All the experts turn out when it comes to our good friends over at “Don’t Be Evil.” — I mean Google. Have you ever wondered why? It may be because they’ve been doing a lot this year. Or, it could be, because despite all they have done in the the last year, we ain’t seen nothin’ yet!
In as many months, the publicity surrounding Google’s big-business activities, in the area of search, media advertising, and telecommunications have given body to Google’s business moves; a body which previously held a much more ghostly form — one buried in the cloaking power of the NDA (Non-Disclosure Agreement). Still though, this is a body we now see only as eyes slowly peering from under a line of shadow — The Don’t Be Evil People, alright.
Lo, did I say telecommunications and Google in the same sentence? Sorry, Eric, I don’t mean to give away any major GooglePlans(tm) before they’re done being hatched… oh, and neither do you it seems.
Google has publicly denied plans to get into the lucrative business, valued at US$1.3-trillion globally, but industry experts say it is inevitable. The Mountain View, Calif.-based company already has its toes in it with offerings such as Google Talk and the hugely popular YouTube video service. A major splash is only a matter of time, and when Google — with its mammoth US$163-billion market capitalization — does dive in, phone company takeovers and Apple gizmos will look like quaint curiosities.
If Microsoft is the ever-apparent Goliath of the Information Technology Industry, than the world needs to stop right now and wonder, who is this David that we call Google with over 8 times the revenue per share? Way back, it seemed Google didn’t have any real reason to expand very far beyond search. The sudden domination of that area, gave them plenty of foot-room, and plenty of customers. In fact, domination over search for Google, because of the model they implemented, meant domination over advertising and brand building. These days, that model still sings. Free services and advertising sang something like a $10 billion dollar tune for the Don’t Be Evil People, and thats just in the last year.
You might say it seemed like Google had found a sufficient niche. Evolution though, leads to a new question: How to spend the windfall?
Google bought YouTube, of its many, many acquisitions, and made headlines. This purchase was quite shocking given the immense amounts changing hands. Still, besides the size of the sticker price, there are other reasons why the purchase shocked some experts. The internet-based video-medium employed by YouTube, in many ways just seeded in the minds of most internet users, could only be savored by pockets of enthusiasts. The bandwidth does not yet exist.
This meant a limit to the advertising audience and a limit to the visibility of Google’s brand as well as their clients. At least, thats how it seems when you’re dealing in billions.
A major factor; the ability of the general public to afford a source of high speed Internet access, in the form of emerging broadband, assisted greatly in YouTube’s adoption, or more generally the interim adoption of large file sharing in many formats — the kind that creates the demand for new network technology.
But, even now, within the flow of that demand, broadband Internet access is far from a universal given amongst Internet users. And, if we look purely in terms of the United States, while broadband penetration is considered high, the performance capacity of the penetrating networks themselves are extremely low (China’s transfer averages are around 100 times that of their US counterparts).
So, what could Google do? Seemingly it would appear a difficult market to enter. Or at least, one requiring time, money, strategy and/or perhaps innovation, to become competitive. It would seem unlikely of Google, or anyone for that matter, to be interested in spending the money to become competitive in such an arena. Doing that, would set a hard limit for growth within any company.
What if Internet TV doesn’t take off? (Not likely) What if Internet TV advertising doesn’t take off? No companies, or brands, big or small, will want to waste advertising dollars to have ads appear on your proprietary, side-show network — it makes them look only more small-time.
So, why go to all the trouble?
As it always is when looking down the long miles, it takes a bit of business longsight. If you’re Google, it is more than well worth your while to look far ahead. Lets put a name to our pain to help explain why we’re talking in such long time scales: custom… Telecommunications… Network…
This is what we need to build if we have Google’s “problem”. In short it means a lot of money up front. Building something as actual as a Telecommunications Network is very different from building software or an on-line service. But who knows how much fiber Google already has… What do the experts say?
TeleGeography’s Mr. Schoonover doubts Google will ever become a telephone company because the profit margins in businesses such as phone and broadband provision just aren’t worth it. But the company could save itself a ton in costs if it moves its web traffic off the networks owned by phone and cable firms and onto its own.
There is a hint here toward the end that explains why Google continues to build so many data centers, and just might be building the latest and greatest Internet backbone… saves itself a ton in costs if it moves its web traffic off of the networks owned by phone and cable firms and onto its own.
Now, you and me should be American about result number one, should Google build that network: Google can use those tons of savings to recuperate the building costs, over time — its just a form of deficit spending, and they are a company with a product: search. It is number two, on the other hand, that should stir perhaps a curiosity in anyone who has used a Google service: Google now owns the only proprietary network that runs the software everyone has been locked into using, only as a free segment of the Internet, for the better part of the last decade. Enter the private network segment: GoogleNet.
If Google moved all its traffic onto its own network, phone and cable firms would suddenly find the electronic equivalent of cobwebs and tumbleweeds blowing on their own networks. They would also find a gaping hole where big network usage revenue used to be and the roles could be reversed — the phone and cable firms could become customers of Google, selling access to its network.
This is now a great truth about the Internet — commercial networks would become increasingly unnecessary as they provide less sense of service, offering little more than bandwidth. Google means access to information services, content, cache, etc.
How much would you pay to be on? How much if you needed it to run your business?
As Google, you can now isolate your users and charge on any basis you like. You can create any deriving technology you like — you’re also the market leader in brand awareness and advertising. You can charge to peer with this network or just to make use of it temporarily. Also, you have isolated all your existing products and services onto this network. You can ensure security. You can ensure integrity. You can ensure availability. You can now choose how you plan to lease access to even your individual services finitely and with a greater sense of control and awareness.
Google may not want to be a phone company per se, Mr. Surtees says, but the old definition of what a phone company is no longer applies. Just as Google redefined search and advertising, so too is the company changing the definition of telecommunications. “Telecom is meshed and integral to what Google does and is becoming moreso,” he says. Mr. Enderle says Google won’t have to stretch its core business strategy — offering ad-based services for free to consumers - very far to offer telecommunications services. In fact, it’s exactly the business model the company is experimenting with in mobile phones.
Progressively, more Internet-based activities will rely on Google Services or results from some Google-based solution, as are so many already, irregardless of the network path taken to make use of them. This is why, in the end, Google will enter this arena of Telecommunications. For Google, shortening that path, securing the end-to-end communication through some retail Google device, say, means better, more reliable service, and a significant incentive to make that service come at price.
