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Google Fiber lowers costs and helps the company's core search business. Source: Google.
Competition is a good thing. Throughout our capitalistic existence, competition has led to an economy that has produced increasingly improved products with cheaper costs (inflation-adjusted). There are negatives, of course -- businesses fail and individual jobs are replaced by technology to lower input costs -- but the overall trend is one toward progress. Over the long term, more competition benefits consumers and the greater economy.
However, there are some markets that are decidedly non-competitive. When it comes to pay-TV and Internet service providers, competition is mostly an illusion, with many geographies living in an ISP monopoly. Even worse, many state governments are voting to prevent cities from establishing municipal broadband Internet (among other services) to "protect" monopolies from consumer choice.
The end result of all this is predictable: Internet and TV costs that are higher than they would be under perfect competition and a lower-quality Internet than most of the developed world. Essentially it's a de facto tax on consumers, a monthly transfer of wealth from subscriber pockets to cable providers (and investors), TV stars, and athletes. Fortunately, there is hope. Google (NASDAQ: GOOG) (NASDAQ: GOOGL) has entered the space with its Google Fiber service, and it has the potential to change our Internet.
Comcast's response shows how much competition matters
For example, on April 2 Comcast shocked observers when it announced that it will bring its Gigabit Pro to consumers in the Atlanta region. For many observers, it seemed to be in direct response to Google's Fiber announcement that it's coming to the area. And when it comes to performance ... it's not even close, Google Fiber comes with a blazing fast 1 GB/s upload and download speeds. Comcast's Gigabit Pro trounces that with 2 GB/s upload and download speeds.
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AT&T Gigapower costs $110 a month in Dallas ...
Now, it's important to note that it is expected Comcast's service will be more expensive than Fiber: Google charges $70 a month for its service; Comcast has a 505MB/s service currently in place for $400 a month. That said, once networks are built, the incremental costs are very low making competition the predominant cost-pricing mechanism -- the company told ArsTechnica that the cost will be lower than the $400 cost of its 505MB/s service.
AT&T's service shows the importance of Google Fiber
And it's not just limited to Atlanta. For example, you can get AT&T's 1 GB/s Gigapower service for $110 per month (more if you don't want the company to track your browsing history) in Dallas, but you have to pay only $70 in Austin, Texas. The most notable difference between those two cities -- aside from the oft-discussed football team -- is that Google Fiber also exists in Austin, where the service isn't in the home city of AT&T. AT&T is charging $40 more per month for Internet service than a Google Fiber city, and this is the city in which AT&T is headquartered.
... but only $70 a month in Austin, as it competes with Google Fiber. Source: AT&T.
In both AT&T's moves and Comcast's, there appears to be a concerted effort to build these high-speed networks in areas where Google Fiber exists or is looking to expand. And while I'm certain this is an attempt by the incumbents to kill Google Fiber before it becomes wildly popular, consumers are the ultimate beneficiaries, with improved services at cheaper prices. And as competition lowers costs and improves ISPs, Google's core business of search stands to benefit.
The article Google Fiber Is More Important Than You May Think originally appeared on Fool.com.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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