Google Dangles 100 Times Faster Web Speeds From

Google Inc.’s effort to offer Internet access at speeds 100 times faster than those available today raises the bar for U.S. cable and phone companies as the government readies a national broadband plan.

“They’ve just defined the new minimum,” said Reed Hundt, who was chairman of the Federal Communications Commission from 1993 to 1997 and now runs an advisory firm in Washington. “They have just effectively written the first page in the report.”

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Google’s proposal, announced yesterday in a blog posting, is to build fiber-optic networks for as many as 500,000 people with connections of 1 gigabit per second. That’s 20 times the speed of the fastest residential connections from AT&T Inc., Verizon Communications Inc. and Comcast Corp., and more than 1,000 times faster than the cheapest connections.

The FCC is set to introduce its broadband strategy by March 17 to ensure all U.S. citizens have access to high-speed Web service. Chairman Julius Genachowski said in a statement yesterday that Google’s trial will serve as “an American testbed for the next generation” of services.

By building its own network, Google would be going around AT&T, Verizon and Comcast to provide Internet access directly to homes, giving it control over how data is delivered to consumers. Google has lobbied for net neutrality legislation to prevent carriers from giving preference to some content providers over others.

Broadband Rankings

The U.S. ranked 19th in a September 2008 study of average broadband speeds, behind Japan, Iceland and Austria, according to the Organization for Economic Co-operation and Development. Wireless networks in the U.S. are also being strained by the growing use of smartphones such as Apple Inc.’s iPhone.

As part of the broadband plan, the FCC may pay broadcasters to vacate unused airwaves that could be used to bolster wireless networks, according to an FCC official, who asked not to be identified because the plan hasn’t been made public.

Google, owner of the world’s most popular Web-search engine, fell $3.08 to $531.37 at 9:56 a.m. New York time on the Nasdaq Stock Market. The shares dropped 14 percent this year before today.

Google, based in Mountain View, California, will first identify cities or counties that want the service and then work with other companies to build the fiber-optic network, said Minnie Ingersoll, a product manager. Google will pay for the deployment of the service, she said.

“We’ve been working with the FCC to advocate that the U.S. needs to make really bold, concrete moves to accelerate broadband deployment,” said Ingersoll. “This is our attempt to put our money where our mouth is.”

Ad Revenue

Google will probably not invest heavily to build out broadband networks and will instead aim to pressure carriers to bolster their networks, said Clayton Moran, an analyst at Benchmark Co. in Boca Raton, Florida. Google gets about 97 percent of its revenue from Internet ads, mostly from links next to Web-search results.

“They would like to see others enter the market and push for faster speeds and they think this could incrementally do that,” said Moran, who recommends buying Google shares and doesn’t own any. “Obviously, it’s very expensive. They are a search and advertising company, first and foremost.”

Google has been in this position before. In 2008, the company participated in a government auction for a piece of wireless spectrum that would bolster Internet services on mobile phones. Google had pushed for a minimum bid — which was met during the auction — that forced the winner to open wireless network space to any mobile device.

Spectrum Auction

After Verizon beat out Google by spending $4.74 billion, Google said “the auction produced a major victory for American consumers.”

In 2006, Google won a bid to build a free Wi-Fi network in San Francisco. The plan was sidetracked after EarthLink Inc., which was going to build the network, backed out and city politics delayed the network.

Google asked for responses from cities that want to be part of its broadband effort by March 26 and will announce which areas have been chosen later this year. The company plans on building the fiber-optic lines directly to consumers’ homes, much like Verizon’s $23 billion investment in its fiber network, FiOS. AT&T hasn’t said how much it is spending on its U-Verse network.

Google, which had $24.5 billion in cash and marketable securities at the end of 2009, didn’t say how much it plans to spend on its network.

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‘Dynamic and Competitive’

“The Internet ecosystem is dynamic and competitive, and it’s delivering great benefits to consumers,” Bob Varettoni, a spokesman for New York-based Verizon, said yesterday in a statement. AT&T spokesman Michael Coe and Comcast spokeswoman D’Arcy Rudnay declined to comment.

Verizon fell 9 cents to $28.78. AT&T, based in Dallas, declined 9 cents to $25.03, while Philadelphia-based Comcast dropped 10 cents to $15.21.

Google is expanding in the telecommunications industry in other ways. In January, the company introduced a touch-screen mobile phone called Nexus One and opened an online store to sell the handset. In 2008, Google was part of a group of companies that invested in Clearwire Corp., founded by mobile-phone pioneer Craig McCaw.

“The emerging Google business model is to be a catalyst in all adjacent markets,” Hundt said. “That’s a very distinctive and extremely creative business model.”

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