July 13, 2012
As you likely know, Google is in the midst of providing ‘ultra high speed fiber’ access to the residents of Kansas City (MO and KS). (‘Ultra high speed‘ means at least 1gb, which is
50100x faster than your 10m gb connection.) This has been positioned as an experiment, and as a poke in the eye to the incumbents to “show ’em how it’s done.” And it has apparently made the incumbents nervous enough to offer residents a bounty for tips about the deployment.
Now Bill St. Arnaud speculates about how Google is going to turn this into a business. I have zero idea if he’s right, simply because I don’t know enough to have an opinion, but it sure is some interesting speculation.
Bill’s post is very readable, so I suggest you not rely on my summary, but here goes. First, Bill wonders how Google could hope to make back its investment in the physical infrastructure, since providers need about 40% of the market to subscribe to drop the per-user cost sufficiently. But (Bill figures), the incumbents will never let Google take 40% of their market. So, Bill figures:
Google will offer a basic free high speed Internet to each and every home, perhaps bundled with Google TV using their new set top box. A variety of premium services will also be offered for additional fees. I would not be surprised that Google decided to offer a basic 1 Gbps service to every home. This would clearly differentiate Google from the cableco or telco and make it almost impossible for them to compete without undertaking a massive investment themselves.
But, Bill guesses that the premium services will still not make the venture profitable. So, he speculates that Google…
…could offer to peak manage the customer’s power usage, by briefly turning off air conditioners and hot water tanks. They could also install smart thermostats and other devices to further reduce energy consumption. The money in the energy savings would be used to pay for the fiber or premium services, rather than being returned to the customer as piffling amount of energy savings.
So, the deal to users would be: We’ll give you incredibly high speed connectivity (or we’ll give you some great premium services) if you’ll let your energy company install a smart thermostat and manage your peak energy consumption in ways you won’t much notice. The user’s energy bills don’t go down (or don’t go down proportional to their energy consumption decrease), and the energy company shares the money with Google.
I’m not convinced that users would take the deal positioned that way. Maybe I’m positioning it wrong, but it seems like a pretty complex offer. I think I’d rather take a deal with my energy company to lower my usage and my costs, and then decide if I want to pay Google for fiber access or for premium fiber access. I already resent the cablecos for making their “triple play” (telephone, tv, Internet) pragmatically a requirement to get any one of the three. A double play of Internet and energy savings would be even weirder.
But, Bill knows approximately 50x what my own poor brain fiber does. The key is, I believe, in the energy company making the claim that the decrease in energy consumption will be minor, the noticeable impact on the user will be negligible, and the monetary savings would be “piffling.” If he’s right, it’ll be fascinating to watch.
This isn’t right, is it?