The lucky people in Austin, Texas are about to get Google fibre, Google’s revolutionary cable service.
Austin would become the second part of the country to get Google fibre. It’s currently offered in Kansas City, Missouri and Kansas City, Kansas.
How much is Google fibre going to cost Google? Last December, Goldman Sachs estimated it would cost $140 billion to cover the entire country. While we in New York City dream of getting Google fibre, odds are that Google isn’t going to cover the entire country, so it’s not going to cost that much.
Today, Bernstein analyst Carlos Kirjner has a report on how much Google paid for fibre installation in Kansas City, and how much it might cost in Austin.
He estimates Google’s total cash investment in Kansas City will be $94 million in 2013. For a company that generates over $4 billion cash every three months, it’s not a lot of money.
To build out the network in Austin, the cost per household will be similar to Kansas City, says Kirjner.
We’ll use Kirjner’s tables to break down where the money goes, what customers get, and then at the end, his thoughts on why it makes sense for Google.
The total cost to pass fibre is $84 million.
The cost to acquire and connect a customer only using broadband isn’t cheap.
The cost to acquire and connect a customer with TV and broadband is even more expensive.
The overall estimated cost for this year isn’t all that high, though:
If you’re a Google fibre customer, here’s what you can buy. It’s a pretty great deal.
And here’s what that translates to for Google:
And for someone with TV and internet:
Screenshot, BernsteinIf you’re still with us, great. You might be wondering why Google is doing this.
There are a number of reasons. First, it can be a real business. Google can price this to make money in the long run, or at least break even if it chooses the right markets to attack.
Second, Google wants to prove that fast Internet is feasible at an affordable price, hopefully scaring the big cable companies into offering the same. The faster your Internet, the more you use it, and the more you use the Internet, the more you use Google.
Third, for pocket change, Google has a sort of experimental lab with which to play around. It can test new ad formats, learn about consumer behaviour, and see what people watch on TV.