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Kansas City, Missouri has been chosen by tech giant Google to be the home of the world's most advanced internet service development. The move caused quite a commotion and further affirmed why Google (NASD: GOOG) is the way of the future for investors and businesses alike. The new ‘Google Fiber’ provides individuals and businesses with One Gigabit per second (1000Mb) internet speeds, bringing a whole new world of opportunity to subscribers (and developers). To put this into perspective, subscribers will be able to stream high-definition video conferencing from several locations in real time, download a full-length movie or load an internet page up to 100 times faster than is currently available.
This astonishing speed is achieved via Google's own new fibre network, which has so far only been rolled out in Kansas City. Google Fiber is designed to change the way we view the internet, as well as ruffle the feathers of dominant internet providers. And ruffle the feathers it has! The move has prompted Time Warner Cable (NYSE: TWC) to reduce its rates across the board, as well as deliver a more capable broadband product, which is still way short of Google’s new product.
The Ideal Location: Many thought Google would use a traditional tech hub like San Francisco or their own location in Silicon Valley to roll out the first phase of its service. Instead, they chose Kansas City, which proved an ideal test venue. Kansas is a growing city of half-a-million people, located in central North America, just a few hours flight from nearly all major centres. Its population is diverse, with several different sectors including medical, technology and more traditional sectors such as manufacturing, which offered a number of benefits to Google as they ‘road tested’ their vision of the online future. Kansas City has been a model of adaptation, and represents the future America.
What it means for Google: Google’s foray into the world of internet further stamps its authority on the tech industry as a shaping force in technology and internet. Investors who were wondering if the firm had reached an expansion saturation point following its hugely successful ‘adwords’ business and the ultra-competitive mobile phone environment need not worry. Its closest rivals appear bound to a specific product set, or target market. Apple can be clearly categorised as an electronics provider. It is unlikely the company will stray from this niche, comprising computers, tablets, mobile phones and soon to be television. All of these environments are saturated with billions of dollars being invested by major competitors. Electronics is a dog-eat-dog world. Under the previous leadership of Steve Jobs, Apple was the pit-bull but they have stalled in recent times. Predictable offerings too similar to existing product lines and a certain distaste of their recent performance have been reflected in the company's share price:
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Until now Verizon (NYSE: VZ) and Comcast (NASD: CMCSK) have experienced a competition-free environment, virtually stalling the roll-out of previously considered 'fast' internet broadband projects. Until now, their flagship products, Xfinity and Fios respectively - were marketed as America's fastest available internet, boasting speeds of just 25% of what is now being offered by Google Fiber. Both companies placed greater emphasis on their mobile phone and wireless internet products, as it is much easier to charge exorbitant sums for smaller internet usage on mobile devices. That focus is likely to change as Google enters the world of high-speed internet. If Google continues its fibre network roll out across several more states, both companies may lose their current market share, which includes internet, TV and mobile phone plans. The bullies may become the bullied, to the benefit of consumers and business.
What next for Google? Nothing is certain in the tech world but it seems investors can be confident that Google's evolution continues apace. The company has momentum and a presence. If they don’t have the capacity to handle their array of new products and services, they can use their mountains of cash and talent to build it, as has been the case with Google Fiber. With the growth of the internet and companies such as Google offering social networking, video communication and voice applications, the potential to grow and monetise their existing product offering is exponential. As they become a provider to homes, they open new doors such as television, mobile phone service and a host of other products. For investors, the future looks bright. As for Apple, Verizon, AT&T and similar 'one trick ponies': Look out, Google is coming to a platform near you...
Stay Ahead of the Game,
Lachlan McPherson
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