• Insight Bite


Google – Cutting Back On Fiber?

Marcus Allchurch, Partner at Acuity Advisors, is keeping a close and insightful eye on the global rollouts of gigabit connectivity networks. His considerable experience across the technology and telecoms sector in senior corporate finance roles combined with an avid interest in new technology give him a unique insider viewpoint.

It’s been all over the headlines in the last few days that Google Fiber is cutting jobs and putting the brakes on its expansion plans; indeed Craig Barratt, who is CEO of the Google division which looks after Fiber, has also stepped down from his role to an advisory position. 

Is this worrying news?

Has one of the world’s most forward-thinking and well informed technology companies concluded that fibre is a bad bet?

On Thursday’s quarterly earnings call, Google’s CFO, Ruth Porat confirmed that the business will finish what it started with existing rollouts, but that the pause was focused on integrating “some of the technology work that they’ve been developing”. 

The market backdrop

There can be no doubt that we are living in a world where high bandwidth connectivity really is critical infrastructure. I don’t mean FTTC (up to 100Mbps assymetric) or 4G (up to a theoretical 150Mbps) – I mean gigabit connections which can only really be delivered over a limited number of technologies.

Why do we need gigabit connections?

  • Streamed media content in ultra-high definition to multiple devices in the same property
  • Gaming and media consumption with Virtual Reality headsets
  • Tactile Web
  • Uploading files at the same speed as downloading
  • Building a 5G connected world where the user experience is of unlimited speed and bandwidth

Indeed research by NLKabel & Cabel Europe forecasts that by 2020 the average sufficient provisioned broadband speed will be over 160Mbps – beyond the capabilities of FTTC or 4G.

What’s more, at the end of 2015 the USA was well down the leaderboard of countries with FTTP connections, with only 20% of properties passed versus a whopping 60%-70% in countries like Japan, South Korea, Spain, Portugal and Lithuania…

Source: Ofcom Digital Communications Review, February 2016


So what’s really going on?

Earlier this year Google acquired a business called Webpass for an undisclosed price. In 2014 they bought a very small company called Alpental and another called Titan Aerospace.

What’s interesting about these companies is that they are all experts in the deployment of gigabit connections over wireless technology. Consider the potential for acceleration and cost savings compared to planning and getting permissions to dig-in fibre, employing armies of contractors, and the potential for bad-will through inconveniencing residents.

Furthermore, Google has an experimental license from the FCC for nationwide testing of airborne delivered wireless broadband using high altitude balloons.

The radio-waves used by Google for these connections are capable of very high transmission rates and are in the millimetre wave bands, which are higher frequency than microwaves, and they are actually not uncommon at all.

Indeed, in the UK there are some excellent companies such as MetronetLuminet and Optimity, which are using millimetre wave wireless connections to provide gigabit broadband to their business customers in cities from London to Manchester. These happen to be some of the fastest growing connectivity providers, and their expertise in using both fibre and wireless technologies is a key reason why they are proving so successful.

Taking all of that into account, in our opinion Google is right to be looking to build a joined-up technology strategy before investing in further fibre rollouts. 

My prediction for the future of fibre connectivity

Let’s be clear, you can’t deploy a wireless network without fibre, so there is no question that fibre will ever be redundant. Physics tells us that the fastest way to get data from one place to another is using light down a piece of glass, so fibre will always be the ultimate medium for that.

What Google, Metronet, Luminet and others are showing us however is that particularly in cities there is a strong argument for building a network that takes the best of both: optimise the connectivity AND the cost.

In rural areas, where the cost of deploying fibre makes more sense, FTTP networks should continue to expand quickly and we are seeing that opportunity being jumped on by the likes of Gigaclear and TrueSpeed.

I’m hugely excited by this development and have confidence that it will lead to a much accelerated rollout of the infrastructure we need for an exciting digital future. 

Will Google pull out of the connectivity market?

I doubt it.

Will they come back with a smarter, better, faster and more cost-effective proposition?

I’m pretty confident they will.

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