In the Coming Gigabit Era, Not All ISPs Can Win

Now that Google Fiber is to be built in three U.S. cities, and given AT&T’s announced intention to counter with a 1-Gbps network of its own in Austin, Texas, new attention will be paid to precisely what has to be tweaked in an ISP’s business plan to make such networks possible on a wider scale.

Other ISPs are taking a look at the economics as well. Wicked Broadband in Lawrence, Kansas, for example, is among the latest to announce it will build a 1-Gbps network. Work will have to be done on both the revenue and cost fronts, since the retail pricing set by Google Fiber ($70 a month for 1 Gbps, free 5 Mbps service) disrupts current pricing levels. Where available, 1-Gbps connections have sold for about $300 a month (Utopia in Utah) (EPB Fiber in Tennessee) (Sonic.net in northern California). With a $70 retail price for 1 Gbps, all lower speed services likewise will have to be reevaluated. That is going to compress profit margins for any ISP that actually does boost speeds, even if speeds are not increased all the way to 1 Gbps immediately, since the “1 Gbps for $70” pricing umbrella almost inevitably will require a revision of all lower-speed prices as well, as that price point is lower than what ISPs now set for 50 Mbps services.