Google Optical deploys telecom operations with internet thinking

In recent years, Google Optical has been deploying telecommunications operations based on Internet thinking.

In mid-August, AT&T announced that it launched a 1Gbps FTTH broadband service called "GigaPower" in Austin and Miami and officially joined the "1Gbps" broadband club created by "Google Fiber." Although before AT&T, CenturyLink, Cincinnati Bell, and other small operators also introduced 1Gbps broadband, the significance of the large carrier AT&T following up “1Gbps” is not unusual. This shows that mainstream operators have also started to “Google Fiber”.

Google launched the “1Gbps” broadband commercial “Google Fiber” project in February 2010. Its strategic background is very clear. That is, Google must wedge in any related industries that may seriously affect Internet traffic and protect “Internet traffic”. Aggregate and share "This Google core benefit is to prevent operators from uniting and "rubbing" Google.

Although the outside world also understands Google’s strategic intent, operators generally do not take “Google Fiber” as a tactical measure. They believe that “Google Fiber” is a “business hobby” of Google, and that Google has tasted this “business hobby”. With the high capex and opex required, Google will naturally retreat. For "1Gbps," the common attitude of operators is to stand by.

Although this judgment of the operator is still partially correct, it still underestimates Google. Google displayed a very unique operational thinking on fiber optic projects, successfully operating an expensive "business hobby" into a sustainable "innovation business." At the end of 2012, Google launched commercial services in Kansas. At present, Google Optical has expanded to Kansas, Austin, and Provo. In the future, Google may choose to continue deploying some of the nine candidate cities such as Portland. Although Google did not profit from it, the cost control was always good and basically reached its business goal of “sustainable, scalable, and deterrable”.

According to the traditional telecommunication operation, “broad cloth network, post-marketing” thinking, 1Gbps broadband is currently impossible to launch, even if the ordinary FTTH, it must be the scale of the coverage of users far more than paying users, after the capex “J-type” soared , Generally, it takes a few years to lose. After a few years, with the increase of users, you can see the free cash flow turns positive.

Compared with traditional operators such as "spot" deployment, "Google Fiber" basically engaged in "futures" deployment - Google announced optical fiber project in February 2010, only one year later in March 2011 announced the first deployment of the city Kansas; announced the package and pricing of 1Gbps fiber services in July 2012, and began installing users in Kansas only four months later. So, in these two phases, what exactly does Google operate through "futures"?

In the first phase, Google used the feedback from various cities to complete the battlefield selection. As a commercial broadband service, “Google Fiber” is impossible to compete with operators on a large scale. Google can only choose to fight in the most secure market. Therefore, Google first announced "Google Fiber", through the media hype, some interested cities began to contact with Google, Google began to choose the "best battlefield."

There are several principles for the selection of cities in Google Fiber: First, the city has a certain amount of fiber-optic metropolitan area network resources available for lease, and the burden of new construction is small. Second, the size of the city is moderate, the user density is high, and the user has existing broadband. Satisfaction with service is poor. Special attention should be paid to avoiding the best service and quality of Verizon Broadband from US operators. Third, local governments must provide subsidies, such as free use of computer rooms and electricity, and Google will provide government agencies with free broadband. Based on the above principles, Google first selected Kansas, followed by Austin and Provo. Through battlefield selection, Google first drastically reduced the risk of uncontrolled competition and ensured capex control.

In the second stage, Google used the feedback information of potential users to complete user selection. After selecting the cities to deploy, Google adopted a "build-by-demand" innovative operating model. Google did not make any network deployment, first publish "Google Fiber" packages and pricing on the site, invite interested residents to pre-register (Pre-register) and pay a $10 deposit; Google divides the city area into many inclusions. Hundreds of users' "blocks" (which Google calls "fiber hoods") then count and sort "pre-registration ratios" in each block. If the block pre-registration rate exceeds a certain threshold, the block starts deployment.

With "deploy on demand," Google has completed the "demand breakdown" and "income flow-investment flow-maintenance fee" correspondence very efficiently and has substantially increased the return on investment. At the same time, Google has pre-registered data with blocks. The rankings are open to users, which eases the unfairness that “deploys on demand” may create for users, and encourages users who want to use the service as soon as possible to actively “market” their neighbors for pre-registration.

Compared with the traditional model, Google Fiber Mode achieved a high return on capital through market selection, demand segmentation, and cash flow management. It not only controls project costs, but also offers highly competitive 1Gbps service pricing. The city where “Google Fiber” refers to, and the operators of the city, including the surrounding cities, have great pressure to reduce prices. A large number of cities have begun to apply for Google’s fiber as a candidate city.

In the face of “Google's selective acupuncture, the operator's general discomfort”, large operators such as AT&T must respond, and the way to respond is to copy “Google Fiber Mode” and restrain Google’s fiber expansion. AT&T's "GigaPower" lists 100 candidate cities for city selection, while Austin and Miami, which were originally selected, operate on an "on demand deployment" model that is exactly the same as Google.

Google not only made the concept of "1Gbps broadband" popular, but also successfully put operators into the 1Gbps broadband battle group. After AT&T first entered the market, the response of giants such as Comcast and Verizon was only a matter of time, and once the giants were all Joining a local war is not far away from escalating into a war. From this point of view, the strategic goal of “Google Fiber” entering the wedge into the telecom industry has been basically achieved.

Of course, it is worth mentioning that the "Google Fiber Model" is not a subversion of the "traditional operating model." Google does not want to be a big operator with low return on capital. If “Google Fiber” continues to expand, then “Google Fiber Model” will become closer to the “traditional operating model” and Google will lose its advantage. Last year, Los Angeles once launched a plan to deploy 1Gbps broadband throughout the city, soliciting operators to participate. Operators such as AT&T and Time-Warner Cable were required to sign, and Google Fiber refused to participate.

The advantage of the “traditional operating model” lies in the supply side. Compared to supply (than investment), no one can compete with the traditional incumbent; and on the demand side of the research and operation, the Internet company has the highest level. "Google Fiber Mode" is a new way of thinking that reconstructs operations from the demand side and complements traditional operational thinking. "Whether we attach extreme importance to the demand side (it is an extreme emphasis, not just attention)" may be the biggest difference between "Internet thinking" and "traditional thinking."