It’s too expensive. No one wants to buy it. Laying cables is unprofitable. The government is overreaching. Objections to high-speed fiber broadband today sound like those facing rural electrification during the 1900s. History suggests they’ll prove wrong today as well.
On Oct. 25, Google pressed “pause” on rolling out high-speed fiber across more US cities. In an announcement, Google Fiber said it was delaying fiber-to-home service in eight cities, including Dallas, Los Angeles, and Phoenix, to focus on the 12 urban markets where it is already working. The CEO of Access, the unit that includes Google Fiber, stepped down, and 9% of its 1,500 employees will be laid off, reports Bloomberg.
Many heralded Google Fiber’s announcement as evidence of its folly. The model is proving too expensive and unscalable, even for Google’s deep pockets. Demand has not materialized. A lack of “killer applications” demands a slower approach. It’s just not profitable, contend Wall Street analysts.
Almost all these criticisms were made in the process of electrifying America’s hinterlands, and that effort’s success should give critics of Google Fiber pause, said Joshua Lewis, an economics researcher at the University of Montreal, in an interview. Lewis’ research (pdf) found that the benefits of rural electrification defied almost every expectation about the cost, demand, and benefits for productivity and quality of life.
“Over time, electrical utilities learned that this actually did turn out to be a profitable market,” said Lewis. Opposition rested on the assumption that rural residents wouldn’t pay for the technology, and pilots ”proving” it was uneconomical to extend transmission lines outside cities. By 1930, almost every US city enjoyed electricity, while only 10% of farms and rural towns had access to power (a similar, if less stark, gap exists among high-speed internet access today).
In response, the Rural Electrification Administration (REA) was created to loan money to rural communities for transmission lines. It was a runaway success. Within two years, 100,000 miles of power lines had been strung, reports Lewis (pdf), and utilities realized they were making money selling to the new customers. By 1955, 95% of farms were electrified.
Fiber also faces an immature market and resistance from incumbents to invest in new infrastructure. But in many places the business of fiber is already profitable, says Dane Jasper of Sonic, which is deploying a similar service in the Bay Area. The model is already sound, he argues, and expanding it will only be a matter of time.
Google Fiber’s real stumble may have been not perfecting its business model before racing to bring fiber to 20 cities just two years after first launching in Kansas City in 2013. “Every city was a fire drill, and we weren’t able to learn from our mistakes,” a former Google Fiber employee told The Information (paywall).
Deploying a municipal fiber network can take at least five to seven years. For a Silicon Valley company accustomed to growth measured in months, the slow pace likely pushed Google Fiber’s capital expenditures far beyond what newly cost-conscious parent company Alphabet would countenance. The company is now returning to its original plan: proving that gigabit-speed residential internet is feasible and profitable in just a few major cities, and then expand from there.
Now, the pieces fiber needs to succeed—strong demand, affordable infrastructure, and clear benefits—are coming together. AT&T says demand for its fiber connections “is exceeding even our high expectations,” while prices have plummeted. Thanks in part to competition, the cost of a gigabit connection from AT&T, Comcast, and Google Fiber has tumbled over the last two years. Services that need gigabit speeds, while rare, are waiting in the wings from ultra-high resolution home media at Netflix to Microsoft’s augmented reality with its HoloLens technology .
Patience is in order. Even after it proved profitable, rural electrification took decades, and the full benefits from the technology took even longer. But when transformative change from fiber finally comes, says Susan Crawford, a Harvard Law School professor who has studied the subjects, it will likely seem sudden. “It’s a phase change,” she said in Vox, “Like ice turning into water.”