The Wait-for-Google-to-Do-It Strategy

It’s too often said that some event “changed everything” in technology. But when it comes to the history of broadband in the United States, Google Fiber really did. Before February 2010, when Google asked cities to apply to be first in line for the fiber-optic lines it would install to deliver Internet service to homes at a gigabit per second, the prospects for upgrading Americans’ wired broadband connections looked dismal. The Federal Communications Commission was on the verge of releasing its first National Broadband Plan, which stressed the importance of affordable, abundant bandwidth and the need to spread it by “overbuilding”—stringing fiber to houses and businesses even if they already had service over cable and phone lines with relatively low capacity. Yet at the time, as Blair Levin, executive director of the broadband plan, told me, “for the first time since 1994, there was no national provider with plans to overbuild the current network.”

This was not because of technological hurdles. Instead, it was a simple matter of incentives. Building much faster networks was an expensive task, one that would require the kind of hefty capital expenditures that Wall Street typically frowns upon. (Verizon’s spending on its FIOS TV and high-speed Internet service, for instance, came in the face of deep skepticism from investors, which eventually led the company to curtail its expansion of FIOS nationally.) And since Internet service in most cities was supplied by either a near monopoly or a cozy duopoly in which the two players—typically a cable company and a major telecom provider—barely competed against each other, there was little competitive pressure to improve. As long as all the players kept the status quo intact, it seemed, Internet providers could look forward to years of making sizable profits without having to put much money into their networks. The Internet as we know it was only 15 years old, but ISPs were already shifting into harvesting mode: maximizing revenue from their infrastructure rather than upgrading it. Forget gigabit Internet. The National Broadband Plan set a goal of getting 100 million homes affordable access to download speeds of just one-tenth of a gigabit, or 100 megabits, per second. (Only 15 percent of American homes have connections above 25 megabits now.)

http://www.technologyreview.com/review/538411/the-wait-for-google-to-do-it-strategy/