Last week, Google parent company Alphabet made it official: It’s suspending the expansion of its super-high-speed Google Fiber internet into Jacksonville and 10 other cities.
Angela Mattia, a business professor at Jacksonville University, specializes in the technology and telecommunications industries.
She said several factors likely contributed to Google’s decision:
- A recent regulatory ruling made the internet provider business potentially less profitable
- Alphabet failed to hit its user targets for the service in cities where it already exists
- Laying fiber optic cable comes with a staggering cost
- Intense competition exists in the telecommunications business from huge companies like AT&T, Comcast and Verizon
Last, but certainly not least, the development of 5G wireless internet service is making fiber optic cable seem obsolete. That promises to deliver super high speeds without the investment in the expensive cable infrastructure.
Mattia said technology companies are comfortable with diving into new businesses. It’s part of their nimble culture.
“When you are a company like Alphabet, they often throw out things to see what they, kind of, want to get into—they call it their sandbox—and then they see, kind of, what goes and what doesn’t. And they’re quick to respond, much more so than a more traditional company like AT&T or Comcast. They are much more prone to being slow and more bureaucratic.”
Google changed its name to Alphabet about a year ago, and analysts say the “bet” in Alphabet represents the company’s ability to jump quickly into experimental business opportunities. The driverless Google Car initiative is an example.
“Again, they’re very nimble, so they’re quick to see what seems to be working and what’s not, and they typically have a plan to either grow it or they’ll abandon it," she said.
The decision to scale back on Google Fiber is also a sign the tech company is maturing into a more traditional, stable company that is subject to the desires of shareholders, who want growth but also want tight controls on how the money is spent.
Mattia says Apple is also making those kinds of decisions, like putting the brakes on developing a driverless car because it saw too much competition, too high a cost and better ways to use its resources.
