Parks Associates Blog

Thursday, February 11, 2010

Google's Stimulus Plan

Google’s announcement today that it will build an “experimental” fiber network to offer super fast broadband Internet access of 1 gigabit per second to between 50,000 to 500,000 U.S. households is the stimulus model for economic recovery. Google is investing its own cash surpluses, rather than deficit government funds, to create an information superhighway which will put the U.S. back on pace with Japan, France and other nations that already enjoy much faster Internet access for less cost per megabit. This investment will create jobs, upgrade our broadband infrastructure and push Internet access toward the inevitable market based pricing model, whereby those who greatly value really fast data speeds will pay a premium within a tiered price structure. Of course telcos and cablecos will vie for their share of the premium customers that Google’s experiment will identify. Will they build their own super highways or might they find themselves leasing capacity from Google?

The Google fiber network sidesteps the net neutrality debate, as theirs will be a private, opt-in network independent of the public Internet. If you drove to work this morning on one of the nation’s many toll roads or dropped off a child at a private school, you have confirmed the effectiveness of market based pricing. Today American Airlines announced that all but its frequent fliers will now be assessed a $50 fee for same day flight changes (formerly known as stand-by). As airlines have effectively used tiered pricing to survive and occasionally earn a profit, so will Internet providers who wish to offer a first class option.

Hey Goldman Sachs, what infrastructure investments will you be announcing this quarter?

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