Google Fiber Expanding Faster, Further -- And Making Comcast Very Nervous

While Google Fiber was originally seen as an adorable little experiment primarily designed to bring PR attention to a lack of broadband competition, over the last six months Wall Street has woken up to the fact that Google Fiber isn't playing around. While the number of customers that can actually sign up for Google Fiber remains in the several hundred thousand range, Google's announcements to tackle sprawling areas like Atlanta, San Antonio, Chicago, and Los Angeles has many Wall Street analysts changing their tune. In 2012 or so, Wall Street analysts proclaimed it would just be too expensive to deploy Google Fiber at any scale. Fast forward to 2016, and you'll notice that a very different tune is being sung:

Although Google’s announcement is just that, could lead to nothing, and requires minimum capital commitment by Alphabet at this stage, it increases on the margin the likelihood that Google Fiber will pass a large number of locations within five years. Correspondingly, it increases the chances that we will see Alphabet’s capex in the non-core businesses, or what the company has referred to as “Other Bets,” increase significantly. Indeed, if Google Fiber were to build out in Chicago and/or Los Angeles and their surroundings, it could precipitate increased interest from other major metro areas, making it easier for Fiber to scale up. Our high end estimate of 20-25 million homes passed by Google Fiber may prove less aggressive than we thought.

Google Fiber has learned some hard lessons in trying to build a broadband network from scratch, so it has started leaning more heavily on existing builds (or plans to build). This week for example Google Fiber announced in a blog post it would be riding on a planned open access municipal broadband network being built by the city of Huntsville, Alabama. This comes on the heels of the company's announcement it's also riding on existing apartment fiber builds in Atlanta to speed up availability there:

To date, we’ve built the majority of our Google Fiber networks from scratch. But over the past five years, we’ve repeatedly seen that every city is unique. So in order to bring Fiber to more people, we’ve taken different approaches in different places. In Provo, Utah, our Google Fiber service is being delivered over a network we purchased from the city. In Atlanta, Georgia, we’re both constructing our own network, and using existing fiber to provide Google Fiber to some apartment buildings. And now, due to the leadership of the Mayor and Huntsville Utilities CEO Jay Stowe, we’ll be working with a muni-owned network to bring our high speed service to Huntsville.

There's every indication that Huntsville's network will be open to any other ISP competitors, an idea Google Fiber originally trumpeted then backed off from. So, yes, while Google Fiber still has a small footprint now as it labors to dig fiber trenches (Austin, Kansas City, Provo), the sheer number of builds in progress or close to finalization is starting to become mammoth (Louisville, Salt Lake City, Portland, Phoenix, San Antonio, San Diego, San Jose, Charlotte, Nashville...). In other words, by 2020 or so things should start to look notably different: Broadband ISPs, much like Wall Street, generally thought Google Fiber would never be big enough to seriously impact their bottom line. But as Google Fiber pushes into Comcast territories like Atlanta, flyers being handed out by the cable giant make it abundantly clear it's getting nervous about having to face real competition: Unfortunately for Comcast, Atlanta is one of the many markets where Comcast is engaged in usage cap and overage fee "trials," which oddly is omitted in the company's attempt to deflate Google Fiber "hype." Most of Comcast's flyer claims are either misleading (WiFi is as fast as the router you buy) or just not very interesting (wow, video