Google Fiber in Kansas City

Data & Metrics

Jan 01, 2014

Client:   Bernstein Research

Staff:     Mike Wilson, Jim Stegeman

Model:  Gigabit Cities Model (GBCM)

This study, commissioned by Bernstein Research, discusses how Google is building a fiber network in Kansas City to offer consumers broadband Internet access and pay TV services. In this report CostQuest data metrics are used to discuss the demographic characteristics of the area covered by Google's build out, estimate the cash costs Google will incur to build its network, passing 149K homes at about $84 million, and give investors a sense of how much it would cost Google to extend its footprint. The following are some high level findings of the report:

Highlights:

  • One key objective for Google in Kansas City is to determine whether or not it can profitably become a facilities-based provider of broadband and pay-TV services. As we have written recently, we believe Google Fiber has two related objectives: first, Google is seeking to figure out whether or not, or under what conditions, it can make money as a facilities-based provider of broadband and pay TV services; second, it is an opportunity for Google to test new applications, new ad formats and delivery models (e.g., targeted TV ads) and to get further insight into consumer behavior. We do not believe this effort will have any significant impact on regulation or legislation.

  • Google is building a fiber network in Kansas City covering 149 thousand homes in neighborhoods with very different demographic characteristics. In the first phase of its build out, Google will pass 149 thousand households, 57 thousand in Kansas City, KS and 92 thousand households in Kansas City, MO. The demographic make-up of the neighborhoods targeted by Google varies significantly, with some neighborhoods with annual median income well above $100K, while others have median income below $40K.

  • Google has three differentiated consumer offers including pay TV and broadband. Google has three service offers in Kansas City. A high-speed broadband offer at $70/month plus a $300 install fee (waived for customers signing a 2-year contract) for 1Gbps symmetric2 broadband Internet service. A $120/month double-play bundle including the 1Gbps and pay-TV with a linear content line-up very similar to what incumbent providers offer, and a low-speed broadband offer supporting download speeds of 5 Mbps and upload speeds of 1 Mbps for a one-time installation fee of $300.

  • They estimate that Google will spend $84 million to pass (without connecting) the 149 thousand households in its first-phase build out area, with $38 million in Kansas City, KS and $46 million in Kansas City; our estimate is based on a detailed, street-by-street network design analysis of both areas. This network will include an estimated total of 7.2 million plant feet. Exhibit 7 and Exhibit 8 provide a visual representation of the custom-designed Kansas City network we have used as a proxy for the Google build out. Because Kansas City, MO has higher linear density of homes, or more homes per miles of plant, we estimate that the cost per home passed in Kansas City, MO will be lower, or $500, compared to Kansas City, KS, which we estimate at $674.

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