What Does the Future Hold for Google Fiber?

Google’s (NASDAQ:GOOG) Internet service Google Fiber could reach 8 million homes by 2022, costing an estimated $7 billion for the build-out. The Internet service offers blazingly fast 1-gigabit-per-second Internet speeds, which only exists in Kansas City presently. However, Google’s plans to expand the service to Austin, Texas, and Provo, Utah, has led many to speculate on the future of the Internet service.

The possibility of Google moving forward with Google Fiber has led many onlookers to wonder what might be the impact of such a move. Evercore Partners (NYSE:EVR), an independent investment banking firm based in San Francisco, predicted that Google could sign as many as 3 million customers in the next seven to nine years assuming it continues to target only select neighborhood, according to Evercore analyst Ken Sena. This would firmly place Google Fiber within the top ten broadband service providers.

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“Done selectively, Google Fiber has the potential to deliver a modest standalone return in addition to providing positive benefits to Google’s broader business in promoting faster industry speeds and accessibility, migrating more TV viewing and online behavior onto Google’s cloud, and paving the way for YouTube, Google Play and other Google experiences to become a bigger part of the TV home viewing experience, even outside of fiber-deployed areas,” Sena explained.

Last year, Jason Armstrong, an analyst at Goldman Sachs (NYSE:GS), made a similar prediction about Google Fiber. Armstrong predicted that Google could reach 830,000 homes at the cost of $1.25 billion a year. The nine-year-figure given Armstrong’s prediction would result in 7.5 million homes in nine years at a cost of $10 billion. The report went on to say that “while this initiative is clearly still in very early days, going direct to consumers with internet connectivity and video distribution could give Google the potential to become the end users sole channel for media consumption.”

Richard Greenfield, an analyst at BTIG Research, is excited about the possibilities Google Fiber provides for innovation. “Faster speeds enable Google to innovate faster and make new and better products that can leverage faster broadband speeds,” he explained. Milo Medin, Google’s vice president for access services, admits that while Google didn’t initially see Google Fiber as a viable business, they now expect to make money from the service. “This is a great business to be in,” Medin said.

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