Google Fiber Is World-Changing! Or Maybe Not. Or Both!

Google has now announced plans to roll out its high-speed broadband service in three cities, which excites lots of people who get excited about the notion of fiber lines delivering a gigabit per second.

Lots of other people, though — including investors and the cable guys — don’t know what to make of Google’s moves.

They have two big questions:

• What is Google actually trying to do here?
• How much is Google willing to spend on whatever they’re doing?

And there are multiple theories to answer those questions, which aren’t necessarily mutually exclusive:

• It’s a sandbox for Google. It’s literally trying to figure out what goes into offering that kind of speed, and what happens when customers take advantage of it.
• Google thinks that by offering blazing-fast fiber in a bunch of cities, it will spur the likes of Comcast, Time Warner Cable and other incumbents to up their own investments in speed. And that eventually means that more people will have faster Internet, which is presumably good for Google.
• Google really does plan on wiring a big swath of the country. Because, why not? It’s Google. It can afford just about anything.
• During yesterday’s earnings call, analysts again tried to suss out what Google was up to. Both CEO Larry Page and CFO Patrick Pichette did a good job of speaking at length and not saying very much, beyond the notion that it would be good if lots of people had fast Internet.

Here’s one exchange between Bernstein analyst Carlos Kirjner and Page that is pretty representative:

Kirjner: “How do you expect fiber to have a major impact, given that it would take many billions and several years to pass something like 20 million U.S. homes — and after all of that time and money, you would be at best a mid-sized provider (Note: Comcast, the U.S.’s biggest broadband company “passes” — i.e., could provide service to — 53 million homes) in a market that accounts for less than half of your current business?”

Page: “I’m glad you’re very ambitious — the fiber industry’s not big enough for you. So I applaud that. We’d love to find businesses much bigger than our entire business to invest in, but I think that there’s only a small number of such companies that even exist. So I think on fiber, we look at places where we can provide products that we can make a very big difference in people’s lives, and we can make a lot of money and resources doing it. And I think it certainly meets that criteria.”

Does that spell things out for you? Me, neither. But Kirjner seemed to get some value out of it. In a note this morning, he writes:

• That he is now convinced that Google is not experimenting with fiber, but is serious about it.
• But! He also doesn’t think Google is going to embark on a truly massive effort: “Google is playing a very long game and does not aim to change the broadband access and pay-TV world in three or even five years … We remain skeptical that we will see a mass roll out involving billions of capex to build a fiber network passing millions of homes in the next few years, but think they will continue to expand Google Fiber’s footprint.”

Got it? Me, neither. But fascinating to watch.