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Comment by swombat | Hacker News Reader

Time for the other so-called broadband providers to shake in their boots.

I like companies that have no respect for established business models. In this perspective, despite its size, I think it's fair to call Google a start-up.

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I forget where the link was (I think somewhere on yc), but it showed a chart of internet access speed through a few years, rated by countries. Most of the large-nation world had grown by 10%+, many over 50%, in a few years, while the US had dropped by a couple percent. This is in addition to most of those countries being higher already, so it's not merely a 5kbps -> 8kbps jump. My price for internet access not going down, and speed not going up (personal experience) in several years implies the ISPs are gouging because they can.

Proper competition is essential in every industry. If Google can provide it, good for them. This is an area where only the big players can compete, but nobody's stepped forward to fix things. Maybe this will be it.

The problem is that cable companies were given monopolies by the local governments when the setup.

Here's a chart: http://lifehacker.com/5451127/seems-like-everyones-getting-f...

Yup, that's it. While clicking around something like that site, I also found one that covered a couple years, and the trend is roughly the same (with a couple more spikes).

edit: another, related chart, from a quick Google: http://www.marketingcharts.com/?attachment_id=781

I'll grant that median is likely not a good measuring point, but it is still revealing. Hell, Canada is out-doing us, so you can hardly argue it's because we're more spread out.

Just as a side-point, although Canada has a large land area for a small population, it is actually much more urbanized than the US.

There is the possibility that the providers aren't intentionally gouging their customers. Even though the market is small, there is enough of a market to drive prices down. I think it's much more likely that those companies are just so horribly inefficient that it really does cost them a lot to provide you with high-speed access.

Several years ago my family got cable internet from Time Warner. The modem/router they provided was one of the first models to support DOCSIS 3.0. We stayed with Time Warner for at least 2 years, and they never rolled out DOCSIS 3 support at their end. The maximum speed we could get from them was 6Mbps. We're now using DSL, and the maximum we can get is 6Mbps, though with more reliability than from cable.

The nearest cable box is next to our neighbor's driveway. The phone company has fiber to their box in our other neighbor's yard.

There's enough competition to keep price inflation mostly at bay, but there clearly isn't enough to convince the ISPs to invest in the equipment that would be able to give us connections that are four times faster. Efficiency doesn't have a lot to do with it. For all practical purposes, our local ISPs aren't spending any money to improve service in areas that already have some service.

Non-growth (negative growth!) despite significantly more paying users and far more fiber lines than a few years ago? What have they been rolling all that fiber out for, if not to crank up the speed? Oh, wait. To sell the same speed to more people for the same price to make way more money.

I don't buy inefficiency. They're selling it at this speed for this cost because they can, just like cell phone companies. Which from a business standpoint makes perfect sense, but it's at the cost of screwing everyone else. Since significantly better businesses / strategies clearly exist if it's just a sign of business incompetence, why haven't the successful ones, say in Japan or Korea, migrated over here and decimated the market?

Average access speed is dropping because of the increased penetration of wireless access in the US lately.

Then what's the excuse for Japan being so much higher? They've had a lot of wireless access for quite a while, and web browsing on their phones for much longer. If that's taken into account, they should be significantly lower.

It's not an issue of wireless penetration, it's about maturity. Obviously the first rollout in the USA is going to be slower than a mature infrastructure like Japan's.

Surely when you roll out new wireless, you should roll out the fastest stable technology? Wouldn't Japan be held back to some extent by wireless infrastructure that hasn't yet been upgraded?

Like what Gmail did to all the e-mail provider/administrators who said anything over a 100MB Inbox was too expensive.

Expense isn't a problem when you have a multibillion dollar company who wrote their own filesystem to use custom designed free software on custom designed low power servers redundantly spanning over cheap disks in energy efficient custom datacenters and no uptime guarantees.

For most companies a new Exchange cluster backed by RAID SCSI disks and a backup system upgrade isn't a trivial cost.

Edit: yes, Google did it cheaper, but that's not because IT people were lying, misleading or dismissing - it really is expensive to do 'properly'.

This has nothing to do with technology. It's all 70's as all the rest.

it's all politics.

I think this is more around trying to force the broadband providers to get their act together. Scare them ;0)

The way Google throws products on the market to increase competition for the benefit of its core products ... it's genius.

Are there any other companies that do this?

Yes, tons. See "commoditize your complements". Microsoft is a master of this as well.

http://www.joelonsoftware.com/articles/StrategyLetterV.html

There is an important difference between compliments and complements.

Which is interesting, as Google certainly wants to commoditize operating systems. I'm sure Bing is intended to commoditize Google somehow, but I don't think it's working so far. Microsoft appears to be more in the role described for Sun in Joel's article, of the company trying so hard to sabotage potential competitors that they act against their own interest.

(Not nearly as spectacularly as Sun creating Java to spite Microsoft, and ending up commoditizing their hardware business. But I do not think Bing would look like such a good business strategy without the obsession of beating Google.)

Yes I know about that strategy ... but Google's means are different.

When they release a freebie (like Chrome or Android), they force their new competitors in that market to follow their lead.

The browser's speed, instability and lack of proper standards implementations hurts them? ... so they release a super optimized browser with a clear design and with tabs running in their own process. Now Firefox, Opera and Safari (at least) will follow.

The mobile-market is too closed and becoming more so? So they release Android, a pseudo-open OS with an online-store that has more relaxed rules. And I'm pretty sure they don't need an Android-monopoly (as Microsoft is trying with everything they release) to achieve their goals.

Their strategy is not (directly) for increased lock-in (as Microsoft does) ... it's more for eliminating distribution channels / middle-men that might get in their way on reaching customers.

I don't know of any real market changers from microsoft, save IE, which was an attempt to kill competition and preserve market. Maybe I am too far from the microsoft circle to know of any...

Wasn't the XBox hardware pretty much sold at cost to sell their games for their own platform? How many recent games does Microsoft have for the PS or Nintendo?

All consoles (at least at launch, and for years afterwards) are sold at a loss, with profits made up on the games. The difference for Microsoft is that the XBox division has never made a profit, unlike Sony's or Nintendo's.

Note: the Wii is the only recent exception to this rule that I know of; the hardware has been sold at a profit since day one.

If I recall correctly the GameCube, DS and GBA were all profitable from day one as well. It's possible this goes back as far as the NES.

Right. At Google's scale, it will even benefit them a lot if other broadband providers provide a better service, since it promotes more use of the internet, and thus more ad income for Google.

Or will make video ads more practical. Uhm, yay?

I guess people said the same thing when pictures were first being used on the net.

I'd say that it was still a net benefit not to be text only, wouldn't you agree? Ads can be annoying, but they also pay for a lot of what we're using online every day.

They use the scare tactics a lot, but they didn't work in the wireless spectrum auction did they?

They ensured that open access provisions were included.

Yeah, after Google starts selling broadband significantly below cost, no real ISP will be able to meet customers' inflated expectations.

It's not in Google's best interests to reduce competition in the telecommunications industry. If they offer bandwidth at such a low cost that it threatens the viability of existing providers, they have to commit to providing that bandwidth in perpetuity. Their current business model requires bandwidth, and replacing that by raising bandwidth prices in the future when competitors have been eliminated would be met with government opposition fairly quickly.

I'm not worried about Google becoming a monopolist and raising prices; I'm concerned that they'll offer unsustainable (or even free) pricing in a small trial and many people will begin to expect other ISPs to match that pricing in nationwide deployments. Much like the complaints that US broadband sucks compared to South Korea, but worse.

I don't think Google is going to sell at below cost, the limitation on large network's bandwidth is primarily routing technology which has continued to improve while US broadband has stagnated. It's not like other countries have not been rolling out low cost 1Gbit consumer connections for a while.

PS: Despite all these talk of caps etc, upstream bandwidth is still a small chunk of a large ISP's budget.

Anecdotally: A friend of mine who lives in Sweden gets 100 megabits for about the equivalent of $25 per month. It's not a gigabit, but it's a lot closer to a gigabit than five megabits is.

There are some faster connections available in the US too. In and around the north east iirc.

Here on the west side of Canada, Shaw offers 100mbps connections for $150/mo. That's obviously a complete rip-off but it's nice to have the option to get gouged. They price the 25mbps connections at $100/mo presumably to make it seem economical to get 100mbps.

http://www.shaw.ca/en-ca/ProductsServices/Internet/Nitro/

Telus has 25mbps as well now. Fttn and capable of serving 100mbps according to a Telus technician I spoke with, so I'm sure they'll up the speeds at some point.

Nice to see competition that isn't just offering us "gifts" ... for signing 3 year contracts.

The variable cost of selling broadband is extremely low.

The problem isn't the variable cost; it's the $2,000 truck roll per customer.

They wouldn't be selling "at a loss" based on fixed costs. They'll eventually recoup those somehow, much like AT&T or Comcast or anyone else will. Comcast may hope you'll buy On Demand movies while Google might settle for more Youtube views.

Is it selling at a loss if I pay someone $100k to write software and then sell it for $15/pop?

I'd be fine with a wireless last mile to avoid cable messiness.

Wireless gigabit? Does not compute.

Huge pipes to supply 600Mbit wireless stations (http://en.wikipedia.org/wiki/IEEE_802.11n-2009) would be a reasonable stopgap until faster wireless tech becomes available.

$2000? citation needed.

http://www.ftthcouncil.org/en/knowledge-center/legislative-r...

Apparently it's down to ~$1,000 if you assume 100% take rate and don't attempt to serve rural areas, but it will easily exceed $2,000 in realistic deployments.

In Utah if you're willing to pay for your fiber upfront it's only $3,000. And then you still have to pay the monthly fee for Internet access on top of that. http://www.app-rising.com/2009/11/utopia_proving_new_option_...

Oh, I thought you were insinuating that any truck roll cost $2000. In this case, I can say that your original statement is incorrect: it's not $2000 per customer, it's $2000 per residence at most. (Consider college towns, where lots of residents cycle through few apartments.)

But at whose cost? Google already owns a significant chunk of their own infrastructure, so their costs are cheaper than most ISPs.

Google could profit at rates that would be "below cost" for other ISPs.

I've been wondering lately what would happen if someone like Google decided to build their own cellular network. Is there a way that someone could disrupt that industry?

Rumor Mill: Google Acquiring Sprint http://blog.tmcnet.com/blog/rich-tehrani/google/rumor-mill-g...

Thats from 2007. Sprint and Clearwire merged last year and Google is significantly invested in Clearwire's 4G network build-out.

http://en.wikipedia.org/wiki/Clearwire

Isn't the poor coverage of decent internet connections a much bigger issue? Highspeed internet in urban areas might be cool but what about the rest of the country.

A bigger issue issue for who? Telecommunications companies have decided that it's not worth investing much in connections to low density areas. If there are enough people clicking on ads in those places to make it worthwhile, maybe Google will provide connections in those areas. If that doesn't happen, I don't see any justification for subsidizing people's connections above a level that is necessary for basic access of information to aid in making informed voting decisions since we share a government.

That's the thing, I think internet access is essential to being an educated citizen nowadays, and many websites are no longer viable for dialup users to visit. High speed internet for all should be placed on the same level of importance as education for all.

If you feel it is essential for the educated citizen today, then it isn't Google's job to address the lack of broadband in some areas, but rather the government's job. I'm fond of the idea of refreshing old programs like Rural Electrification by changing them into new broadband expansion programs. Whispers of this have been made by politicians including our President while he was campaigning, but as far as I know nothing even remotely substantial has happened to either promote or cancel the idea. Instead it just seems forgotten.

Sorry, yeah, this is what I was referring to, I wasn't trying to imply that Google is responsible for doing it.

Satellite internet speeds are acceptable for web browsing and is available everywhere. I'd consider subsiding the costs of such connections for those who can't afford it. My understanding is that things like Universal Service Fees subsidize even those who can afford it.

Have you actually tried satellite service? Latency is worse than dial-up. We tried for a while to get some of our customers using satellite but that turned out to be a failure due to the miserable performance.

Apparently, 63% of US adults live in households with broadband. Considering the number people who avoid or can't use the internet (i.e. older folks) this seems like remarkable penetration to me.

PDF: http://www.pewinternet.org/~/media/Files/Reports/2009/Home-B...

Plenty of old people can use the internet. I suspect more people don't have broadband because it's not available at a reasonable price for them than you might think. Adults living in rural America had home high-speed usage grow from 38% in 2008 to 46% in 2009. vs. Among adults whose highest level of educational attainment is a high school degree, broadband adoption grew from 40% in 2008 to 52% in 2009.

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