Here’s a story that passed under the radar screen (or at least under mine.) In last week’s Multichannel News (subscription required,) a story ran about Current Communications Group, a company planning to offer video, high-speed data and VoIP services over powerlines. That in itself isn’t big news—lots of companies are investing in broadband-over-powerline technology. What is news is that Current’s two largest investors are Liberty Media and Google. Liberty Media is the company founded and run by John Malone, who also founded and ran TCI, the largest cable operator in the U.S. at the time, for many years. Google is, of course, Google. They’re rumored to have invested $100 million in Current.
$100 million is a comparative drop in the bucket to Google, but it’s a big investment. Current vice president Jim Dondero was quoted as saying: “We certainly intend to leverage the Google brand in our offering, and it will certainly be a part of our offer.” He sidestepped the question of whether or not the broadband service will itself be branded with the Google name, but that’s an obvious option.
This deal inserts another piece of the puzzle that I discussed here. Executives at the two largest telephone companies, AT&T and Verizon, have both gone on the record saying that they want to force companies such as Yahoo!, Google and MSN to pay for access to their customers. If the telcos get paid, the cable operators are certainly going to demand the same fees.
Google has been buying thousands of miles of “dark fiber,” fiber optic networks built during the dot-com boom that are unused. They’re also in the WiFi service provider business in Mountain View, CA, and they’re bidding for the rights to build and run a citywide service in San Francisco. With broadband-over-powerline, a “bypass” scenario begins to take shape.
Google could use its fiber network to make itself a peer to the telcos (AT&T and Verizon control the vast majority of the internet backbone.) In peering arrangements, no money usually changes hands, so Google would get access to the backbone without paying the telcos. Google’s fiber probably goes all the way into many cities. From that point, Google could connect directly to customers through either or both WiFi (and perhaps WiMAX) and broadband-over-powerlines. In short, Google could almost completely bypass the local telephone and cable systems, and thus not be subject to the customer access charges currently proposed. In addition, the network would generate revenue for Google from subscriptions. It would take years to pay off the capital costs of the network, but it may very well be worth it.
One other thing: Google won’t have to bear all the costs itself. John Malone has been looking for ways to get back into the cable business ever since AT&T acquired TCI in 1998. Both personally and with Liberty Media, he’s been acquiring cable systems in Europe. With broadband-over-powerline, Malone could build a communications powerhouse (no pun intended) to rival Comcast. With Google’s brand, he’d have instant credibility, and both Google and Liberty Media have the financial strength to take on a lot of debt in order to build out the network.
And, by the way, there’s almost nothing to build out. Powerlines are strung to virtually every home and business. WiFi and WiMAX networks are very cost-efficient to deploy and maintain. Google’s fiber network can handle backhaul of the local connections to the Internet backbone. In short, this network would be very fast to deploy and extremely cost-efficient.
Both Google’s WiFi experiments and broadband-over-powerline investments are probably trial balloons at this point, but they could represent the first steps of a major push into communications. For companies like AT&T and Verizon, which are both investing billions of dollars to upgrade their local networks with fiber, a Google/Liberty Media market entry could be very bad news indeed.