AT&T's and Google’s Austin Experiments: Is a Gigabit a Good Idea?

AT&T's and Google???s Austin Experiments: Is a Gigabit a Good Idea?
A Google broadband technician installs a Google Fiber network at the home of a customer in Kansas City
Photograph by Julie Denesha/Bloomberg

Austin may be feeling like one of the luckiest towns in the world today. Not one, but two big-name companies have said they plan a gigabit network in the Texas capital. But, as both Google and AT&T plan their fiber-to-home deployment strategies, they are testing plans that look inefficient and might bite consumers in the end. Still, innovation is needed in broadband deployment, so all eyes will be watching Austin.

Ma Bell announced its gigabit plans on Tuesday after Google said it plans to offer its own gigabit, fiber-to-home network to the Texas capital.

I got on the phone with Larry Solomon, an AT&T spokesman, to get details on the network. Solomon said AT&T will expand its existing fiber-to-the-node product to “homes and buildings.”

In its release, AT&T also said this expansion wouldn’t “materially affect its capital expenditures for 2013,” which struck me as far-fetched. Solomon, however, said, “AT&T spends $20 billion a year on capital expenditures. We don’t expect this year to be materially different.”

In further conversation with Solomon, the rationale behind that statement became clear. The time frame here is uncertain, and AT&T has learned a thing or two from Google on how to lower the cost of deployment.

AT&T executives will meet with city and state officials seeking the same concessions that Google is getting to build out its network, Solomon said. As someone who has followed telecom in Austin, and in Texas, I believe this mostly means the ability to cherry-pick where to deploy its gigabit network. And that points to both the upside and downside of Google’s influence.

I wrote back in July that Google has changed the economics of deploying fiber, in part by its strategy of getting people to sign up in advance and then choosing to deploy where demand was greatest. This eliminates the need to pass homes that might not sign up for fiber and also lets Google roll out service to neighborhoods in bulk.

Well, AT&T wants to do something similar. AT&T would like to follow a strategy in which communities help drive demand for the gigabit service, Solomon said. When I asked if that means aggregating demand and then serving those communities, he said that was something AT&T was interested in.

But there’s a big downside to this plan for end users and the cities. Having both Google and AT&T trying to persuade customers to sign up for their respective gigabit service effectively splits the vote. Solomon didn’t comment on that possibility, but he did say AT&T wants to offer competitive pricing and build offers around wireless and other AT&T products. Google hasn’t announced pricing for its services in Austin yet, but in Kansas City, a gigabit costs $70 a month and a gigabit plus TV costs $120 per month. I’ve covered AT&T’s comparable pricing in Austin here.

Which brings me to my larger issue with our broadband strategy in the U.S.—the lack of a plan for delivering real wireline competition. If AT&T gets its way with city and state officials and goes head to head with Google in the neighborhoods, we’re looking at what could become—at best—a network buildout in areas where people own their own homes (Google had to develop special programs for attracting landlords to commit, which made Google Fiber in low-income areas a tougher sell) and already know they want a gigabit. At worst, neighbors split between Google or AT&T will not meet the threshold to get a buildout, and no one gets a gig.

Frankly, it’s dumb that both AT&T and Google might spent dollars building out fiber to the home in the same neighborhoods. Will streets get torn up twice? Will your broadband provider be determined for the life of your home, based on the decisions that occur during a few predetermined fiber signup periods?

A better option for Austin, and what could potentially become a model for communities everywhere, would be if Google and AT&T decide to work together to lay conduit (basically pipe in which anyone could run fiber) in areas where people want the service. When I asked Solomon about this possibility, he said, “I wouldn’t rule out anything, but I wouldn’t include it either.”

He then pointed out, however, that with its Android operating system, Google is not just a competitor on the fiber front, but also a partner. “Google provides the operating system for a lot of devices we sell, so in that sense, Google is an indirect partner and great company. We have a lot respect for Google.”

For better or worse, AT&T is coming to Austin to seek the same opportunity that Google has. It wants to get city officials to let it roll out a gigabit, fiber-to-home network in a way that lowers AT&T’s deployment costs and allows it to put fiber exactly where people say they want it. And it is happy to take this plan on the road to other places in the U.S.

“We will sit down and work with any community that allows us to reach an agreement that allows us to accelerate our telecommunications investment,” Solomon said.

As for timing on AT&T, Solomon says that once AT&T has its agreements from the city, it plans a similar style of announcement to the one Google hosted in Austin today. “We have been looking at this for some time, and seeing the Google announcement is obviously a sign that is encouraging,” Solomon said. “That telecom companies and Google, or whomever, can work with city officials to get policies in place to see regulations and costs lowered to speed up the infrastructure is good.”

I’m not so sure this is the best way for gigabit networks to be constructed. It is clearly less efficient than laying conduit—although in the U.S., the question of who would take on that investment has rested in the hands of private companies. There are very real questions and worries about how and when all parts of a community would be served. Google faced some of that scrutiny in Kansas City when lower-income neighborhoods weren’t signing up quickly enough, but eventually Google said it would roll out fiber to 90 percent of eligible neighborhoods.

The telecom industry has needed innovation to get it to faster speeds, however, and this is clearly an innovative way to try to expand network access and upgrade the infrastructure. So instead of simply getting a gig, it looks as if Austin may get a whole lot more—a starring role in the battle to bring innovation and faster speeds to the broadband industry. I just hope it’s one that consumers win.

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