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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.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCTV Kansas City Competition for Google Fiber 7-26-12.mp4[/flv]

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.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Fox Business News Google Stirs It Up 7-26-12.flv[/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.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WDAF Kansas City Competitors Gear Up For Google’s Challenge 7-26-12.flv[/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)

 

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Ian L
8 years ago

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,… Read more »

Scott
Scott
8 years ago

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… Read more »

Sean A
Sean A
8 years ago

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

Scott
Scott
8 years ago
Reply to  Sean A

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

txpatriot
txpatriot
8 years ago

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
rjdafoe
8 years ago
Reply to  txpatriot

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
Tim
8 years ago
Reply to  txpatriot

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
txpatriot
8 years ago
Reply to  Tim

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
Scott
8 years ago
Reply to  txpatriot

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… Read more »

Scott
Scott
8 years ago

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,… Read more »

Tim
Tim
8 years ago

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… Read more »

txpatriot
txpatriot
8 years ago
Reply to  Tim

What he said!

J.J.
J.J.
8 years ago

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… Read more »

MP
MP
7 years ago

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… Read more »

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