Google Fiber’s bold expansion into new US markets may improve the chances that Comcast’s $45 billion Time Warner Cable buyout will be approved by US regulators, according to industry analysts.
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Google Fiber's bold expansion into new US markets may improve the chances that Comcast's $45 billion Time Warner Cable buyout will be approved by US regulators, according to industry analysts. That's because Comcast can use Google Fiber's expansion as evidence that competition is growing across the country—especially in the cable giant's target cities for the merger, including Atlanta and Nashville.
"Comcast must love the fact that Google Fiber just announced plans in some of their biggest markets," said Rich Greenfield, a tech policy analyst at BTIG. "This is definitely a positive for the merger."
Comcast, the nation's largest cable company, wants to merge with Time Warner Cable, the second-largest US cable company, to create a communications giant that will control nearly half of the country's high-speed internet connections. Comcast argues the deal will lead to better service (if not lower prices) for consumers.
The Federal Communications Commission is evaluating the proposed pact, even as the agency addresses other important tech policy issues like net neutrality and community internet networks. The FCC's mandate is to evaluate the consumer benefits of the deal. The Justice Department is also examining the merger for antitrust problems.
Critics say the combined company would wield an alarming amount of power over consumers and content providers. Comcast already owns NBCUniversal, one of the crown jewels of the US media business.
"Google may capture some subscribers in the few cities where they're building, but Comcast would still have more than 40 percent of the subscribers in the country," said Matt Wood, policy director at the DC-based public advocacy group Free Press. "Even though Google's entry is welcome and pushing in the right direction, it's still a drop in the bucket compared to Comcast's reach and dominance both nationally and locally."
For almost a year, Comcast has been arguing that it faces robust competition in the market for TV and internet service, from wireless companies, satellite providers, and Google Fiber.
On Tuesday, the Google announced a long-awaited expansion of its super-fast internet service Tuesday, rolling out plans to bring gigabit internet service to Atlanta, Charlotte, Nashville, and Raleigh-Durham. The tech titan also said that it's exploring fiber projects in five other cities: Phoenix, Portland, Salt Lake City, San Antonio, and San Jose.
Comcast controls the cable and high-speed internet market in Atlanta and Nashville. Time Warner Cable controls Charlotte and Raleigh-Durham. Google is bringing additional competition into all of these markets, which plays right into the hands of Comcast, according to industry officials and analysts.
The conventional wisdom among DC tech policy types is that the merger will be approved by the FCC, albeit with conditions designed to benefit consumers. A Comcast representative declined to comment, citing the ongoing FCC review.
Comcast must love the fact that Google Fiber just announced plans in some of their biggest markets
Google's announcement bolsters the company's commitment to the Google Fiber project, which began several years ago as an exercise designed to shame the cable and telecom giants into boosting service and speed, but has now turned into a full-fledged business. Google has already launched its gigabit service in Kansas City, Austin, and Provo.
But as BTIG's Greenfield points out, it will take months and even years before Google Fiber is fully installed in these cities. Still, he thinks the tech titan's move enhances Comcast's argument to the FCC that it faces robust competition around the country.
For Google, speed means money, because faster internet means Google does business more quickly. "We truly believe that speed matters," Google vice president Dennis Kish said Tuesday. "So having that additional speed really does increase engagement and helps any company doing business over the web."
A Google representative declined to comment beyond Tuesday's announcement.
Google says it plans to deliver super-fast internet service over fiber-optic lines. It also wants to deliver wireless phone service through a partnership with Sprint and T-Mobile, according to published reports, which could shake up the US wireless market. The company also wants to deliver internet service via balloon, and even satellites: Last week the company invested $1 billion in Elon Musk's space internet project.
Taken together, Google's clear steps toward becoming an internet service provider represent an important shift away from the company's traditional desktop search advertising business, which has been declining as a share of the company's revenue growth due to the meteoric rise of mobile advertising. Facebook in particular has chipped away at Google's online ad dominance by focusing on smartphones and tablets.
Google has said that its fiber-to-the-home product delivers internet speeds of 1 gigabit per second—roughly 100 times faster than the average US connection—as well as crystal-clear, high definition television service. Needless to say, that's gotten the attention of Comcast, which is still serving its customers mostly through aging copper-wire infrastructure.
For Google, the fiber-plus-wireless strategy is a way of consolidating control over the delivery platform for a full suite of Android-based products. Think of the Google triple play: gigabit Internet, TV, and wireless service, plus music—all based on the Android platform. Google Fiber's expansion ramps up the competitive threat to incumbent service providers like Comcast, AT&T, and Verizon, which have grown accustomed to controlling their respective markets.
Matt Wood, of Free Press, isn't buying this logic. He acknowledged that Comcast's argument in favor of the TWC merger may be "slightly more true" after the latest Google Fiber expansion, but said that the arguments still weigh against the cable giant. "This deal is not in the public interest, and that's the burden of proof that Comcast has to carry."