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Alphabet, the parent company of Google, is signaling a strategy shift for one of its most ambitious and costly efforts: bringing blazing-fast web connections to homes across America.
The company said on Tuesday that it was curbing the expansion of its high-speed fiber optic internet network and reducing staff in the unit responsible for the work. Alphabet did not provide an exact number for the jobs that will be cut.
Craig Barratt, chief executive of Access, the Alphabet division containing Google Fiber, also said he planned to step down because the company was shifting to new technologies and methods of deploying high-speed internet. No replacement was announced. Mr. Barratt, an Alphabet senior vice president, said he would remain an adviser to the company.
When Google introduced Fiber in 2010, it was heralded as a sign of the company’s ambitions to compete against cable and telecommunications operators who have controlled the market for internet access. But after years of costly investments to dig up roads and lay fiber optic cable, Google started considering alternatives, including wireless and fiber partnerships, that did not necessarily require the company to build a full network.
The company’s fiber optic internet and television are currently available in eight metro areas, including Atlanta, Nashville and Salt Lake City.
In June, Google Fiber announced that it was acquiring Webpass, a company that beams high-speed internet into apartment buildings using a fiber-connected antenna. This and other wireless technologies provide a quicker and less expensive way to expand access to faster web speeds.
A Google Fiber office in Kansas City, Mo., in 2014. Alphabet, Google Fiber’s parent company, said it would cut back the operations and work force of the division, which provides high-speed fiber optic internet and television in eight metropolitan areas, including Kansas City. Photo: New York Times
Google Fiber is one of the units that make up Alphabet’s “other bets” — businesses outside Google’s core web search and internet services business. When Google moved to a holding company structure and branded the parent entity Alphabet last year, it broke out the losses from the other bets to ease investors’ concerns that the profits from Google’s core businesses were being squandered on science projects that were not viable moneymakers.
The new structure — which makes Alphabet units like Access responsible for their own profits and losses — has instilled financial discipline across the company. It has also contributed to the termination of ambitious undertakings like Project Ara, Google’s attempt to build a modular smartphone, as well as the departures of executives who bristled under the new cost controls.
The company does not disclose financial results for Access. But its other-bets businesses reported revenue of $185 million in the second quarter of this year and an operating loss of $859 million. The Fiber business accounted for the bulk of $280 million in quarterly capital expenditures — money spent on things like equipment, the company said.
Alphabet has not disclosed the number of Google Fiber subscribers in cities where the service is available. In the markets where it operates, Google Fiber costs $70 a month for the fastest internet connection and an additional $60 a month for its TV service, but Google has to pay to connect homes to the network even if they do not subscribe.
Access said it would continue to operate in markets where it already offers fiber optic service or has started construction, but it planned to halt discussions with cities where it was considering expansion. On its website, Google Fiber identified eight “potential fiber” cities, including Dallas, Los Angeles and Phoenix.
Because Google runs most of its business on the internet, analysts have suggested that its entry into the costly world of fiber optic internet was an attempt to motivate existing internet providers to accelerate the introduction of faster web connections.
(NEW YORK TIMES)
