Google Is NOT Getting Into The Network Business, The Further Adventures of T. Googlii

Unsurprisingly, the telecom world is all abuzz over the news that Google will build a bunch of Gigabit test-beds. I am perfectly happy to see Google want to drop big bucks into fiber test beds. I expect this will have impact on the broadband market in lots of ways, and Google will learn a lot of cool things that will help it make lots of money at its core business — organizing information and selling that service in lots of different ways to people who value it for different reasons. But Google no more wants to be a wireline network operator than it wanted to be a wireless network operator back when it was willing to bid on C Block in the 700 MHz Auction.

So what does Google want? As I noted then: “Google does not want to be a network operator, but it wants to be a network architect.” Oh, it may end up running networks. Google has a history of stepping up to do things that further its core business when no one else wants to step up, as witnessed most recently by their submitting a bid to serve as the database manager for the broadcast white spaces devices. But what it actually wants to do is modify the behavior of the platforms on which it rides to better suit its needs. Happily, since those needs coincide with my needs, I don’t mind a bit.

How does that play out here, and why do I compare Google to a protozoa? See below . . . .

Back when Google was starting to push to get on the wireless platform, I wrote this blog post: “Why Google Makes A Great Protozoa.” I compared Google to the Toxoplasma Gondii protozoa. For those unfamiliar with T. Gondii, it goes through two stages. In stage one, it can exist in any mammal. But for reproduction, it needs to be inside a cat. So T. Gondii alters the behavior of mice. Mice infected with T. Gondii have their brain receptors flipped so that they find the smell of cat urine attractive. When they find a cat, they respond with aggressiveness instead of hiding, rushing out to fight the cat. The cat, of course, is very happy to devour the mouse. It does not even notice the protozoa cavorting inside it. If it did, it would probably say “as long as it keeps bringing me mice, why should I care that it’s using me to reproduce.”

T. Googlii is quite similar. It needs to get to us to “reproduce” (make money). To do this, it must alter the behavior of the platform providers so that we consumer kitties can provide T. Googlii with what it needs to reproduce. And while this no doubt appears parasitic from the mouse/carrier point of view, it looks much more like commensalism from the perspective of the consumer/cat.

In the wireless space, Google worked to modify the behavior of wireless companies by showing that it would actually challenge them in their own space if they did not open their platforms. Even though Google lost its bid for C Block, it still persuaded enough wireless carriers of the advantage of letting its operating system into the carrier platform. Now all manner of consumer kitties are cheerfully devouring Android mice provided by wireless carriers who two years ago were telling Google to bugger off or buy its own spectrum. And, in the manner of a truly successful evolutionary organism, it actually benefits the wireless carrier/host as well.

I read Google’s move into fiber in a similar way. Google is not looking to become a network operator on a large scale. Good God, get into a mature line of business where high switching cost makes it impossible to pull away customers, huge cost of investment, totally different business line? That would be crazy. For all that Google has built a sprawling empire by acquisition, the acquisitions have always ultimately worked back to their core business of encouraging people to use the service as much as possible to in every aspect of their lives so that they can gather information, organize information, and sell services based on those two ideas. It may be a vast empire, but like the Sir John Seely’s characterization of the British Empire, it appears to have been “built in a fit of absent-mindedness” while trying to pursue other goals.

What Google wants is to (a) get better networks built, and (b) figure out how to make more money along its core business lines when Gigabit networks actually materialize — either in the U.S. or elsewhere. But our cable/telco duopoly shows no sign of wanting to provide these networks anytime remotely soon, and the National Broadband Plan and stimulus program — while helpful in many positive ways — are not going to get us to gigabyte networks anytime soon. So how to modify the behavior of network providers (and those who subsidize/regulate them) to produce the desired gigabit networks? Answer: show everyone what happens when you actually have gigabit networks.

This will do more than simply stimulate demand. It will embarrass and expose the existing providers to get them to change their behavior. Google will have proof, and share it with the world, about what it really takes to run a network that works BETTER than the ones being offered Americans today. The idiotic children’s tales carriers like to tell about their cost structure and pricing, based on trying to squeeze out legacy equipment and minimize capital expenditure and which rely on hiding real information about how networks operate and maintaining in the listeners an ignorance of real economics, will be exposed for what they are, and it will increase pressure on these networks to produce something that runs like the Google test bed or face the specter of real regulation. After all, one of the most potent arguments on the carrier side (and for their supporters) has been that Google doesn’t “really understand what it takes to run a network.” Now they not only will understand it, they will happily share that understanding with the FCC, the Congress and the public. And while carriers will have an endless list of reasons why Google can do things they can’t and why Google’s data are tainted or don’t matter or whatever, the presence of gigabit networks operating at a modest (if not monopoly) profit will make it increasingly difficult for these carriers to claim that they need to be deregulated to build The Glorious Network Of Tomorrow or that network neutrality makes things unprofitable or that local governments shouldn’t be allowed to compete or that we need more USF funding and all the other fanciful tales carriers like to tell to credulous audiences here in Washington.

Along the way, Google will gather valuable intelligence (hence the “test bed” appellation) about how the habits of Americans will change — and what applications it should offer — when better networks are deployed.

So notions of “cherry picking” in this context are misplaced. Google is not looking to earn a profit from the testbeds — at least not in the usual carrier manner. They will seek to embed themselves in systems and gather information and make money the way they always have. I expect them to pick a variety of environments to maximize the impact of the demonstration networks and highlight the actual cost of build out in less profitable (but still actually profitable) lower rate of return areas – precisely because no real carrier can admit they are shunning an area because it while it is profitable, it has a lower rate of return than they would like.

Mind, Google is unlikely to go out to the truly rural, because that makes a lousy test bed and doesn’t embarrass any provider worth embarrassing. If I were Google, I would include — one major urban area in “flyover” country, population 50-100K; one inner city underserved community; one upscale rural community, and several suburban and exurban communities. I would site them in communities bypassed by AT&T, Qwest and FIOS — possibly in communities that the ILECs just sold off. Ideally, these would also include Comcast, Time Warner, or Cox territory.

So don’t look for Google to become a carrier. T. Googlii, a smart and adaptable protozoa, is up to its old tricks of not changing its ways, but getting others to change their ways to suit it better. And, as the consumer cat waiting for carriers to start bringing me new gigabit mousie treats, I don’t mind a bit.

Stay tuned . . . .