Google Fiber Clears Hurdle in Nashville; Challenges Seen Ahead

The council voted 32-7 to OK the second reading of the proposed make-ready bill, meant to speed network rollouts by new entrants by allowing all pole attachment work to happen in a single visit by a crew approved by the pole owner. Currently, each existing provider on a pole sends a separate crew to move its line to make room for the new one, a process that Google said causes long delays (see 1609020013). “This is an extremely big step forward … for Nashville [and] for internet competition,” Councilman Jeremy Elrod said at the Tuesday session. The legislation needs a third vote for final passage, which is scheduled for Sept. 20, emailed sponsor Councilman Anthony Davis. AT&T, which has publicly slammed Google Fiber (see 1608300057), threatened to sue the council over the measure, he said.

The council nearly postponed the vote until late December -- a motion to defer failed 19-20. Several council members supporting a delay said they feared a lawsuit from incumbents opposing the ordinance, and deferring would give parties time to reach agreement. The would-be law “addresses barriers that cannot be effectively cleared through private business agreements or other non-legislative channels,” said Davis. He said Level 3 participated in negotiations. Elrod said he doubted AT&T and Comcast would work with Google if there were a delay. “These parties are like oil and water,” he said. AT&T and Comcast want to keep Google Fiber out of the market, he said: “Do not be afraid of litigation.”

Google Fiber probably will face similar battles as it expands into more markets, Mitchell said in an interview. “It's hard to imagine there's a community where any kind of one-touch-make-ready policy won't be controversial because the incumbent wants to maintain that barrier to entry." Poles usually are owned by an electric or phone company, “and generally, neither one has an interest directly in making it easier for Google to get on those poles,” he said. It’s a hassle for energy companies, while telcos tend to resist competition, he said.

“Pole access, including make ready practices, is a chronic problem for independent broadband companies,” emailed Tellus Venture Associates President Steve Blum, a community broadband consultant for cities. “Telephone, cable and electric companies have learned to live with each other over the years, and they have a system that suits them. Requiring the next company to access a pole to pay the full cost of necessary upgrades is an equitable way to share costs when only three ubiquitous companies are involved -- it evens out over time. It's also an often insurmountable hurdle for independent providers.”

An existing Google Fiber city -- Kansas City, Missouri -- overcame resistance from Kansas City Power and Light to provide pole access to Google in 2012, Kansas City Assistant City Manager Rick Usher said in an interview. “They understood the [positive] impact that it would have on the residents of the city, but then of course they had to make a business decision.” Unlike in Nashville, “the incumbents weren’t taking [Google] seriously at the time” and didn’t put up much resistance, he said. Incumbents seemed to be in “denial” then, but later in other markets moved to “anger” and “bargaining,” he said. Charlotte, North Carolina, was “early enough in the game that other carriers weren’t fighting Google Fiber quite so vigorously,” said Alan Fitzpatrick, co-founder of Charlotte Hearts Gigabit, a local grassroots effort seeking gigabit-speed broadband to support economic development and entrepreneurship. There was no pole attachment issue because Charlotte buries fiber, he said. Negotiating land leases for Google Fiber hubs took time, he said.

AT&T invested $1.15 billion in Tennessee wireless and wireline networks over the past three years, and the company offers gigabit speeds over fiber to 80,000 locations in the Nashville area, an AT&T spokeswoman said. “AT&T remains eager to identify and adopt policies that legally speed up broadband deployment without harming Nashville’s workforce, and without creating safety risks or service interruptions. We are disappointed that Google was unwilling to discuss these proposed policies to bring the benefits of broadband to consumers.” Comcast and Google didn’t comment Wednesday.

Cost of Fiber

As more cities seek Google Fiber's entry, the make-ready issue may become less controversial, said Mitchell. "Google historically will work with places that will work with them.” Google Fiber may have bigger problems than pole access, said Blum. “Top of the list is the capital cost of construction, followed by the long-term nature of [return on investment] in capital intensive businesses and by the regulatory friction that comes from all sides.”

Google recently delayed fiber builds in multiple California cities to explore alternative wireless technologies (see 1608090038), precipitating speculation about the cost of deploying fiber. The move to wireless is likely about keeping capital spending under control, said Blum. “They will discover that wireless is an excellent way of solving spot problems, but a lousy way to provide cheap, fast and high quality service over a wide area,” he said. “The iron law of engineering is still in effect: good, fast, cheap -- pick any two.” The cost of deploying fiber may have caught up to Google, MoffettNathanson analyst Craig Moffett wrote investors Wednesday. “After seven years of trying, they have presumably concluded that the economics of Google Fiber just don't make sense.”

Mitchell said embracing wireless doesn’t mean Google is scaling back fiber. He predicted the company will still run fiber to residential suburban communities, but will use wireless to get revenue sooner from multi-dwelling units while it negotiates connecting them with fiber -- a process that can take three years: “I don't think there is a wireless product that will allow you to give the high speed to single family units that Google wants to deliver.”

Fitzpatrick interprets the wireless move as Google seeing​ “more than one way to accomplish the objective,” he said. “Google wants everybody online” to use its services and receive its advertisements, he said. “Their objective is to do that one way or the other with a good user experience.”

If Google Fiber ceased expansion, it wouldn’t be the end of fiber rollout growth, said Moffett. “AT&T alone is building more [fiber to the home] than Google had ever planned to, and Verizon's small cell build-out is similarly larger.”

‘Google Fiber Effect’

Google Fiber has been great for Kansas City and Charlotte, said Usher and Fitzpatrick. In his 31 years with the city, Usher said the Kansas City deployment is “really the most amazing project I’ve been part of.” It’s attracted new businesses and residents and revitalized the downtown, he said. The network has lured other tech companies, including Cisco, which said it approached the city about smart city technology after watching Google enter, Usher said: “You date a hot model and then other people start calling you.”

Like any big construction project, deploying Google Fiber disrupted neighborhoods, said Usher. But Google attended neighborhood meetings and set up customer service quickly, and the company has been “very responsive to complaints,” he said. Judging Google as a company against other ISPs is like comparing “night and day,” Usher said. From the beginning, Google said it wanted to serve economically distressed areas, and the company holds tech education events most weekends, he said. Once or twice a year, AT&T and Charter Communications' Time Warner Cable announce digital inclusion efforts, like a neighborhood community lab, but it’s “nothing on the scale of what Google is doing,” he said.

“People are pretty excited about it” in Charlotte, where Google Fiber announced signups in July, said Fitzpatrick. “If there’s any negative so far, people just can’t get it fast enough.” Service is available in a small portion of the city, but Google seems to be increasing the footprint at a realistic pace, he said. The announcement that Google Fiber was coming spurred incumbents to step up their games, Fitzpatrick said. “The other carriers lowered their prices and increased their speeds.” TWC increased Fitzpatrick’s home connection speeds by about five times for the same price, while AT&T rolled out gigabit speeds to many places where Google doesn’t yet offer service, matching the web search company's price, he said. “They call it the Google Fiber effect.”

Google has its limits. It's "been selective about which neighborhoods to build out," noted Blum. "Once it stops expanding, the competitive pressure on incumbents will ease.” Communities may still find advantages doing municipal broadband without Google, Mitchell said. Google has made efforts to serve the poor, but low-income households tend to change addresses frequently and the service doesn’t necessarily follow, he said. Google lacks the direct accountability to local officials, he said. It could make an unpopular change -- for example to privacy practices -- without local approval, he said.

“It is perhaps its impact on the regulatory landscape that is Google Fiber’s most lasting legacy,” Moffett said: “It is possible to draw a straight line between Google Fiber and the 2015 Open Internet Order, which declared broadband a utility telecommunications service and opened the door to longer term price regulation." He said the FCC net neutrality order deeming broadband service a Communications Act Title II telecom product "is arguably Google Fiber’s crowning achievement.” The decision to freeze fiber expansion may “reflect a declaration of victory; they arguably got what they wanted all along, so why keep going?”