Gigabit Internet service providers challenge traditional ISPs

Last fall, the New America Foundation's Open Technology Institute published a study examining high-speed Internet prices around the world. Compared to its international neighbors, the bulk of the United States pays higher prices for slower services than the majority of the planet.

Internet access itself is only part of that cost. Comcast and AT&T, for example, charge monthly fees for modems, routers and additional wiring (along with cable boxes, remotes and recording equipment for cable customers), which almost doubles the advertised monthly cost. Internet service providers can do that because, apart from a handful of spots in America, the competition is severely limited, if not nonexistent.

That could change, experts say - and Google's high-speed, low cost, gigabit Internet service deserves the credit.

Google Fiber By the Numbers: Better, Faster, Cheaper

Google Fiber costs $70 per month, or $120 per month for an Internet/TV bundle, with installation fees up to $30 installation. Google says it's 100 times faster than the average cable Internet connection. Compared to what other services list on their websites, Google Fiber is 22 times faster than AT&T's best offering, 10 times faster than Comcast's and 3.3 times faster than Verizon's top choice - and it costs 24 times less than AT&T, 15 times less than Comcast and 10 times less than Verizon.

Google Fiber is even cheaper than ISPs' slowest connection options. Comcast's slowest plan, at 6 Mbps, costs $8.33 per megabit, while AT&T's comparable package is $7.67 per megabit! Google's gigabit plan is 167 times faster but cost only $.07 per megabit.

[ Analysis: Google to Big ISPs: Fiber is Good for You ]

What's more, Comcast Executive Vice President David L. Cohen has argued that Americans don't need high speed Internet because they can't handle it. (Time Warner agrees.) According to Cohen, even if Comcast could deliver gigabit service like Google Fiber's 1 Gbps), most customers couldn't access those speeds because of insufficient equipment. (He neglected to mention that Google provides its high-speed compatible equipment to all customers at no additional costs, along with a free Nexus 7 tablet, unlike the additional monthly fees Comcast charges for its equipment.)

Forrester communications and networking analyst Dan Bieler says Google Fiber increases Google's leverage in negotiations with carriers regarding connectivity provisioning. Clearly, the carriers and cable providers want to retain a major role in the connectivity provisioning. If Google builds its own networks to the home and business users, carriers risk losing customers to Google.

"Google Fiber has forced the competition to take a closer look at the need to roll out 'real' broadband at a reasonable price," Bieler says. This will happen in areas with "high purchasing power and a high business density, but it's less likely in rural areas, where fiber investments aren't always as easy to justify. "Competition for fiber will increase," Bieler says, "but not everywhere."

Ian Keene, research analyst and vice president at Gartner, agrees: "High bandwidths of 100 Mbps and above will only be available in the large cities for the foreseeable future."

[ Related: Cheaper Equipment to Give Fast Copper Broadband a Boost ]

Telecommunications firms and cable multiple-system operators (MSOs) are competing to get fiber closer to subscribers, Keene says. Telcos have mixed feelings about fiber into the home. Some bring fiber closer, using existing copper to provide broadband, since the emerging copper standard can deliver 500 Mbps services. Others swallowing the capital expenses needed to install new cables and equipment in the home. Finally, along with competition, government broadband initiatives are driving improved services, he says

Gigabit Internet Arriving, Slowly But Surely

Google Fiber - installed throughout Kansas City, Kan. and Kansas City, Mo., with Austin, Texas and Provo, Utah next on the list - isn't the only gigabit Internet provider in the United States. The ranks vary, too, from ISPs to electric companies to municipal governments, all offering services for a fraction of the cost of cable. This suggests that competition is coming from all corners.

Chattanooga, Tenn., can thank its electric company, EPB, for its 9-county service area. EPB needed its systems to monitor and communicate with new digital equipment - but the nation's biggest phone and cable companies said they couldn't do it for another decade or more. So EPB became the sole ISP for Chattanooga, also referred to as Gig City, and now manages 8,000 miles of fiber for 56,000 commercial and residential Internet customers. The service costs about $70 a month (compared to $300 a month before EPB stepped in).

[ Related: Apple, Microsoft Team With White House to Close Broadband, Tech Gap in Schools ]

In addition, the Vermont Telephone Co. has brought gigabit Internet to Burlington, the state's largest city, and Springfield, the town where it's headquartered. CTO Justin M. Robinson says "it's certainly not without concern" being among a handful of companies providing gigabit Internet, "but we like to think what we are doing on a small scale here in Vermont could be replicated in a thousand different places across the country or, perhaps, even expanded to become a nationwide goal."

Vermont Telephone's gigabit Internet rollout is part of a larger project, funded in part by the federal Broadband Initiatives Program, that's also upgrading the state's voice telephone switch, adding an IPTV video head-end and deploying a 4G/LTE wireless network to most of the state, Robinson says.

According to Robinson, the goal is to build fiber to all 17,500 Vermont Telephone customers. Approximately 3,500 homes and businesses have been converted so far, with broadband penetration for those converted exceeding 80%. The IPTV video service, built using the former Microsoft Media Room platform, which Ericsson recently acquired, is in a trial phase.

[ Also: China to Bring Gigabit Internet Speeds to Key Cities By 2020 ]

One of the most compelling reasons for the gigabit Internet rollout, Robinson says, was the realization that significantly higher throughput has only a minor effect on total usage but still improves customers' experience.

"They can access data more quickly and perform multiple tasks at once," Robinson says. "My wife can watch a movie on Netflix and browse Reddit while, at the same time, I remotely connect to the office ... listen to streaming music from Pandora and download the latest [game] from Steam in the background.

"At GigE speeds," Robinson continues, "the worry about bandwidth disappears. The bandwidth is always available and waiting for the customer, instead of the customer waiting for the bandwidth."

Other areas with gigabit Internet include Las Vegas and Omaha, Neb. ( CenturyLink); Bristol, Va. and Bristol, Tenn. ( BTES); Lafayette, La. LUS Fiber; Chicago's South Side ( Gigabit Squared) and the Santa Monica, Calif. business district.

J.D. Sartain is a freelance journalist from Boston. You can reach her her via email or on Twitter @JDSartain. Follow everything from on Twitter @CIOonline, Facebook, Google + and LinkedIn.

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This story, "Gigabit Internet service providers challenge traditional ISPs" was originally published by CIO.

Copyright © 2014 IDG Communications, Inc.

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