What Google Fiber is teaching us about vertical integration

[Commentary] Google is becoming a major investor in fiber optics and other networking technologies, and in doing so is demonstrating the value of vertical integration in information technology.

The commercial reason behind Google’s emerging business model appears to be the value that a single company can create if it combines content services with network hardware. One way to create this value is by aligning networks capabilities and content needs. Another benefit of a vertically integrated Google is that it allows the company to capture what are called network effects. In Google’s case, if it connects more customers to the Internet, it sells more advertising. Google’s business expansion also demonstrates that vertical integration is a misnomer in information tech. As Apple demonstrated with its innovative products, the lines between information, software, device, and networking are of our own making and can be altered or even destroyed by creative product developers. Three cheers for Google for breaking down the old order on its way to creating something entirely new.

[Mark Jamison is the Director and Gunter Professor of the Public Utility Research Center at the University of Florida]