The Road to a Gigabit. Milo Medin, Vice President, Access Services
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1 The Road to a Gigabit Milo Medin, Vice President, Access Services
2 Background Broadband in America is not advancing adequately Mass Market broadband started being deployed 16 years ago $40/month for 4-5 Mbps download Prices have not come down, higher cost speed tiers more common, but no step function increases in performance Broadband is increasingly important as a driver of economic activity and national productivity falling behind is a big problem! 2
3 US speeds lag the rest of the world Average advertised broadband download speed, by country, kbit/s, September 2011 (2012 OECD data) Average advertised broadband download speed, kbit/s* Median
4 and we pay more for it Broadband prices per megabits per second of advertised speed, Sept USD PPP (2012 OECD data) Japan Sweden 0.10 Korea Estonia Finland Hungary France Slovenia Canada Germany Slovak Republic Portugal Poland Denmark Austria United Kingdom Australia Czech Republic Italy Netherlands Ireland Iceland Switzerland Belgium Luxembourg Turkey Norway Spain United States Israel New Zealand Chile Greece Mexico Japan Sweden 0.21 Korea Estonia 0.29 Finland 0.31 Hungary 0.34 France 0.38 Slovenia 0.40 Canada 0.42 Germany 0.43 Slovak Republic 0.46 Portugal 0.47 Poland 0.48 Denmark 0.58 Austria 0.61 United Kingdom 0.63 Australia 0.64 Czech Republic 0.64 Italy 0.65 Netherlands 0.66 Ireland 0.67 Iceland 0.70 Switzerland 0.77 Belgium 0.78 Luxembourg 0.89 Turkey 0.92 Norway 1.09 Spain 1.10 United States 1.39 Israel 1.56 New Zealand 1.64 Chile 1.68 Greece Mexico
5 Fiber Project History Google decides to try and influence US broadband market In 2009, the management concluded that instead of complaining to the Government and existing broadband operators, we should talk less and do more Fiber program was created Initially, Fiber was designed as an experiment, not a product, and optimized for political/research goals Stanford chosen as a test system and an RFI issued to see if any communities would step up and partner with us to deploy in a single market of 50,000 to 500,000 people 1100 cities respond Widespread demand for much higher speed services and not just a few cities, but all across the US - Users and communities are screaming for more capacity Maybe there is an opportunity here? Project scope and mission changed Create a business for gigabit access that competes with dominant cable platform by giving consumers a new choice of provider Utilize Google s scale and innovation to create a new RETAIL option optimized for what consumers want data not a retrofit Advance the web with a 100X step function increase in speed 5
6 But isn t delivering a gigabit really expensive? Bandwidth is actually quite cheap, and getting cheaper Internet traffic has grown at 40-45% CAGR over the last decade without major cost increases Advances in optical and switching technology have continued to drive down the delivered cost/bit aggressively on long haul and metro networks CDN s have further emerged as a vehicle to drive down the cost of delivery, and helping scale long haul networks and interconnection now responsible for 35-40% of all bits delivered on the Internet Access business are profitable (if you have a good cost structure) Gross operating margins for broadband Internet services from TWC and Comcast > 95% This is a good business, and one without a lot of competition in the US Very hard for new entrants to compete in Google is a large facilities based network provider A very large long haul network with extensive interconnection, including owner/investor in undersea fiber systems One of the largest global CDN s powering YouTube Google Fiber can take advantage of this tremendous infrastructure to deliver bits inexpensively 6
7 Large increases in optical capacity at flat cost
8 Large increases in routing capacity at flat cost
9 With a resulting decline in Internet Transit pricing
10 Costs and revenues are flat despite significant traffic growth
11 Making gigabit valuable is important Product incorporates great applications for gigabit networks 1 TB of Google Drive is included with both Gigabit packages the cloud works great with gigabit access High quality video service Mbps H.264 streams today, with a path to 4K, and over the top integration Very fast in home networks to allow large numbers of devices to connect and each get high capacity to the Internet Pricing has to be affordable Cannot expect significantly more revenue from the home to The mobile revolution depends on fiber As mobile data traffic grows dramatically, cell sites must be subdivided In the limit, the mobile network will look like Wi-Fi does today small cell sites with lots of access capacity While wireless is in the ascendency today, ultimately it s future to scale depends not so much on new spectrum as on a fiber rich access network 11
12 The Full Google Experience Gigabit + TV $120/mo Gigabit Internet $70/mo Free Internet (Today s Speed) $0/mo $300 construction fee $300 construction fee $300 construction fee Google Confidential and Proprietary
13 Development of in-home CPE Indoor optical termination and compact wall mount ONU An included residential gateway that does IPv4 NAT and IPv6 at gigabit speed, with a very good dual band 3x3 WiFi AP Delivering a Gigabit inside the home is critical WiFi from a single AP is inadequate speeds not much better than high end cable Need to be able to deliver high quality TV reliably Use Coax as a spine (200 Mbps today, 400 Mbps soon), and blanket home with Wi-Fi An easy to use advanced DVR system with integrated over the top and personal content Android Tablet with remote control app shipped to every TV home, along with multiple conventional BT remote controls Server inside the home, and thin Clients attached to TV s 2TB disk for 500+ hours of HD storage and the ability record 8 HD shows at once, and playback 4 simultaneously Integrated Netflix, with YouTube and more coming soon Clients act as WiFi AP s, and bridges to 1000Base-T jacks Guest Wi-Fi support firewalled off of user LAN 13
14 New, Clean UI 14
15 Tablet App 15
16 Tablet App 16
17 Two pronged approach to financial success Reduce costs of deployment Work with cities to streamline processes to reduce construction and support costs Dedicated inspectors Co-located staff with permitting office Reusing city rights of way and real estate to speed site selection City and State policies can make it easier or harder to deploy fiber networks we picked Kansas City partly because it was easy and inexpensive to build in Use Google s network assets to reduce transport costs Use Google s buying power to drive equipment costs down Use new Social approaches to aggregate demand Run a Rally process to determine where demand for the product exists Build where threshold demand targets reached (capital only spent in areas where demand has been verified) Connect up schools, libraries and public safety in qualified areas at a gigabit for free Install users in waves, and not one by one ( we don t install users one at a time) Use free service to drive decision making and install users when it s the cheapest to do so 17
18 Kansas City Fiberhood qualification 18
19 Kansas City Fiber Space 19
20 Hyperlocal marketing campaign 20
21 Very successful rally and deployment 90% of fiberhoods qualified in first build area Over 33,000 homes registered for service in 6 weeks > 20% of all homes in initial build area signed up initially Top neighborhoods had >50% signup rates North and South KCMO rally will be run this year Neighborhoods became more unified as the result of the rally people talked to others that they had never interacted with before Service installations began in November Start slow and ramp to assure quality Use new tools to create a great consumer experience Deliver a great product and transform the market! Still the beginning and not the end 21
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