How Much Will Google's Fiber Network Cost?
Google on Wednesday announced an audacious plan to build what is essentially the most cutting-edge broadband network in the U.S. While it's being misportrayed in certain segments of the media as an ISP effort, in reality it's nothing more than an experimental network, much like Google's (GOOG) early efforts to provide municipal Wi-Fi in the city of Mountain View, Calif. It will be a trial-only network, not Google's entry into telecommunications services. And while the planned network won't be cheap, in the end it will be worth the price.
The idea behind the network: Provide bandwidth and see if it fosters new user behavior and thus innovations. I admire Google for creating a real-life laboratory that will provide intelligence to predict not only the future of the Web but also help it develop new products to stay relevant. By announcing this network, Google also showed why it's quite distinct from its onetime peers, such as Yahoo (YHOO) and AOL (AOL).
When I said Google's plan is audacious, I said so because of the cost. For starters, Google wants to offer 1 gigabit-per-second speeds to some 50,000 to 500,000 people. At 2.6 people per household, that roughly translates to 20,000 to 200,000 homes. Our friend Ben Schachter, Internet analyst with Broadpoint AmTech, estimates that it will cost Google between $3,000 and $8,000 per home, or roughly $60 million to $1.6 billion, depending on the final size and footprint of the network. If Google reaches, say, 100,000 homes, it would cost the company about half a billion dollars.
Population Density is Key
The folks at Calix Networks, a company that sells gear for FTTP networks, have developed an equation that allows them to calculate the cost per household depending on population density, which, according to them, is the single most important factor in calculating the cost of FTTP connection per home. These costs are quite varied, in some cases as much as $4,000 to connect a single home. Google's final tab will depend on where it decides to build out the network.
The end cost is also determined by the kind of technology the company uses. While Passive Optical Networking technologies have come a long way—newer versions of Gigabit PON (GPON) have a range that extends up to 40 kilometers—there is a better than good chance Google will opt for an all-Active Ethernet approach. Mike Fox, business development manager for the carrier networks division at telecom equipment maker Adtran, says that both technologies can get the job done. It just depends on how Google wants to build its network. Fox helped me break down the comparative costs of the two technologies.
A typical PON is made of two pieces: an optical line terminal (OLT) at the service provider's central office, and an optical network terminal (ONT), which is used to terminate the fiber-optic line and is typically outside the customer's premises. A single ONT costs about $330, according to Fox. Since PON is a shared fiber technology, OLT costs are calculated in terms of ports and are about $80 per port. So the total per household is about $410. The fewer the number of ports, the higher the per-home costs.
Of course, when taken together with other costs, such as those for fiber and construction, things start to add up pretty fast. By comparison, an Active Ethernet-based network is pretty much like a corporate Ethernet network. It's a giant switched Ethernet infrastructure. It costs more than $600 in electronics for an Active Ethernet-based network. This is closer to what Google has in mind, according to some experts I spoke with. But that's not all.
Mike Day, chief technology officer at ADC Telecommunications, told me this network is going to be a lot more expensive than somewhat similar ones. It would need a really fast switching fabric that in turn would be connected to the Internet backbone at astonishingly fast speeds. This seamlessness is what will bring true speed to the homes on the test network. Think of this as building a smooth Autobahn from the home to the backbone. Day said the network would need to overcome some major design challenges, such as different data center architecture and a different style of servers that don't become a bottleneck and are able to leverage the 1 Gbps speeds.
Is spending this much money—even for Google, which has about $25 billion in cash—a good idea? I think so. Just as car companies spend their research and development dollars on Formula One Racing teams to get a better idea of what new features could be included in their commercial vehicles, a company such as Google needs to explore the outer limits of broadband. (I will explore more on this topic in a different post.)
In addition, "Google has a secondary motivation here, and that is to also push the FCC to accelerate its examination of using TV white spaces for wireless broadband," says Jeff Heyman, broadband and video analyst for Infonetics Research. He points out that if "Google can make this endeavor successful for a number of communities, why couldn't they do so for even more using white spaces? This FTTH initiative, in other words, could be a proving ground for Google as infrastructure provider."
Is that likely? Perhaps not—but as someone who hearts broadband, I hope Google's desire to push the limits brings about the change we so badly need.
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