Google Fiber, Comcast Prep for Battle

Let the next-gen broadband wars begin in Provo, Utah.

Google Fiber has come out with its pricing plans for Provo, the third target area for its fiber-to-the-premises (FTTP) initiative after Kansas City and Austin, Texas. At the same time, Comcast Corp., the incumbent cable operator in Provo, has begun laying down its competitive response.

In a blog post Thursday, Michael Slinger, director of business operations for Google Fiber, spelled out the upstart FTTP provider’s pricing strategy for Utah’s third largest city. The three plans are basically the same products that Google Fiber has been pitching to consumers in the Kansas City area since the beginning of the year:

  • Free Internet - No charge for a “basic broadband” service offering speeds as high as 5 Mbit/s downstream and 1 Mbit/s upstream. Under the deal that allowed it to buy the city’s iProvo network for $1 last month, Google Fiber has promised to offer this service for at least seven years.

  • Gigabit Internet - As in Kansas City, Google Fiber intends to offer symmetrical 1 Gbit/s service in Provo for a flat $70 per month.

  • Gigabit Internet + Television - This is Google Fiber’s broadband/TV bundle, priced at $120 a month. Besides the 1 Gbit/s speeds, the provider plans to offer hundreds of HD channels and a DVR service that can record eight shows at once and store up to 500 hours of HD video.

In one notably different twist this time, Google Fiber will charge a much lower “construction,” or connection, fee for new customers in Provo. The fiber provider will set the fee at just $30, rather than the $300 charged in Kansas City, presumably because it’s mostly upgrading an existing fiber network rather than building one absolutely from scratch.

In his blog post, Slinger said his team is “working hard to hit our goal of getting our first Google Fiber customers hooked up before the end of the year.” Between now and October, he wrote, the provider is working to upgrade the existing iProvo network and talking with property managers and owners of large apartment buildings in the city of 112,000 people.

Comcast is apparently responding to Google Fiber’s Provo thrust already, according to DSL Reports. The newsletter reported Thursday that Comcast will seek to pre-empt Google Fiber’s entry into the market by making some serious pricing and packaging changes.

Quoting from a memo sent by MSO executives to employees, DSL Reports said Comcast has begun offering Provo residents a beefed-up package that includes its Digital Premiere TV bundle, 105 Mbit/s broadband service, and either Xfinity Voice or Xfinity Home Secure service for $120 a month. Subscribers must commit to the package for three years, which would keep them from jumping off to Google Fiber.

In addition, the memo indicates that Comcast will offer two double-play options to Provo customers. Under the first option, subscribers will pay $100 a month for Digital Premiere TV and broadband. Under the second, subs will pay $70 a month for a more limited basic channel package plus broadband.

Time Warner Cable has tried similar strategies against Google Fiber in Kansas City and Austin, where the MSO is the incumbent cable operator. There’s no word yet on how well these tactics may be working.

— Alan Breznick, Cable/Video Practice Leader, Light Reading.

albreznick 8/20/2013 | 4:56:47 PM
Re: UT Squeeze I never worry about cable companies pricing services too low to make a profit. That never seems to be an issue. And they make such a big margin on broadband right now that threy can shave a bit off and still do fine. The real key, as noted just before, is that they're locking into 3-year contracts, during which Comcast can try to upsell them to more expensive and lucrative services. It will be interesting to see how successful this upsell strtategy will be.  
KBode 8/18/2013 | 1:38:26 PM
Re: UT Squeeze Margins are pretty healthy on things like broadband and voice, but yes. Not to mention TV customers will decline as Internet video evolves, and most analysts think cable VoIP customers are going to go wireless only to offset soaring TV prices courtesy of programming costs. The voice losses haven't hit Comcast yet, but it's expected they will eventually if TV prices keep going up.

Which is why Comcast (and everybody else) continues to pursue metered broadband. Comcast's currently testing several options that involve charging users overage fees:



Of course you'll note nobody wants to test or implement caps in markets where Google is selling symmetrical 1 Gbps connections for $70 a month.
mendyk 8/18/2013 | 1:31:29 PM
Re: UT Squeeze Is Comcast counting on a security service for stickiness? That's an interesting strategy. Regarding service pricing, on the surface it looks as though it's hard NOT to make money with broadband. But all businesses have a margin requirement that gets harder to meet when you compete on price. And at least for video service, licensing fees continue to go up, putting more pressure on those margins.
KBode 8/18/2013 | 12:10:47 PM
Re: UT Squeeze "Race to the bottom" or simply healthy competition? I'll go with the latter.

The 105 Mbps triple play bundle certainly isn't going to be a money loser, and it's not that far of a shift from existing promotions I've seen elsewhere. The real goal of course is to get people to bundle in that Xfinity security service under a three year contract so they can't switch when Google Fiber comes to town. Time Warner Cable has used a similar strategy of long-term contracts in Austin ahead of Google Fiber's launch there.
mendyk 8/16/2013 | 5:23:12 PM
UT Squeeze Our betters in corporate management would characterize a price war like this as a race to the bottom. Do you think Comcast can still make money under the new pricing plan?
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