The parent company of the internet giant and Google fiber in the United States, Alphabet, has decided to curb its expansion of high-speed fiber optic networks and reduce the manpower in those projects. Alphabet officials said that the company was curbing the fiber expansion and the staff in the unit responsible for the work. Alphabet did not provide an exact number for the jobs that will be affected due to its decision.
A few months ago, when the company top executive signaled a strategic shift in its plan to shift to alternative options for broadband such as wireless, we expressed a concern and its impact on investment in fiber technologies. In an attempt to suppress this view, some leading magazines went to the extent of publishing interviews with some Google Fiber officials. Alphabet’s strategy has started working whether those short-sighted editors.
Craig Barratt, chief executive of Access, the Alphabet division containing Google Fiber, also said he planned to step down because the company was shifting to new technologies and methods of deploying high-speed internet. No replacement was announced. Mr. Barratt, an Alphabet senior vice president, said he would remain an adviser to the company.
When Google introduced Fiber in 2010, it was heralded as a sign of the company’s ambitions to compete against cable and telecommunications operators who have controlled the market for internet access. But after years of costly investments to dig up roads and lay fiber optic cable, Google started considering alternatives, including wireless and fiber partnerships, that did not necessarily require the company to build a full network.
The company’s fiber optic internet and television are currently available in eight metro areas, including Atlanta, Nashville and Salt Lake City.
In June 2016, Google Fiber had announced it’s decision to acquire a company called Webpass, which uses beams to provide high-speed internet into apartment buildings using a fiber-connected antenna. Such technologies based on wireless provide a quicker and less expensive way to expand access to faster web speeds.
Alphabet’s shift in the focus from fiber optic networks to wireless networks would have an impact on the investment decisions of network and service providers. Google Fiber has been driving the demand for optical fibers at least in the United States. After years of sluggish growth, the United State’s demand for optical fibers has started picking up now. Many network builders use optical fibers to support growing bandwidth demands in the backbone and access sections of the network. Google’s decision to go wireless will reduce demand for optical fiber in the last mile.
The new structure — which makes Alphabet units like Access responsible for their own profits and losses — has instilled financial discipline across the company. It has also contributed to the termination of ambitious undertakings like Project Ara, Google’s attempt to build a modular smartphone, as well as the departures of executives who bristled under the new cost controls.
The company does not disclose financial results for Access. But its other-bets businesses reported revenue of $185 million in the second quarter of this year and an operating loss of $859 million. The Fiber business accounted for the bulk of $280 million in quarterly capital expenditures — money spent on things like equipment, the company said.
Alphabet has not disclosed the number of Google Fiber subscribers in cities where the service is available. In the markets where it operates, Google Fiber costs $70 a month for the fastest internet connection and an additional $60 a month for its TV service, but Google has to pay to connect homes to the network even if they do not subscribe.
Access said it would continue to operate in markets where it already offers fiber optic service or has started construction, but it planned to halt discussions with cities where it was considering expansion. Google Fiber identifies eight “potential fiber” cities, including Dallas, Los Angeles and Phoenix.
Since Google runs most of its business on the internet, telecom analysts have suggested that Google’s entry into the relatively expensive fiber optic internet was an attempt to motivate existing internet providers to accelerate the introduction of faster web connections.