathanson analyst Craig Moffett is quoted in a Bloomberg article about this potential issue for Google's new service, stating, "Google Fiber is a bit like Ebola: very scary and something to be taken seriously... but the numbers are very small, it gets more press attention than it deserves, and it ultimately doesn't pose much of a risk (here in the U.S. at least)."

What are the Details of the Service?

Despite the service being new and only in limited areas, the simple fact Google is providing internet and cable services creates completion in the industry. Big name providers like Comcast ( CMCSA ), Verizon ( VZ ), and AT&T ( T ) will be forced to improve services, lower prices, or die off if they decide to do nothing - and doing nothing is a bad business plan for rival companies where Google Fiber is available. To receive "up to 1,000 mbps [which is a marketing way of saying 1 gigabyte per second] upload and download speeds" and "1 TB of cloud storage across Google Drive, Gmail, and Google Photos," it will cost the subscriber $70 per month. If you commit to having the "Gigabit Internet" package for 1 year, Google will waive the $300 construction fee.

The "Gigabit + TV" package costs the subscriber $130 per month, which includes everything the "Gigabit Internet" package offers plus over 150 HD channels, one TV Box, DVR, and Network Box without extra fees. You can see the full channel listing here for Kansas City. Some notable channels Google is including are local channels, ESPN, Comedy Central, NFL Network, Fox News, FX, and TNT. Channels do currently vary between cities.

Companies like Comcast, Verizon, and AT&T do offer bundles for internet and cable television, but not for the same price and service. For internet alone, Comcast offers 150 mbps for $129.95 per month, and Verizon offers 300 mbps for 159.99 per month as a 2 promotional price. AT&T offers very similar services as Google, but the prices differ. AT&T offers 1 gbps internet alone for $110 per month as a 1 year promotional price and $150 per month as a 1 year promotional price for internet and television.

Final Thoughts

$70 for 1 gbps upload and download speed is a really quality value for home internet. On the Google Fiber homepage , visitors can compare the different mbps speeds with Google's 1000 mbps and the difference between the speeds is astonishing. Compared to what the competition offers for similar services, only AT&T is comparable to what Google is offering price-wise. AT&T, however, has more experience providing internet and television to the population than Google.

Building a continental infrastructure to carry high speed internet from scratch is going to take years for Google. Fiber is still in its infancy stages. If the service is successful in the upcoming and projected cities, investors, both current and potential, should not be surprise if this becomes a viable player in the industry.

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AT&T INC (T): Free Stock Analysis Report

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


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

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