Saturday, July 18, 2015

The Google Fiber Threat to AT&T

AT&T's deliberate neglect of America's land line infrastructure was supposed to be a classic win/lose.  AT&T wins/America loses.  After buying up local phone providers across the country, AT&T then generally abandoned land lines, often reneging on their promises to upgrade to fiber optics.  Profits from their land line monopolies were then shifted into building out mobile service.  AT&T won because customers were forced to pay for lousy land line service, or shift into more expensive mobile plans.  Customers lost because… well, AT&T was screwing them.  Particularly hurt in this scam, were some of the poorest Americans in rural areas where they had little choice but to use AT&T's expensive second rate services.

Of course, this was all dependent on AT&T retaining monopoly control of land lines, and not having much competition in the mobile sector.  AT&T assumed it could kill any competition in mobile by simply merging with or buying up any competing companies.  Unfortunately, AT&T is so universally hated, for screwing their customers, that even corrupt politicians couldn't stomach letting it merge with T-Mobile.  So it faces serious competition in the mobile sector from T-Mobile as well as Verizon and Sprint.  That competition isn't going to go away any time soon.

On the land line front, AT&T simply assumed no one would bother to compete.  After all, AT&T kept telling everyone it didn't make any economic sense to invest in fiber land lines.  Well, bad news.  AT&T is now facing serious competition in land lines from Google fiber.  Google just announced they are going to start wiring public housing:


Providing free and fast internet service to poor people is a really nice thing to do.  Of course, Google has some good business reasons to do it, not the least of which is that it makes politicians think Google is invested in making America better, not simply ripping it off like AT&T.  But there is another reason Google is doing it.

Providing fast/free/cheap internet is really easy.  For years AT&T has been trying to tell everyone about how hard it is to provide internet service, how data hogs ruin everything, and how everyone should be ready to pay more.  It's a lie.  Internet technology is following Moore's law.  Every year it gets faster and cheaper to provide.  Local governments can provide it at almost no cost, third world nations can do it for very little money, and Google can do it easily as an afterthought.

This problem has already been brewing for years because Americans pay more for worse service than many poor people in third world countries do.  Meanwhile, other countries like South Korea provide amazing service for very little.  And some European countries provide great service for free.  AT&T has really been holding back America from getting fast cheap internet.  If poor people can get free/cheap/fast internet service, why do middle class and rich Americans have to overpay for slow internet?  The answer is they won't put up for it for much longer.  Think of it as trickle up economics.

Google Fiber is increasingly going to be a huge problem for AT&T.  It screws up their plans to abandon land lines, and it screws up their plans to overcharge for mobile.  How is AT&T going to continue to explain why it is overcharging for slow speed internet service, when, thanks to Google, people in public housing are getting faster service for free?  How is AT&T going to keep up the myth about data hogs and how fiber land lines can't be profitable.  

Mobile service is great.  But land lines are still very important to customers and to America's infrastructure.  Businesses prosper with fast fiber access, and poor Americans also benefit from the educational opportunities fast internet provides.  This stuff is simply too important to America's future to be ignored.

There's still a little time for AT&T to try to turn the ship around.  They really need to think seriously about treating customers, even poor customers, better by providing great service at reasonable prices.  If they don't, there are others that will do it for them.  That would be another classic win/lose.  American wins/AT&T loses.


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