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Google Fiber’s Corporate Welfare Model Is Failing

October 26, 2016

Blue and red fibre optical cablesGoogle Fiber, which has received massive subsidies from city and county governments around the nation and has bought failing taxpayer-funding Internet Service Providers (ISPs) for pennies on the dollar, this week announced that it is cutting staff.  According to Bloomberg, “Craig Barratt, head of the Access unit that includes Google Fiber, is leaving, and about 9 percent of staff is being let go, according to a person familiar with the situation. The business has about 1,500 employees, meaning there will be more than 130 job losses.”

In August, the Coalition for the New Economy reported that Google Fiber was “scaling back” its plan to provide gigabit broadband service in cities around the country. Bloomberg noted that, in a blog post the departing Barrett said eight cities, including Dallas, Los Angeles, and Phoenix, would be affected by the decision to scale back.

According to Bloomberg, “inside the company, executives harbored” big ambitions “to deliver service nationwide and upend the traditional broadband industry.” Others, however, “pushed back because of the prohibitive cost of digging up streets to lay fiber-optic cables across some of America’s busiest cities.” Jackdaw Research analyst Jan Dawson told Bloomberg, “I suspect the sheer economics of broad scale access deployments finally became too much for them …  Ultimately, most of the reasons Google got into this in the first place have either been achieved or been demonstrated to be unrealistic.”

On a recent earnings call Google Chief Financial Officer Ruth Porat admitted Google Fiber was the “most expensive unit outside of the main Google online search and advertising business.”

All of which begs the question: if one of the world’s wealthiest companies cannot afford to provide gigabit service, what makes local governments think they can?