Alphabet Shrinking Google Fiber
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Google Fiber is pulling back on its broadband rollout as pressure grows to cut costs
Another bump in the road for Alphabet.
For the past year, Ruth Porat, the CFO of Google and its parent Alphabet, has told Wall Street that Google Fiber is her most expensive unit outside of the core business — and is well worth the costs.
Her bosses may be telling Fiber employees the opposite.
According to a report in The Information, Alphabet chiefs Larry Page and Sergey Brin recently instructed Fiber to severely trim staff and expenses, frustrated with mounting costs of delivering high-speed internet by digging up dirt.
Creating broadband networks via traditional pipes is enormously expensive. And Fiber still hasn’t proven that it has figured out a better way to do it. The Information story comes on the heels of reports that Fiber has put plans to build broadband networks on hold in two cities as it ponders ways to roll out experimental wireless tech.
A rep for Fiber declined to comment.
Fiber, like the “Other Bets” businesses outside of Google, is facing ongoing scrutiny about its operations. Here are the key parts of The Information’s report.
- The unit initially shot for five million broadband subscribers in its first years, but has fallen short of that.
- Last month, Page told Craig Barratt, the CEO of Fiber (or Access, as it’s known), to halve his staff down to 500.
- Page also told Barratt he wanted to cut the cost of delivering internet to homes down by a tenth. Industry experts had told me that wireless plans, like the one Fiber is pursuing, could be about a fifth as cheap as fiber networks. (That said, Page is renowned for his near-impossible demands.)
- Porat, who has developed a reputation as a cost cutter, interceded on Fiber’s behalf, arguing to Page that Fiber’s business model is defensible.
- Barratt considered leaving earlier in the year, reportedly irked by the changes at Alphabet. If he did, he would not be the first “Other Bets” exec to do so.
We reported earlier that Fiber’s current expansion model costs at least $1 billion per market.
While Fiber has hit pause in two markets, Portland and San Jose, it is still moving forward with broadband and cable connections in others. Earlier this week, it announced that service was active in Salt Lake City, its seventh metro area.
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