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Google Fiber: The Current Naysayers Will Love It in 3 Years

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GOOGLE FIBER
DailyFeed
Folks, there's a firm new bearish argument for the Google (GOOG), and that is the pending rollout of Google Fiber.

Now I could point out that every "big bear attack" on Google spending too much money has been proven wrong -- YouTube, Android, Motorola, making smartphones, Gmail, and heck, for that matter, starting the company to go after Internet Search when the industry leaders had essentially quit innovating and investing in search.

But let me just focus on the current bear arguments against Google Fiber and attack them head-on:

1. Google Fiber is going to cost too much money.
2. There is no money/margin in offering high speed connectivity.
3. There is too much competition.
4. It doesn't mesh with Google's push to mobility.

Ok, I've seen all these and find most of them laughable. But here are my responses to each.

1. Google Fiber will cost a lot of money, but Google can easily fund it, and has a very smart deployment strategy. Google, in my view, is attacking this market because prices for fiber deployments have declined massively over the last decade.

2. Now this one really is laughable. Anyone paying a cable, internet or mobile bill can attest that there is plenty of money being paid to the current vendors. Also, any rational view of the the financials of Verizon (VZ), Comcast (CMCSA), AT&T (T) etc... can see that the companies are cash generating machines. Moreover, Google has more ways to monetize the asset compared to many other competitors in this area.

3. I totally disagree with the competition argument. I think there is now too little competition vs. the far too many competitors during the CLEC era in the late 1990s and early 2000s. This is part and parcel of why deploying Google Fiber is brilliant. In fact, this is exactly what Microsoft (MSFT) should have done when they were thinking about it a few years ago and buying into the cable companies.

Thus, we now have an environment where consumers are "hungry" for a viable competitor and will greedily seek out Google Fiber services where and when available.

4. Anyone saying that Google Fiber doesn't fit into the company's vision and long-term strategy simply doesn't know Google. This fits nearly perfectly into what Google is and what Google wants to become. The more ways the company has to create viable and desirable business uses of the company's growing list of valuable services, the better. Google would love nothing more than for people to be using Google software with a Google device, utilizing Google's vast array of services over a WiFi connection with the data passing into Google's massive data storage centers -- all of which were riding over/through and around the Google Fiber network.

Simply put, game set and match for Google Fiber.

Twitter: @UdallTechStrat

The TechStrat Report by Sean Udall. Sean provides in-depth analysis, strategies and trades across the technology sector. Take a FREE 14 day trial.
POSITION:  Position in GOOG, MSFT.

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