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AT&T and Time Warner Cable: ‘We Can Compete With Google Fiber’

Time Warner Cable last week intimated the only thing keeping faster cable modem speeds from Kansas City customers is consumer demand and they are not worried about the arrival of Google Fiber’s 1Gbps broadband speeds.

The cable operator claims they have the advantage in Kansas City, as the first provider to offer a triple play package of voice, broadband, and television service. Time Warner also says they are constantly working on new, innovative services, including the much-touted “tablet remote” the company says it already offers customers in Kansas City in the form of apps available on the Android and iOS platforms.

“We always have the ability to adjust our network to keep up with demands from consumers [for faster broadband speeds],” Time Warner Cable said.

Cable operators and phone companies have traditionally argued there is little consumer demand for gigabit broadband speeds because the services most customers access online don’t need or cannot support that level of speed. Cost has also usually been a factor, and many operators point out the majority of their customers are satisfied with speeds of 20Mbps or less.

“We’re ready to compete any day, anytime, anywhere, with anyone,” said Time Warner Cable spokesman Mike Pedelty.

AT&T, which has been providing U-verse in parts of Kansas City since 2007 says it isn’t threatened by Google Fiber either.

Chris Lester from AT&T Media Relations notes AT&T now offers U-verse to more than 400,000 households in and around Kansas City and claims the company has gotten a “great response” from consumers, but declined to specify exactly how many of those households have actually signed up for service.

Both the dominant cable and phone company in Kansas City are betting on subscriber loyalty and consumer resistance to change to maintain their subscriber numbers. Statistically, they have a good chance of holding most of their current customers, at least for now.

The threat of Google’s fiber fast speeds may not be limited only to Kansas City, however. The Wall Street Journal has learned Google may be intending to bring its fiber network to other American cities, as long as they are not already served by Verizon’s FiOS fiber-to-the-home network.

Incumbent cable operators facing new competition from phone company IPTV (AT&T U-verse, Verizon FiOS) have not lost as much business as they first anticipated. In most cases, only 25-35% of customers eventually left for a satellite or phone company competitor. The older the subscriber, the less likely that customer is to consider a change, unless the service is poor or the price becomes unaffordable.

http://www.phillipdampier.com/video/KCTV Kansas City Competition for Google Fiber 7-26-12.mp4

KCTV in Kansas City talks with AT&T and Time Warner Cable about their newest competitor.  (2 minutes)

No cable operator has reported alarming results from subscriber defections, either from competition or cord-cutting behavior, and Wall Street analysts are watching subscriber numbers closely.

So far, reports on the ground indicate AT&T and Time Warner Cable are following the playbook first established when any new broadband provider arrives on their turf — aggressively market discounts tied to a contract with a stiff early termination fee to discourage customers from switching. At least one local provider has been reportedly sending salespeople door to door to try and lock customers in with a multi-year service contract. When that does not work, both companies use their customer retention departments to offer customers cheaper service in a last ditch effort to keep them from heading for the door.

Even with those defensive measures, some investors still see Google’s new fiber service as something new and different in the broadband marketplace — “the most disruptive thing since Gmail,” concludes Business Insider‘s Matt Rosoff.

Rosoff says Google Fiber could completely change the broadband landscape in the United States much the same way Gmail changed e-mail.

Back when Gmail launched, the other free email providers like Hotmail and Yahoo Mail were offering less than 5MB of storage — that’s five megabytes,” Rosoff writes. “Google trumped them all with 1GB of free storage. With so much storage, there was no need to trash anything. You could archive it and keep it forever.”

http://www.phillipdampier.com/video/Fox Business News Google Stirs It Up 7-26-12.flv

Fox Business News explores Google Fiber and finds phone companies telling reporters consumers don’t need 1Gbps broadband.  (2 minutes)

Gmail has since captured a large share of the email market, while also paving the way for Google’s increasingly profitable business apps. Some also argue Google’s “save everything online” approach was like training wheels for the cloud computing concept, where consumers think less about local storage and more about going online to access content. Google Fiber’s speeds make accessing online content effortless, and with no usage caps, customers need not ration their usage.

As of Monday, Google has already achieved the minimum number of needed homes to install Google Fiber in several, mostly affluent, Kansas City neighborhoods.

Rosoff says much like Gmail exposed the weaknesses of former email leaders like Hotmail, Google Fiber embarrasses incumbent Internet Service Providers and illustrates just how slow they have been to innovate.

“Google Fiber makes the cable-based ISPs look pathetic,” says Rosoff. “It promises to offer speeds up to 1,000Mbps downstream and upstream, for only $70 a month.”

In comparison, Time Warner Cable charges $100 for 50/5Mbps service in Kansas City. AT&T’s U-verse can only offer up to 24/3Mbps service, and it charges well over $50 a month for that, except on a new customer promotion. Both Time Warner and AT&T also sell “lite use” packages from 1-6Mpbs for $20-25 a month — service Google intends to give away for free after a $300 installation fee.

Many industry observers suggest Google is using its new fiber network in part as a hedge against market abuse from dominant cable and phone companies who are fiercely opposed to Net Neutrality and favor monetizing broadband usage.  Both are serious threats to Google’s business model which seeks more usage, not less. The more time consumers spend online, the more likely they will be exposed to a Google ad, use a Google product, or purchase a current or forthcoming service owned or partnered with the search engine giant.

Early indications from Kansas City show the cable and phone companies do have something to be concerned about. In more affluent areas of Kansas City, Google passed the minimum number of households willing to commit to the fiber service in just two days. Enthusiasm has been so overwhelming, tech entrepreneurs drooling for fiber service are hiring door-to-door promoters to visit nearby residents to encourage them to show their interest, in some cases even paying Google’s $10 pre-registration fee on their behalf.

More than 20 percent of the eligible “fiberhoods” in Kansas City, Mo. have already passed their signup goals. In poorer, mostly minority neighborhoods, Google is still waiting for their first pre-registration. In less affluent Kansas City, Kan., Google is finding considerably less interest, and pre-registrations are running below goal in all but three “fiberhoods.”

http://www.phillipdampier.com/video/WDAF Kansas City Competitors Gear Up For Google’s Challenge 7-26-12.flv

WDAF says competing cable and phone companies cannot deliver the speeds Google Fiber will offer, but they are betting consumers don’t need or care about faster broadband speeds. (3 minutes)

 

Currently there are 16 comments on this Article:

  1. Ian L says:

    I’m curious as to whether any of Google Fiber crosses over into SureWest territory (SureWest has cable in some areas, with speeds similar to TWC, and symmetric fiber in others).

    Anyway, my bet is that KC will suddenly be a launch market for every single new technology that TWC comes out with, particularly when it comes to Internet speeds. AT&T will probably do the same thing, though they also have to deal with high-speed fiber connectivity in Chattanooga thanks to EPB (albeit slower than Google…EPB sells 50 Mbps symmetric for $70 per month instead of a gigabit).

    More than that, though, TWC and AT&T will slash prices (introductory rates for the first twelve months, of course), particularly on double and triple plays. Google is on the high end price-wise for its Internet and double play services, so that allows TWC and AT&T to fight for everyone who wants to pay less than $70 for internet above 5 Mbps, and everyone who wants to pay less than $120 per month for ‘net access and TV combined. AT&T is already running a promotion that prices its fastest U-Verse tier at $45 per month (for six months), while TWC is offering 10/1 service for $30, 20/2 for $40, 30/5 for $60 and 50/5 for $80 per month for the first twelve months. They may get a little more aggressive as Google Fiber draws closer, signing up customers in the hope that, when Google Fiber arrives in full force, their retention departments will make offers that then-current customers won’t be able to refuse.

    I wouldn’t be surprised in the least if AT&T drops their fastest U-Verse tier down to $30 per month for users wishing to switch to Google Fiber, with a triple play running around $90 with that tier. As for TWC, my gues is that they’ll hit 100+ Mbps by year-end in KC on the download side, with 25+ Mbps on the upload side, for under $100 per month, with 10/1 staying at $30 ad infinitum as long as a subscriber mentions “Google Fiber” every year. Also wouldn’t be surprised if TWC’s Internet Essentials low-cap offering never makes it to KC.

    If I was in a fiberhood, I’d have already signed up for Google Fiber, and gotten my neighbors to do the same. However I have a feeling that, thanks to the fact that TWC and AT&T can’t compete with Google on speed due to the lack of FTTH networks of their own, everyone else in the area will benefit from Google Fiber by way of lower prices for wireline communications. Kind of like how Fibrant and Greenlight are pushing TWC in NC to offer better services at cheaper prices in their respective service areas.

  2. Scott says:

    For the most part consumers don’t really care about speed as long as they have an adequate amount to run the apps they use during prime time for themselves, all their family members, and every connected device.. For most that’s a minimum of 10-15Mbit.

    However TWC, and AT&T are in denial just like any company that’s never had any real competition. The 50+ Mbit speeds may not be the issue but value and price plus quality service DO matter. Both of which neither TWC or AT&T have offered for many years if ever, nor does their current business plan pushing metered and reduced customer service and investment provide.

    Google will win on price, they will win on clear simple pricing with no gotcha and scammy fee’s tacked on, and they will win on quality of hardware and service.

    The only thing left for Google to prove is how good the on the ground and call center staffing for support are for this product. They’ve always put an emphasis on quality people, but they always seemed to like to keep the head count down and automate as much as possible.

    Google’s point here is to prove the the model works and is profitable. This is a great tool for Google to leverage against the cable and telco’s to get them to moderate or pull back from the anti-consumer practices like metering usage. If not, there’s plenty of room for a well funded competitor like Google to move in to each and every territory. Obviously I don’t think they ever really wanted to go this far, but they felt they had to since nobody else appears to be stepping up with national aspirations for a wired network.

  3. Sean A says:

    So, when is TWC going to compete? Obviously not today……

    • Scott says:

      They’re terribly busy trying to figure out how to give away service for free for 7 years…

  4. txpatriot says:

    I love what google is doing. Still, they are getting a pass from STC and all the other fawning media when it comes to the $300 installation fee. Can you imagine the howls if AT&T, Comcast or TWC charged $300 for installation?

    • rjdafoe says:

      The problem with that is people have been paying that high installation fee for Satellite and FIOS had a high installation rate. Installation rates for cable were, at one point high as well.

      When today, people are spending $300 on a mobile device, spending that on an installation fee that is new and well above anything else that anyone else can provide, is not that bad. Also, call TWC and ask how much that would cost for their comparable service. You are talking $1000 or more.

    • Tim says:

      If you sign a contract, it is waived so I don’t see an issue. The tier that requires a $300 install fee is on their free 5/1 service. And even that is still a great deal so again I don’t see an issue here.

      If the incumbent cable companies offered the same, I don’t think there would be “howls” as you put it. But I doubt they would ever bring fiber to your home anytime soon especially when they are busy with their greedy paws trying to monetize modulated electrical signals, bits.

      • txpatriot says:

        Tim you’re right about the contract. I’d love to see the incumbents offer free monthly service in exchange for a one-time installation fee of $300. I don’t know how google will make money this way but I wish them luck. If nothing else, they certainly got the incumbents’ attention!

        • Scott says:

          I think it’s more of a long term goal for Google with the install, if you pay me $300 to install fiber to your home, that’s a permanent extension of my service just as if the Cable company wired your house up. So when you sell your home and move the next owner can just give Google a call to activate service.

          A side note too, if anyone had followed the FioS deployments by Verizon, there was actually an uptick and active shopping for homes on various realty website that promoted the fact certain homes were wired for FioS. It increased demand and value for quite a for home owners.

          • I think the install fee is also a tool to show Wall Street that the traditional meme that consumers won’t pay an entry fee for fiber service and consider it a barrier for service adoption is wrong.

            It is estimated Verizon got the per-home install expense down well below $1,000 (it used to be $1,500 or more per home). If Google can manage up front costs for line work to around $500-700, having $300 to defray some of that cost, or an annual contract to hold customers in place, can ease some of the concerns Wall Street analysts have about CapEx.

            Remember cable stock fluffer Craig Moffett’s biggest bash about Verizon FiOS was that it cost too much to install and too long to earn back that investment. Is a $300 install fee too much? Kansas City residents are about to give us the answer and I am betting it is not.

            • Scott says:

              True, very good points.

              I’m actually laughing to the bank as I just took a few thousand dollars from Wall St., betting against the same mentality.

              Back when Sprint was $2 I bought in heavily betting AT&T and Verizon would continue their anti-consumer antics and Sprint would start taking customers away and increasing revenue.. Well at the time Wall St was screaming “Sell Sprint” and then when they announced their deal with Apple to buy 20 billion worth of iPhone it was even more doom and gloom from so called analysts.

              Needless to say my $2 shares more than doubled, sprints financials are better than ever and their so called risky bet to invest in their business is paying off at the expense of AT&T and Verizon who they’ve stolen about 40% of their new subscribers from.

              Now that their stock is all but mostly topped out at $4.5 you’ve got Wall St. saying “Buy Buy Buy” ??

              As for a $300 install fee, If more consumers would be better informed financially they’d look at what Google is offering in free hardware, lower monthly rates, and very likely no cable co price increases every 10 months.. and see that even a few hundred bucks for one-time install that also adds value to their home is well worth the expense over the term of their contract.

              • What is ironic is that venture capitalists will still throw millions at daffy dot.com ideas that don’t appear to have a solid way to earn long term revenue, and when those companies go public, the initial stock offering often brings a frenzy of additional investment in the form of stock ownership.

                But once these companies are established, the easy money is over. Now it’s all about short term results, consistent quarter after quarter. Anything that resembles capital spending to invest in your product or service is treated like a leper at a garden party.

                It must give some people whiplash to find venture capital thrown at them by the buckets at the outset only to later discover every dollar they spend on upgrades gets a forensic examination worthy of CSI, and a whole lot of second-guessing and hand-wringing to go with it. Facebook is about to find this out for themselves.

                Frankly, Wall Street has turned into one giant casino with self-proclaimed experts sharing their tips and advice about how to count cards without getting caught.

  5. Tim says:

    I love how this has pointed out the fact that there hasn’t really been competition in markets from various cable TV companies like AT&T, Time Warner, Comcast, ect.. They all mirror each other on prices and promotions. It is only when someone comes in and actually shakes things up that you see how stale and uncompetitive things have become in almost ALL markets.

    A few things I really hope that Google accomplishes with this experiment:

    1. This becomes very profitable for them (so they might serious think of expanding this to other cities)
    2. We see a mass exodus from incumbent cable co’s to google fiber Internet at least (TV wise I am not to concerned about)
    3. Shows that caps on bits is just ridiculous and will just hinder future innovation
    4. Shows that people really do want faster Internet
    5. Show that actual competition is a great thing

  6. J.J. says:

    Praying for Google Fiber to come to Texas ASAP!!!

    You can avoid the $300 installation fee if you Pre-suscribe for only $10 bucks, but if it wasn’t the case, I’ll happily pay the $300 right away ( Just the Nexus Tablet pays off) , I currently pay over $180 a month with Att uverse for a POS service, Hope Google fiber succeed and change the monopolies of Att and TWC, in europe they only pay an average of 15 euros for TV and internet with 100/25mbps , with over 25 service providers , if your not happy you can choice whoever you want and don’t matter wich area you live, if is an apartment complex, house, farm or whatever, and providers they all care about their costumers (Just like ATT, TWC or whoever is your provider… not!!!).

  7. MP says:

    Customer Loyalty? really? Let me explain the real world customer.. like myself.
    I gave Time Warner 7 years of my loyalty for what? slow speeds, constant network drops, always replacing my HD box for some reason or another, poor technical support and promises they never could keep. my bill kept getting higher and higher but my speed never did, my TV experience never got any better and i never got any new toys to play with.

    I threatened Time Warner that i would leave if they didn’t fix my issues, make it faster, and my experience more pleasant. I was told “so what , we don’t care” “we have plenty of customers”

    The very next week. i ripped everything out that was with Time Warner, paid my bill in full and had at&t u-verse installed. And posted a YOUTUBE video of Time Warner.

    Now i have had U-verse for Since June 2012, so far I have not received my $250 visa gift card I was promised where the hell is it?, and on Feb 13th 2013, my internet was creeping at a whopping 0.80 Mbps download speed and upload at 1.2 Mbps, let me repeat that, my download was 0.80 Mbps
    Normally i get a 24 Mbps download and 2.87 Mbps upload, I called support and after having to run around in circles , again with piss poor service, i finally get my internet back up to par.
    I threatened to jump ship , though at&t seemed to care, they did not seem to want to go above and beyond to keep me from jumping ship.

    Today i was just told by at&t themselves that my u-verse is maxed out at 24 Mbps download and 3.0 Mbps upload. (if it is maxed, then you cannot tell me or the world that you have the ability to adjust your network to keep up with demands from consumers [for faster broadband speeds]
    Now lets put this into perspective, i pay $250/month for bundle that is 24×3 internet, tv, and phone. Each and every single month. for that kind of money, I should NEVER have to worry about my speed my tv or my phone., but i am a customer who enjoys more and more power, so i want more internet speed. Can at&t deliver ? NO can Time Warner? No in fact i am getting pissed off thinking about it right now.
    Now Google comes along and says if you pay us $300 one time construction fee, we will give you the internet for free for a year!!! and this is 1 Gbps up and down . then only $25/month after that.

    Now i ask you? WHY WOULDN’T YOU DO THAT! ?
    – you say, you get no TV? Hell i don’t get that now, I get a crap load of reruns and 90-95% of the channels i do get I never watch anyhow! EVER! i stream netflix or hulu or something like that and that’s if the internet stays up and throughput keeps with the flow.
    So with Google, I can stream a movie or two, play a online multiplayer game, have my web server running and hell even have Magic Jack for my phone, plus have the kids online, ALL WITHOUT ANY LATENCY!!!!!!!!!!!!! or throughput issues.
    – you say , you get no Phone!, I have a CELL phone , I am highly debating on getting rid of at&t phone service as it is now! why pay for that overpriced ringbox when i dont really use it.?

    TIME WARNER and at&t if you ask the real world people who really do use broadband, you might find WE ARE hungry for more!

    I question both of you big players when are you going to step up your game?
    and at&t if you DONT do something soon, and when Google becomes available in my area, I WILL jump ship. I have no loyalty to you, I learned my lesson on being loyal to Time Warner, I will not do that again,
    – I am loyal only to the service provider who gives more for less.

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