Om Malik, writing for Business 2.0 speculates that Google (NASD: GOOG) may be getting into the broadband game, possibly trying to offer free WiFi across cities nationwide that would drive usage of various high-bandwidth google.com applications in the future. He cites some interesting evidence:
Business 2.0 has learned from telecom insiders that Google is already building such a network, though ostensibly for many reasons. For the past year, it has quietly been shopping for miles and miles of "dark," or unused, fiber-optic cable across the country from wholesalers such as New York’s AboveNet. It's also acquiring superfast connections from Cogent Communications and WilTel, among others, between East Coast cities including Atlanta, Miami, and New York. Such large-scale purchases are unprecedented for an Internet company, but Google's timing is impeccable. The rash of telecom bankruptcies has freed up a ton of bargain-priced capacity, which Google needs as it prepares to unleash a flood of new, bandwidth-hungry applications. These offerings could include everything from a digital-video database to on-demand television programming.
An even more compelling reason for Google to build its own network is that it could save the company millions of dollars a month. Here's why: Every time a user performs a search on Google, the data is transmitted over a network owned by an ISP -- say, Comcast -- which links up with Google's servers via a wholesaler like AboveNet. When AboveNet bridges that gap between Google and Comcast, Google has to pay as much as $60 per megabit in IP transit fees. As Google adds bandwidth-intensive services, those costs will increase. Big networks owned by the likes of AT&T get around transit fees by striking "peering" arrangements, in which the networks swap traffic and no money is exchanged. By cutting out middlemen like AboveNet, Google could share traffic directly with ISPs to avoid fees.
Furthermore, he notes that Google's co-sponsored a free WiFi spot in San Francisco with a company called Feeva. Feeva has proprietary location identification software which Google could one day use to target contextually, and geographically relevant advertising to the end-user.
Interesting stuff, but consider me quite skeptical. First of all, marrying distribution and content is dubious idea with a bad track record. So 1999.
Furthermore, the model seems flawed. This isn't King Gillette's "give away the razor, and sell the blade" model; this is "give away the razor and the blade and sell advertising on both"--which reminds me of the Free PC. Remember that? They were gonna give you a free computer in exchange for permanent ads on your desktop (Also, courtesy of 1999, and that failed too). Buying up a nationwide fiber-optic network and giving away free internet access seems like a similarly expensive and questionable means for getting some more ads in front of eyeballs.
Still, the fact that they've, according to sources, been buying up this bandwidth means, they're probably gonna do something. Here's my, admittedly more banal, conjecture: They're planning some sort of grid/distributed/remote computing operation that will require fast, dedicated connections between their servers, and major institutions (universities, Wall St. etc.,). I guess we'll see.
Perhaps, Om, a gentleman's wager? Something from NYC for something from San Fran?
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