"The cable distribution giants like Time Warner Cable and Comcast are already making a 97 percent margin on their “almost comically profitable” Internet services, according to Craig Moffet, an analyst at the Wall Street firm Bernstein Research."
Comcast's 2008-2011 mean (standard deviation) operating margin is 20% (0.8 percentage points), pre-tax margin is 14% (1.8 percentage points), and net income margin 9% (1.4 percentage points). This is of note for a purported utility, but not "comically profitable".
Let's observe their most recent quarterly disclosure [1] by business segment. Here we learn that the Cable Communications division, which "consists primarily of video, high-speed Internet and voice services (“cable services”) for residential and business customers in the United States", had an operating margin of 40% and spent 14% of revenues on capital expenditures. We also learn that Cable Networks, which "consists primarily of our national cable television networks, our regional sports and news networks, our international cable networks, our cable television production studio, and our related digital media properties", had an operating margin of 37%.
Where's the money going? Breaking out Cable Communication's costs, 35% went to programming, 35% go to "Other", defined as "business services, advertising, network operations, and franchise and other regulatory fees", 12% to marketing, 10% to technical labour, and 8% to customer service. Also of note, 24% of the division's revenues came from residential high-speed internet (50% came from residential video).
There's zero reason these fat profiteers are still protected businesses. They're simply parasites on the networks the taxpayers paid for. I recommend as step one to stop paying for things like television and unneeded bundled services.
I'd also like to point out that a VPN is about $40-70 a year. Once you have that up, you're only bound by bandwidth restrictions.
It makes me sick that I have to resort to such things simply to extract fair value from my service and believe me, I'm willing to pay my fair share. I'd spend upwards of $150 a month if I could get a legit Internet/TV bundle. What I'm not willing to do is allow these boring shit companies to get rich off subpar services anymore.
> There's zero reason these fat profiteers are still protected businesses. They're simply parasites on the networks the taxpayers paid for.
It's interesting that you should mention this. Most cities actually sign contracts with service providers. The contract grants the provider access to easements and, generally, exclusivity for the type of service (i.e. only one cable provider/local telephone carrier) allowed to operate in the city).
Convincing providers to bump up speeds and lower costs is going to require cities to kill the exclusivity clause, and encourage competition. Alternatively, allow the cable provider to retain exclusivity, but require fiber upgrades.
This kind of tactic may work better in smaller towns, like mine (Pop. 6000) as residents have very direct access to their city officials, but it's one approach that may work.
The article kindly submitted here reports slow uptake even for the Google Fiber service, with its attractive pricing and high degree of publicity. "Google wouldn’t grant an interview about Google Fiber—or even give the number of installations (though neighborhood sizes suggest it can’t be more than a few thousand)." The article also details other providers of high-speed broadband Internet access that have yet to achieve large market share even in the areas where they have built out infrastructure (albeit, at higher prices than the prices now on offer from Google). "As of last year, FiOS had about 5 million subscribers (most of whom also take the optional bundled television service)—or roughly one-third of the possible market where the company has strung fiber. But CFO Fran Shammo said in a conference call last fall that there are no plans to expand FiOS beyond those areas. 'At this point we have to capitalize on what we have invested,' he said." The investors in each company are in no hurry to see the company spend more on installing lines or upgrading the signals sent down the lines unless willing customers will sign up for the new service. That's basic economics.
The question asked by the article title, "When Will the Rest of Us Get Google Fiber?" is not answered in the article, except by implication. That answer is "not real soon." People are spending their money on other forms of Internet access, and people are writing to their lawmakers about other issues, and it will take time before there is either market incentive or regulatory nudging to roll out anything faster than the services that already let most residents of the United States watch YouTube continually. The higher speeds will come eventually, whenever many more customers think they are worthwhile.
Slow installations, not slow uptake. Installations started in in mid-Nov. Based on their schedule (http://googlefiberblog.blogspot.com/2013/02/kansas-reminders...), it seems Google can rollout 1-2 "fiberhoods" a week. With 180 fiberhoods, it is going to take a while to get an impressive installation number.
Many people seem to assume that the business proposition in itself is the reason why Google offers FTTH.
I think it should be considered that their main interest might be one of the strategic downfalls of the service (ex. free raw trafic), akin to how GOOG-411 was used to train a voice recognition engine, before terminating it once the training goals were attained.
If it proves to be the case, the media distribution "giants" have nothing to worry about, and people who expect the service to stay might be in for a surprise.
I agree that it's strategic, but I think Google's motive is to set a minimum standard, a catalyst to make the other service providers fall in line. Ie, don't collude to fatten your profits or Google Fibre is going to overtake you.
I think it's sustainable, if the service companies let their margins get too big then it would be a no-brainer profit making move for Google Fibre to expand and undercut them. If not, no skin off Google's back and the increased access to the internet serves their original goals too.
The cable distribution giants like Time Warner Cable and Comcast are already making a 97 percent margin on their “almost comically profitable” Internet services...
That's just begging to be disrupted. If Google or anyone else is willing to take half or one-third (etc.) that margin, they could offer vastly superior service and still turn a healthy profit.
And the natural response of the incumbents, just like in any industry, unfortunately, will likely be legal blockades:
>For example, in 2011, after the city of Wilson, North Carolina, built its own fast network—competing with existing carriers—the North Carolina legislature, amid industry lobbying, passed a law that made it harder for local governments to build networks and prevented Wilson from expanding its network beyond a county line, she said
But all the incumbents have to do is lower their price just a little bit lower than Google, and Google will never make a return on the billions spent on infrastructure.
That is why Google doesn't really want to become an ISP.
What pisses me off: It takes something like Google to compete with the entrenched oligopoly. And "we" are left waiting on their interest... or lack thereof.
When people finally try to self-organize (e.g. municipal development projects), the oligopoly turns to lawsuits and lobbying to beat them down.
The U.S. is such a hypocritical country. We laud competition, while in actuality we beat it down with ever fewer but larger and more deadly sticks.
Read "Master Switch" by Tim Wu to see how we got from point A to point B.
There's no beef to your argument. The telco oligopolies are the result of two simple factors:
1) Telecom is a field with almost infinite economics of scale, which means that the natural tendency is towards consolidation until there is only one company left. It's the textbook case of natural monopoly.
2) Most of the existing telecoms arose through government-sanctioned monopolies. Those monopolies didn't arise because lobbyists padded the right pockets. Those monopolies arose because rural areas dominate U.S. politics (their votes count about 2x as much when election districts are accounted for). As a result, governments go to huge lengths to make sure that utility providers don't do the most economically sensible thing of concentrating infrastructure in densely-populated areas. One of the measures is giving utilities monopoly rights in return for their servicing rural areas.
The fact that it takes something like Google to take on these interests is completely unsurprising. They are one of the few companies with the dollars to address (1). They are also targeting, so far, only Kansas City (not a megalopolis, but an urban area of 1.5 million people) and thereby dodging (2).
I have EPB Fiber here in Chattanooga, TN. I currently pay for the 50Mb service which usually runs on faster than that and is symmetrical. I started with 15Mb and since March 2009, they've bumped the speed up from 15 to 30 to 50. My friend has 100Mb service through them, which I'm considering since switching too since the cost isn't that much more, I'm finally setting up a wired NAS box, and my household no longer has cable TV, instead using the Internet for our media consumption.
With current technology, I wouldn't complain about 1Gb speeds, but 50, let alone 100, is still pretty damn quick. An HD TV show at just over 4.6GB took just over 13 minutes to download; in the process, practically saturating my wifi connection (which I've found to be the more limiting factor in my Internet speed).
So, fiber: yeah, it's awesome. But I'd wager that stupid-fast speeds aren't necessary for most people for a while, and until 802.11AC or faster has market saturation, it won't be.
As much as I would love to get rid of the shitty overpriced service I have, it isn't going to happen.
Google needs to have something of a service so they can keep their finger on the pulse. When Google knows how much it costs to provide service then they can negotiate better for their position within the oligopoly.
Google is going to be able to sell personalized advertisements in TV shows. Forget targeting networks or shows, Google can hit exactly me, complete with all my search history.
At the beginning, they're only going to have a few ad slots to work with, but the next step will be to negotiate with the ESPNs/Discovery Channels/MTVs to expand the number of ad slots they personalize. (Advertisers are going to demand it, since this blanket show the same ad to everyone watching is incredibly dumb.)
If the cable companies had their act together they'd have done this years ago, but a few minutes with my cable box convinces me they're no where near able to pull this off.
> "Google is going to be able to sell personalized advertisements in TV shows. Forget targeting networks or shows, Google can hit exactly me, complete with all my search history."
I'm all for disrupting the oligopoly that cable companies set up, but this point you're making in particular (ie. ultra-personalized TV ads) is not something I'm looking forward to.
Not just Google Fiber, I want to know when the rest of us will be able to get the Nexus 4. It was released in November/December and they are still sold out on Canada's Google Play website.
I wanted to get one for April when my current Bell contract runs out and then use it with Wind Mobile but it doesn't seem like I will be able to get one in time.
If someone wants to do something like this in santa clara, the economics don't work out for single family homes, but it would work for the larger apartment complexes, at least if I had someone else to do sales and inside wiring. I'm already sitting on the santa clara municipal fiber ring for other reasons.
[+] [-] JumpCrisscross|13 years ago|reply
Comcast's 2008-2011 mean (standard deviation) operating margin is 20% (0.8 percentage points), pre-tax margin is 14% (1.8 percentage points), and net income margin 9% (1.4 percentage points). This is of note for a purported utility, but not "comically profitable".
Let's observe their most recent quarterly disclosure [1] by business segment. Here we learn that the Cable Communications division, which "consists primarily of video, high-speed Internet and voice services (“cable services”) for residential and business customers in the United States", had an operating margin of 40% and spent 14% of revenues on capital expenditures. We also learn that Cable Networks, which "consists primarily of our national cable television networks, our regional sports and news networks, our international cable networks, our cable television production studio, and our related digital media properties", had an operating margin of 37%.
Where's the money going? Breaking out Cable Communication's costs, 35% went to programming, 35% go to "Other", defined as "business services, advertising, network operations, and franchise and other regulatory fees", 12% to marketing, 10% to technical labour, and 8% to customer service. Also of note, 24% of the division's revenues came from residential high-speed internet (50% came from residential video).
[1] http://www.sec.gov/Archives/edgar/data/1166691/0001193125124...
[+] [-] homosaur|13 years ago|reply
I'd also like to point out that a VPN is about $40-70 a year. Once you have that up, you're only bound by bandwidth restrictions.
It makes me sick that I have to resort to such things simply to extract fair value from my service and believe me, I'm willing to pay my fair share. I'd spend upwards of $150 a month if I could get a legit Internet/TV bundle. What I'm not willing to do is allow these boring shit companies to get rich off subpar services anymore.
[+] [-] jmj42|13 years ago|reply
It's interesting that you should mention this. Most cities actually sign contracts with service providers. The contract grants the provider access to easements and, generally, exclusivity for the type of service (i.e. only one cable provider/local telephone carrier) allowed to operate in the city).
Convincing providers to bump up speeds and lower costs is going to require cities to kill the exclusivity clause, and encourage competition. Alternatively, allow the cable provider to retain exclusivity, but require fiber upgrades.
This kind of tactic may work better in smaller towns, like mine (Pop. 6000) as residents have very direct access to their city officials, but it's one approach that may work.
[+] [-] res0nat0r|13 years ago|reply
[+] [-] tokenadult|13 years ago|reply
The question asked by the article title, "When Will the Rest of Us Get Google Fiber?" is not answered in the article, except by implication. That answer is "not real soon." People are spending their money on other forms of Internet access, and people are writing to their lawmakers about other issues, and it will take time before there is either market incentive or regulatory nudging to roll out anything faster than the services that already let most residents of the United States watch YouTube continually. The higher speeds will come eventually, whenever many more customers think they are worthwhile.
[+] [-] gyozaking|13 years ago|reply
[+] [-] millerc|13 years ago|reply
I think it should be considered that their main interest might be one of the strategic downfalls of the service (ex. free raw trafic), akin to how GOOG-411 was used to train a voice recognition engine, before terminating it once the training goals were attained.
If it proves to be the case, the media distribution "giants" have nothing to worry about, and people who expect the service to stay might be in for a surprise.
[+] [-] coopdog|13 years ago|reply
I think it's sustainable, if the service companies let their margins get too big then it would be a no-brainer profit making move for Google Fibre to expand and undercut them. If not, no skin off Google's back and the increased access to the internet serves their original goals too.
[+] [-] patrickk|13 years ago|reply
That's just begging to be disrupted. If Google or anyone else is willing to take half or one-third (etc.) that margin, they could offer vastly superior service and still turn a healthy profit.
[+] [-] hkmurakami|13 years ago|reply
>For example, in 2011, after the city of Wilson, North Carolina, built its own fast network—competing with existing carriers—the North Carolina legislature, amid industry lobbying, passed a law that made it harder for local governments to build networks and prevented Wilson from expanding its network beyond a county line, she said
[+] [-] politician|13 years ago|reply
[+] [-] codexon|13 years ago|reply
That is why Google doesn't really want to become an ISP.
[+] [-] pasbesoin|13 years ago|reply
When people finally try to self-organize (e.g. municipal development projects), the oligopoly turns to lawsuits and lobbying to beat them down.
The U.S. is such a hypocritical country. We laud competition, while in actuality we beat it down with ever fewer but larger and more deadly sticks.
[+] [-] rayiner|13 years ago|reply
There's no beef to your argument. The telco oligopolies are the result of two simple factors:
1) Telecom is a field with almost infinite economics of scale, which means that the natural tendency is towards consolidation until there is only one company left. It's the textbook case of natural monopoly.
2) Most of the existing telecoms arose through government-sanctioned monopolies. Those monopolies didn't arise because lobbyists padded the right pockets. Those monopolies arose because rural areas dominate U.S. politics (their votes count about 2x as much when election districts are accounted for). As a result, governments go to huge lengths to make sure that utility providers don't do the most economically sensible thing of concentrating infrastructure in densely-populated areas. One of the measures is giving utilities monopoly rights in return for their servicing rural areas.
The fact that it takes something like Google to take on these interests is completely unsurprising. They are one of the few companies with the dollars to address (1). They are also targeting, so far, only Kansas City (not a megalopolis, but an urban area of 1.5 million people) and thereby dodging (2).
[+] [-] theorique|13 years ago|reply
[+] [-] javajosh|13 years ago|reply
Examples?
EDIT: Okay. Wow. Had no idea. Has any municipality tried to create a wireless mesh network that connected through a few high-bandwidth connections?
[+] [-] crymer11|13 years ago|reply
With current technology, I wouldn't complain about 1Gb speeds, but 50, let alone 100, is still pretty damn quick. An HD TV show at just over 4.6GB took just over 13 minutes to download; in the process, practically saturating my wifi connection (which I've found to be the more limiting factor in my Internet speed).
So, fiber: yeah, it's awesome. But I'd wager that stupid-fast speeds aren't necessary for most people for a while, and until 802.11AC or faster has market saturation, it won't be.
[+] [-] tnuc|13 years ago|reply
As much as I would love to get rid of the shitty overpriced service I have, it isn't going to happen.
Google needs to have something of a service so they can keep their finger on the pulse. When Google knows how much it costs to provide service then they can negotiate better for their position within the oligopoly.
[+] [-] epaulson|13 years ago|reply
At the beginning, they're only going to have a few ad slots to work with, but the next step will be to negotiate with the ESPNs/Discovery Channels/MTVs to expand the number of ad slots they personalize. (Advertisers are going to demand it, since this blanket show the same ad to everyone watching is incredibly dumb.)
If the cable companies had their act together they'd have done this years ago, but a few minutes with my cable box convinces me they're no where near able to pull this off.
Google is going to make a killing.
[+] [-] jmsduran|13 years ago|reply
I'm all for disrupting the oligopoly that cable companies set up, but this point you're making in particular (ie. ultra-personalized TV ads) is not something I'm looking forward to.
[+] [-] mhurron|13 years ago|reply
[+] [-] sareon|13 years ago|reply
I wanted to get one for April when my current Bell contract runs out and then use it with Wind Mobile but it doesn't seem like I will be able to get one in time.
[+] [-] dagar|13 years ago|reply
[+] [-] lsc|13 years ago|reply
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] Zigurd|13 years ago|reply