Are Google's telecoms aspirations growing?

Stuart Corner
Saturday, 22 September 2007 03:29

Opinion and Analysis

That may not be the case for submarine cable capacity. In the late 90s there was a huge boom in the industry with massive networks installed but under-utilised. This was followed by the inevitable bust which saw billions of investment lost and the installed cables sold for a song, to Chinese and Indian companies. Now its boom time again: these networks are being expanded and new ones built. For the time being at least, it's a sellers market.

This is very clear in Australia where tier 2 carrier Pipe Networks has grand ambitions to get into the business and is very close to making its final commitment to do so. In a shareholder presentation last week CEO, Bevan Slattery. said that Australia-US cable capacity was 20 times more expensive than Japan-US because existing systems were currently owned by members of the 'Gang-of-Four' major carriers and there had been little movement in unit pricing of bandwidth to Australia "due to limited competition existing providers see little/no incentive to reduce pricing." He said that, if Pipe were to proceed he expected its cable system, to Guam, to be profitable within a year.

If Google believes it can get a sustainable cost advantage by investing in a network, it may well do so. But there are a number of other new systems planned already. Technology advances rapidly. It seems more than likely that Google will be best able to meet its needs by relying on a healthy market with strong competition and investing its money in businesses that are centred around content and services and in which it can leverage its intellectual property and its massive access to end users, not raw connectivity.