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Google Fiber Hits Pause Button, Scales Back

Alan Breznick
10/26/2016

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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kq4ym
kq4ym
11/9/2016 | 11:06:46 AM
Re: Correction
I'm even skeptical about the fiber for the original cities providing service promised, even though Google says the  "pause" will not affect Google Fiber's current fiber deployments.  ONe might think getting rid of lots of employees is not going to make the journey easier for Google and it's customers there.
brooks7
brooks7
10/27/2016 | 1:14:32 PM
Re: did it raise the bar?
Joe,

How did Google Fiber get a jump on FiOS (which is a much larger deployment)?

seven

 
Joe Stanganelli
Joe Stanganelli
10/27/2016 | 12:20:58 PM
Re: did it raise the bar?
@Mike: Indeed, Google Fiber started something special here by getting the jump on -- and spurring on -- the competition.  But then Google stopped acting like a nimble startup somewhere along the way and took its sweet time -- giving said competition plenty of time to catch on and get their own acts together.
Joe Stanganelli
Joe Stanganelli
10/27/2016 | 12:19:25 PM
Look at the lawsuits
Hey, lawyers cost money...and Google/Alphabet has lawsuits from AT&T to worry about.

Of course, the lawsuits might not have come to fruition had Google Fiber been perfectly willing to play by existing rules for deployment -- which, of course, would slow their speed to market -- instead of lobbying for new ordinances granting them special treatment.

The rush, therefore, means that Google Fiber has had potential solvency issues for quite some time.  At one point, Google Fiber was a pioneer.  Now, there's a ton of competition.  They moved too slowly, and veterans in the industry caught up and then some.
KBode
KBode
10/27/2016 | 12:09:33 PM
Re: Correction
I agree. I'll be curious if the pivot to wireles (especially millimeter wave) will be successful. Hopefully this effort will continue, because if nothing else, it has certainly driven a conversation about the need for competition, and the  benefits of public/private partnerships. 
Carol Wilson
Carol Wilson
10/27/2016 | 11:40:21 AM
Re: Correction
I wouldn't disagree with that - the pole attachment fracas has definitely made it much harder for them to do business in some cities. 

Initially, cities were competing to get Google Fiber and rolling out the red carpet and Google may have thought that experience would be replicated elsewhere. Instead things seem to have gotten much harder on multiple fronts. 

I give Google credit for generally drawing attention to local and state policies and rules that made it harder for FTTH networks to be built. With that effort, however, came the resistance from incumbents - in retrospect, it should have been anticipated. This is how they always behave. 

 
KBode
KBode
10/27/2016 | 11:27:53 AM
Re: Correction
The pole attachment fracas also clearly illustrates that they over-estimated how difficult it would be to bust through duopoly protectionism and get the work done, I feel. 
Carol Wilson
Carol Wilson
10/26/2016 | 3:56:36 PM
Re: Correction
Thanks, Susie, that is now fixed. 

This just confirms what many have said before - Google underestimated how hard it would be to build FTTH networks and then sell the services on top of them, never having done it before. 
susielansing
susielansing
10/26/2016 | 3:45:39 PM
Correction
Alan, It's Craig Barratt, not Craig Barnett.
mendyk
mendyk
10/26/2016 | 1:59:07 PM
Re: did it raise the bar?
That may be giving Google a little too much credit. The whole video/digital/cloud etc. movement is driving broadband buildout a lot more than Google's presence is a couple of cherry-picked markets.
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