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The Google Factor in the Obama Broadband Speech

Every time Google becomes involved in telecommunications it gets international media coverage; and every single time the same question is raised—why does Google become involved in telecoms infrastructure, plus the underlying issue of it becoming a telecoms operator.

This time the question is—why does Google want to become involved in mobile telecoms and how is it going to compete with the other operators?

My response has always been that Google will not become a telecoms operator in the same sense as companies like AT&T, Verizon, Sprint or BT, or Telstra for that matter. Its focus remains steadily on applications and traffic to the Google service, with handsome rewards in a variety of advertising and marketing revenues and other business opportunities. But what Google desperately needs is more and better broadband infrastructure and more open telecoms business models in order to grow its own business. It is also important to remember that Google has already a massive global ICT infrastructure of its own that it can use in combination with any form of other public or private broadband networks.

However, with a very conservative telecoms industry being pushed into a commodity pipe operation business there is less and less incentive for the traditional telcos to build better networks. They have largely missed their chance of becoming much more significantly involved in value-added business. The majority of these telcos operate in a monopoly/duopoly market where they can dominate and dictate their environment. In the short term it is financially far more advantageous for them to stick to the old infrastructure that they can dominate, rather than move into a more open environment where they will face more and more competition.

Political ineptitude around the world also resulted in a lack of vision from governments about their economic and social future. Stuck in the past they are all reluctant to move forward in a world that is becoming increasingly global and complex. There is still reluctance to see national telecoms infrastructure as an item of national importance for their economy which has become more and more digital based and the major telcos, especially in the USA, are incredibly successful at playing the regulatory game to their advantage, through lobbying and in other ways—all aimed at maintaining the status quo for as long as possible.

However President Obama is now taking a leadership role on this issue, and it will be interesting to see what effect this will have on the incumbent telcos and their monopoly games. But it will also be interesting to see if political leaders in other countries are now more interested in looking at broadband from an economic and social perspective.

In 2009 I presented my vision for a national broadband network and its economic and social benefits to the Obama Team at the FCC and in the White House. There was still the ‘Yes we can’ approach at that point in time, and I was very optimistic about progress on this issue in the USA—only to be disappointed because the initial momentum was lost and it all became ‘too hard’.

So what has changed for the President, six years later, for him to suddenly be willing to pick up the issue and run with it in a very public way in his speech: Why broadband is important?

I would say that, indirectly, Google has a lot to do with this. Going back to my opening paragraph, Google doesn’t want to become a telco but it has the financial power to create changes in the market. High-speed broadband is essential for its business and it will do everything in its power to stimulate the development of the right infrastructure to support that business. For Google, customers having access to high-speed broadband is essential for its future, so we have seen it involve itself in submarine networks, city-based WiFi networks, fibre optic networks, and soon mobile networks.

Google becoming involved made several things happen:

  • It shows the (international) telecoms infrastructure industry business models that are beneficial for them, stimulating them to make further investments in this area.
  • It shows that end-user customers are interested in affordable high-speed broadband networks, and that this creates further opportunities for local telcos, encouraging them to build more of such networks.
  • It shows customers what they can do with high-speed broadband and creates demand for such services, which leads to a customer push for better infrastructure, and this becomes a political opportunity for those politicians who want to run with that issue.
  • Through its applications Google assists in industry and business transformations in all types of sectors—business, health, education, etc—and as such creates a better understanding by those sectors of what their digital future looks like—where digital infrastructure will become more and more important.
  • It creates a level of competition in the market. While on the larger scale of the trillion dollar telecoms market Google’s investments are relatively small in size they sting the incumbent operators, and they are putting them on the back foot and making it more difficult for them not to roll out better and more affordable high-speed broadband networks.
  • Customer awareness regarding the importance of broadband also started to create broader support for Net Neutrality—a rather unique issue to the US telecoms market—that led to political support from the President and others and will also lead to a weakening of the stranglehold the incumbent telcos have on the American market.

All of this has happened over the last five years in America and, given his broadband speech, the president must now feel more confident to push for better broadband, since there is now a groundswell for better broadband among a significant enough proportion of the American people, making it more politically doable than when we discussed these issues with the Obama Team back in 2009.

Obviously Obama’s push for more and better broadband infrastructure will also assist Google and other providers operating in the digital economy.

There is still a lot of work to be done before major changes will take place, but Obama’s support is a significant positive move in that process. It is good to see that this also has the support of my friend Tom Wheeler, the Chairman of the FCC, who has also been very vocal on these issues and it is his organisation who is in charge of the execution.

Back again to Google, it will be very interesting to see what their business model will be for the mobile industry. The company will most certainly not run this as a traditional mobile operation. It will use its applications, advertising, WiFi and fibre experiences and, most importantly, its ICT assets to create a whole new model.

One thing is certain—it will again be a disruptive development that will have an effect on how the telco and the mobile telecoms industry in particular will develop over the coming 5 to 10 years.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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