That's probably the reason they chose Austin, surprisingly.

It's a lot less legwork to setup shop in a city that doesn't already have red-tape in place.

Actually it's fortunate for Austin. It has pushed the other companies to offer much more bandwidth. Before Fiber was announced the max you could get was 50Mb down.

From Google Fiber's FAQ on "Why have you chosen this list of cities?"

> These cities are led by people who have been working hard to bring faster Internet speeds and the latest technologies to their residents. We believe these are communities who will do amazing things with a gig. And they are diverse -- not just geographically, but in the ways they’ll give us opportunities to learn about the wide range of challenges and obstacles that communities might face in trying to build a new fiber network.

So it sounds like a combo of local government initiative & geographic diversity. But yeah - unfortunate in the respect you said