Google Fiber Gets Hung Up

Google GOOGL fiber optic

As I’ve visited Provo, Utah, many times for business in the past three years, the advertisements for Google Fiber have filled me with envy.

Provo was one of the earliest cities to get a rollout of the fast, efficient service provided by Alphabet Inc.’s (NASDAQ:GOOGL) fiber-optic internet connections. Google Fiber caught my interest nearly as soon as the company that was then named Google announced it in 2012. The service was designed to offer lightning-fast speeds to residential users, 100 times faster than the then-average broadband connection.

Since its launch, Google Fiber has arrived or is underway in Atlanta, Austin, Kansas City, Salt Lake City, and both Charlotte and “The Triangle” in North Carolina. (And Provo, of course.) A few more cities are in the first stages of construction. It is hardly the nationwide, high-speed revolution its proponents promised – yet – but Google Fiber has gained a lot of fans by offering more reliable, faster internet at competitive prices in the places it has managed to reach.

But to a large degree, Google Fiber’s hopes to expand fast residential internet access have now gotten hung up – specifically in some places like Nashville, Tennessee, where service has gotten hung up on the city’s utility poles.

According to Google, some 44,000 utility poles in Music City need preparation in order to carry the company’s fiber, and approximately three dozen of them have been processed so far. This slow pace suits the city’s incumbent internet providers, AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA), just fine. The Nashville Metro Council, not so much. The council passed legislation last month that would allow Google, at its own expense and risk, to hire contractors to relocate its competitors’ wires on the utility poles in order to make space for Google Fiber’s lines. Letting Google’s work crews take care of everything at once will make the process of outfitting utility poles much more efficient.

Google’s competitors are not at all pleased. AT&T went to federal court to block the new ordinance before the ink was dry on the mayor’s signature. Comcast has now followed suit as of Tuesday, seeking a temporary injunction to prevent any of the work from going forward.

AT&T owns some of the utility poles in Nashville, but 80 percent are owned by Nashville Electric Service – a municipally owned utility. Notably, NES is neither an internet provider nor a party to the lawsuits. The only utilities that use Nashville’s utility poles who seem concerned about Google’s contractors working on them are those utilities facing a competitive threat from Google.

The lawsuits are based on the premises that, first, the Nashville Metro Council lacks authority to give Google this permission and, second, that the Federal Communications Commission ultimately holds jurisdiction over the city’s utility poles. AT&T has additionally claimed that the arrangement would force the company to violate its own union contracts by letting Google’s contractors install their competing service. This strikes me as a truly novel argument – but maybe it isn’t, considering that Louisville, Kentucky, is undergoing a similar legal challenge by AT&T.

Nashville and Louisville’s attempts to pass “One Touch” legislation – so called because without it, each utility must move their own service’s wires, however slowly they choose to get around to doing so – was a hopeful sign for Google, but the legal challenges have slowed progress to a crawl.

The cost of these battles is beginning to show. Google Fiber announced this week that it has cut staff and that Craig Barratt will step down as CEO, though he will stay on as an adviser. Google Fiber has also, in the company’s words, “paused” rollout of its service in previously announced U.S. cities while it examines alternate technology. One strong possibility is wireless, which would not require the company to lay much fiber or touch neighborhood utility poles. Google Fiber recently acquired Webpass, a company that provides internet service via point-to-point wireless in five metro areas.

None of the pushback against Google Fiber is particularly surprising, as old, franchised utilities try to hold on to their pricing power over your broadband service. But it is encouraging that a few city councils have proved willing to abandon or modify long-ago utility deals that entrenched these monopolies in favor of providing better and more competitive service to their residents.

In the meantime, those of us in cities without Google Fiber can only envy cities with access to Google’s fast service. I know I do, every time I get my Comcast bill.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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