Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Google Inc (GOOG): How Austin Just Received a Dose of Fiber

Google Inc (NASDAQ:GOOG)Google Inc (NASDAQ:GOOG) has recently expanded its fiber-network footprint to Austin, Texas. Google’s fiber role out to its second city has definitely gotten attention from other ISPs. Google Inc (NASDAQ:GOOG) offers up to seven years of free Internet to residents, who can then upgrade for a cost of $70, add in cable and it comes to $120.

Just after Google fiber was announced, Dallas-based AT&T Inc. (NYSE:T) announced a roll out of its own — Gigabit Internet. It seems like competition is heating up in the ISP space.

The pressure is on

Google Inc (NASDAQ:GOOG)’s push into the ISP business has worried the large dominant companies that provide Internet to large cities. Time Warner Inc (NYSE:TWX) is the largest ISP in the Kansas City, MO area and has the most to lose with Google moving into the neighborhood. Time Warner even offered $50 to people in Kansas City with information on the new Google-fiber roll out. Time Warner Inc (NYSE:TWX) certainly does not like seeing its large capital investments turn virtually worthless overnight, as Google Inc (NASDAQ:GOOG) promises to offer a better service at a better price.

Broadband has traditionally been one of the most lucrative and sticky businesses for consumers. Think about how many activities you do every day that require Internet. As more and more of us start relying on the cloud for storage, we will become more and more reliant on the companies that provide us a path to get there, the ISP. Google is putting pressure on those companies to provide better service at a better price.

The pressure’s on

Last year, Time Warner brought in $9.5 billion on its subscription division, nearly one third of its $28.9 billion in total revenue.  Google Inc (NASDAQ:GOOG) Fiber is forcing these large companies to expand their broadband capacity and keep prices inline with today’s standards. This will put pressure on operating margins as capital expenditures will increase with revenue staying constant. The biggest players in this industry have the most to lose here; companies like Frontier Communications Corp (NASDAQ:FTR) in rural America won’t have to worry about a fiber line being dropped in their back yards anytime soon.

Time Warner’s saving grace will be its original content division that houses brands like HBO and Warner Brothers. As Google presses on with Google Fiber, we could see broadband margins erode as the company relies more on its creative content as its profit center and capital expenses rise. Google fiber is in its infancy now, but it could become a very real threat to the moat that Time Warner’s ISP division has built.

Google Inc (NASDAQ:GOOG) has more than $48 billion sitting idle on its balance sheet, but is that any reason to build out an infrastructure like this? Google could just use this money to purchase Charter Communications, Inc. (NASDAQ:CHTR) outright and upgrade its established network.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.