Google Fiber hits speed bumps as Alphabet looks to cut costs

Alphabet is slashing the budget for its high-speed fiber optic internet service and pushing for a cheaper alternative: wireless. In an effort to roll out Google Fiber to a lot of cities very quickly, the company spent too much money and is now being reeled back in by parent Alphabet, according to The Information.

The report says that Google had expected to land 5 million subscribers over the course of five years, but the company’s actual progress was much slower. At the end of 2014 Google Fiber only had 200,000 subscribers. Its TV service has also suffered from sluggish growthLast month, CEO Larry Page reportedly asked Google Fiber head Craig Barratt to cut his staff in half, to 500 people, and reduce costs of delivering fiber to customers’ homes to one-tenth of their current rate.  

When it launched in 2010, Google Fiber was supposed to offer consumers a less expensive alternative to high-speed internet suppliers like Verizon. But laying fiber optic lines has proved to be a costlier venture than expected. In the first quarter of 2016, Alphabet spent nearly $280 million on capital expenditures primarily related to Fiber. During the same period, operating losses from Fiber and Google’s “other bets” were $802 million, with revenues of $166 million.

For Access, as the Google Fiber unit is now known, turning to wireless could reduce costs and speed up the rate at which the company is able to offer the $70-per-month service to more people. According to the Wall Street Journal, the company is hoping to use wireless in about a dozen new metro areas, including Los Angeles, Chicago, and Dallas, and as a result has suspended projects in San Jose, Calif., and Portland, Ore.

Alphabet is also actively exploring how it can solve the cost of laying cable through using less expensive technology and existing infrastructure. Last month Google acquired Webpass, a company that uses fiber optic antennas to facilitate high-speed internet.    RR