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Google Fiber Is Changing Its Strategy as Costs Grow (fortune.com)
Google is taking a strategy timeout on its high-speed-internet business. According to WSJ, the Google Fiber unit is -- including Los Angeles, Chicago, and Dallas -- after its initial rollouts proved time-consuming and expensive than anticipated -- is rethinking how to deliver internet connections in about a dozen metro areas (could be paywalled; alternate source). From a Fortune report: Turns out it is very expensive to run wires -- or in Google's case, fiber optic cables -- to each and every house that wants service. Known as the "last mile" problem, the high costs, in turn, make it difficult for companies to earn a solid rate of return on the installation investment. Google's effort, through its unit called Fiber that launched in 2010, is now seeking alternative means to connect to consumers homes or finding other people to pay the cost. Google has sought deals with municipalities and power companies to pay for the connections and is also exploring less expensive wireless technology. Meanwhile, Google has suspended efforts to add new cities such as San Jose, Calif., and Portland, Ore., using its prior strategy of stringing up cables to each customerâ(TM)s home.
"Turns out it is very expensive to run wires -- or in Google's case, fiber optic cables -- to each and every house that wants service. "
Holy cow...did nobody at Google see what happens with similar utilities? Or did they just assume the old rules didn't apply to them since it was "on the Internet"? I thought the 1999 "we'll make it up in volume" rules were already thrown out. I highly doubt Economics 101 courses at Stanford leave out the discussion of natural monopolies.
The only thing I can possibly think that they were thinking is that the value of the data they were able to mine by being plugged _directly_ into your Internet usage habits would be way bigger than the cost to run fiber to thousands of houses.
Why do you think Verizon et al is now trying desperately to get out of the wireline business? They're a public utility and can't raise rates whenever they feel like it, unlike their wireless business. At the same time, you have real physical stuff deployed in the ground that needs to be maintained. It's the same over at the electric company, or worse, the water authority. I can't imagine how much it costs to maintain 100+ year old pipes and clean up after water main failures.
Rather, run fiber optic to all neighborhoods. Than broadcast over a wireless signal to the last mile.
Roads, electricity, water, gas, telephone: All of these things could only be built with significant involvement/investment/regulation from the government. It should be blatantly obvious that no amount of "free market" magic by itself is going to get fiber infrastructure built to every home in the country which currently already has the aforementioned infrastructures; most of which are much more expensive to build out than fiber lines. This is what I find most aggravating about the whole broadband mess. I'm imagining an alternate history where Eisenhower was never able to build the Interstate highway system because a bunch of powerful monopolies already had a bunch of bumpy dirt roads with exorbitant toll booths.