Google Fiber Hits Pause Button, Scales Back

Maybe it was all just a science experiment after all.

Five years after announcing that it would bring gigabit speeds over all-fiber networks to the Kansas City area, Google Fiber Inc. is laying off staff, losing its CEO and putting its expansion plans in up to 11 new areas on hold. In a blog post late Tuesday, Craig Barratt, senior vice president of parent company Alphabet Inc. and CEO of Alphabet's Access unit, said Google Fiber will "pause our operations and offices" in "most of our 'potential rollout cities'" while "we refine our approaches" and explore other technological options.

"We're ever grateful to these cities for their ongoing partnership and patience, and we're confident we'll have an opportunity to resume our partnership discussions once we've advanced our technologies and solutions," Barratt wrote. "In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we'll be reducing our employee base."

Google Fiber did not spell out how many people will be laid off. But various news reports last night said the unit will cut about 9% of its employee base, which numbers about 1,000 or more.

In his blog, Barratt also said he will be stepping down from his CEO post after three years at Alphabet and Google (Nasdaq: GOOG). But he said he will remain involved with the company as an advisor for an unspecified time.

Barratt said the "pause" will not affect Google Fiber's current fiber deployments in "our existing footprint, in the cities where we've launched or are under construction." These markets include the Kansas City area, Atlanta, Austin, Charlotte, Nashville, and Provo and Salt Lake City, Utah.

But the exploratory and preparatory work will halt in nearly a dozen other markets where Google Fiber was looking to extend its reach, including Chicago, Dallas, Jacksonville, Fla., Los Angeles, Louisville, Ky., Oklahoma City, Phoenix, Portland, Ore., San Diego, San Jose and Tampa.

The retrenchment announcement comes just three weeks after Google Fiber closed on its acquisition of Webpass, a point-to-point wireless broadband provider that serves customers in five major markets -- Boston, Chicago, Miami, San Diego and the San Francisco Bay area. It also comes after Google Fiber requested permission from the Federal Communications Commission (FCC) to conduct wireless broadband trials in up to two dozen US cities, including Atlanta, Chicago and New York, as it seeks way to deliver gigabit service cheaper and more efficiently. (See Google Fiber Now a Wireless ISP! and Google Fiber Buys Webpass in Wireless Play.)

In addition, the pullback comes as reports have surfaced that Google Fiber has been struggling to sign up broadband, and especially video, subscribers in its pilot markets while racking up big operating expenses. In a recent report, Wall Street firm MoffettNathanson LLC estimated that the company ended the second quarter with about 453,000 broadband and 69,000 video subscribers after several years of operations.

Finally, the move comes as such chief broadband rivals as AT&T Inc. (NYSE: T) and Comcast Corp. (Nasdaq: CMCSA, CMCSK) have responded to the Google Fiber market incursion by extending their own fiber networks and launching gigabit service in numerous markets. In AT&T's case, for instance, the company has now launched gigabit service in 40 markets throughout the US and plans to add five more by the end of the year. AT&T also recently changed the name of its gigabit service from "Gigapower" to "AT&T Fiber" to go head-on with Google Fiber. (See AT&T: Getting Up to Speed for Gig & 5G.)

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

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