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Can Google Fiber crack cable's stronghold in KC?Mar 20, 2012 (The Kansas City Star - McClatchy-Tribune Information Services via COMTEX) -- War is afoot. (Spoiler: Consumers probably win.) Google Inc. and its Google Fiber subsidiary increasingly appear ready to launch a campaign to occupy turf in the Kansas City pay TV market. The search titan enters the battle well-armed with cash and the cachet of mostly admired company. Time Warner Cable, by comparison, is old-guard, entrenched. It's hardly universally loved by the local populace. Yet Time Warner has done for decades what Google has yet to do at all: pump hundreds of TV channels around the clock to hundreds of thousands of homes. So far, Google says, it has deployed upward of 100 people to begin building its network -- anchored by a promise of Internet speeds 100 times faster than the national broadband average. Time Warner -- the largest player in the market holding a third of TV subscribers -- has close to 900 troops stationed here already. That includes 250 in its technical and engineering ranks, and another 250 at local call centers and other customer-care strongholds. It's got 200 local contractors for reinforcements in construction and such. Maybe that explains the bring-it-on bravado that Time Warner and others adopt at the news of a Google offensive. "As far as Google, it's all speculation at this point," said Time Warner spokeswoman Marci Pelzer. "This is a product that doesn't exist on a network that doesn't exist. "In one way, Google is no different than AT&T, Dish or DirecTV, or any of our other competitors," she said. "We hope the community and our potential customers will see the investment we've already made." Curse the cable guys all you want -- for a signal that disappears just when the big game is tipping off, for not letting you buy only the channels you really watch -- but recognize that they've done for decades what Google has yet to do at all. They're the ones with a network in place, with a generation of experience, with a workforce that knows how to find your house and -- admit it -- many more times than not give TV, telephone and Internet services that work just fine. Google is mute about what sort of package it might sell to the market or how it will feed your home's quickly multiplying gadgets with ultrafast Internet over fiber optic wires stretched directly to homes. Meantime, the old guard insists it knows what consumers want, and it's delivering it today. There's just no evidence, competitors contend, that many consumers hunger for the super-sized bandwidth that would make Google's service unique. "When we see the demand out there," the Time Warner spokeswoman said, "we'll offer it." Time Warner and others challenge the notion that some comfy monopoly is about to get demolished. In fact, figures for the Kansas City market show that though Time Warner remains the dominant player, it has been challenged in recent years by AT&T's U-verse TV-over-the-Internet technology. AT&T followed other "overbuilders," sellers of cable-style TV in neighborhoods where some other service already exists, who've been challenging Time Warner in Kansas City and Comcast Corp. in several suburbs for the market's video dollars. What's more, more than a third of households that pay for TV in Kansas City don't write checks to a cable company. They use satellite services DirecTV and Dish. "The cable companies are going to want to upgrade what they have and what they plan to offer," said Bruce Leichtman, a media and cable industry analyst. "But they've seen overbuilders before. In some ways, this isn't new." Still, the Internet big boy is sure to cut into the bottom lines of others in the market. Google's presence just as surely figures to ratchet up competition. It might slow the climb in subscription prices. More likely, analysts said, it will crank up pressure to offer more bandwidth and gee-whiz technology to compete for the most lucrative subscribers. Google is nearly certain to win some business simply because it's not the cable company that customers have now -- the one that might have left them waiting an entire afternoon for installation. It's certain to have the geek in the family drooling at its 1 gigabit-per-second Internet services. That's 10 times faster than the priciest service available to homes today, 100 times quicker than the national download average, and 1,000 times speedier than the norm for uploads. What's more, Google has sent several, albeit cryptic, signals that it will bundle Internet feeds with a TV package. Wait, asks Time Warner: Does Google have nearly 900 people here to make the installations and keep the system working? "The level of reliability we offer can only come from a well-established infrastructure and a large staff of local experts," Time Warner said in an email. Remember, notes Comcast, we've got 200 on the job in Kansas City. "We compete all the time for our customers," Comcast spokeswoman Mary Beth Schubert said. If there's a downside to Google coming to town, it's the likely lull in cable companies expanding their territories and consequently bumping up against new competition -- at least within Wyandotte County and Kansas City, Mo. That's where Google has said it will be selling hook-ups. The prospect of going into an area where the competition is ready to intensify simply won't look very appealing. "Overbuilding in general has never proved that successful," said Judah Rifkin, a media analyst for ISI Group. Look at the layout of pay TV service in the market. Across most neighborhoods, and in the two Kansas Citys, Time Warner has almost universal coverage. In Independence, Olathe, Blue Springs, Lee's Summit, Raytown and a few other pockets of suburbia, Comcast is the main cable option. The two do not overlap. In many parts of the market, consumers can buy from one of those cable companies, erect a satellite dish or use over-the-air signals. Then there are the "overbuilders," companies that know they will have to compete with those cable companies directly. SureWest Communications was the first sizable player to enter the market in 2000. Although it planted a small footprint in Kansas City's Brookside and Red Bridge neighborhood, its expansion in Kansas City stopped shortly after it started. Instead, it has focused on growth in Johnson County. It overlaps Time Warner in some neighborhoods, Comcast in others. More recently, AT&T brought U-verse to the market and now passes by about 45 percent of the homes in the market. That puts it in competition with both Time Warner and Comcast. Virtually all of its customers represent subscriptions that used to go to the cable guys. In the portions of the market where Google has set its sights, overbuilding has stalled. SureWest is growing only in Johnson County, where Google has yet to announce any plans. AT&T says it will continue expansion in the market, but for competitive reasons would not say whether that growth will come in either Kansas City, where it would have to compete with both Time Warner and, soon, Google. All the landline TV sellers note that they've offered increasingly faster Internet, including service up to 10 times faster than the national broadband average. Yet, most customers sign up for less robust connections. "There's no consumer demand for that kind of bandwidth" -- Google's promise of 1 gigabit-per-second --"today," said Ken Johnson, a SureWest vice president and chief technology officer. Cable operators say it's hard to judge competition from Google when the newcomer hasn't said what it will sell. Google has said it will make its fees for incredible broadband comparable to what people pay for ordinary connections today. But by the time that service is bundled with TV, the costs will pile up. Like its new competitors, Google will have to figure in the costs of construction, of customer service -- both categories brand new to the company -- and of the expense of video programming. That last category is the one analysts say has been driving regular increases in cable bills. "The cable companies bear the brunt of an industry dynamic that they're only half responsible for," said Rifkin, the media analyst. "But they can't control all the costs." Contracts with program producers typically bar newcomers from negotiating better deals than those already in place. So Google probably will pay at least as much to carry Fox News, ESPN or Showtime as Time Warner does. Google would enter the market with some built-in advantages. It's building from scratch, so it won't have to engineer around an aging infrastructure. Add to that the low regard consumers have for the cable industry. Google, meantime, sits perched atop the rankings in its own mostly loved Internet search industry. "Google is a great company and they have a lot of money," said Johnson, the SureWest executive. "Over the long run, they're going to figure it out and be a formidable competitor. We have to see how it unfolds." To reach Scott Canon, call 816-234-4754 or send email to [email protected]. ___ (c)2012 The Kansas City Star (Kansas City, Mo.) Visit The Kansas City Star (Kansas City, Mo.) at www.kansascity.com Distributed by MCT Information Services |