Google Fiber Is Rethinking Its Strategy

In the nearly four years since Google brought its gigabit internet service, Google Fiber, to Kansas City, it`s expanded to just five other metro areas. The internet and television service is now part of Alphabet`s "other bets" segment, which overall had $185 million in revenue in Q2 and an operating loss of $859 million.

Despite hundreds of millions invested in the acquisition and buildout of its fiber network, it`s still slow going for Fiber. The task of surveying neighborhoods to determine their viability and then physically digging up roads and providing fiber to the home is very time- and capital-intensive. That`s why Fiber is rethinking its strategy, and it recently made an acquisition to potentially decrease the time and capital expenditures required to expand its service.

The company in June bought WebPass, which is a small, high-speed internet service provider. What makes WebPass interesting is its wireless technology, which allows it to beam internet into apartment buildings, for example, using an antenna connected to a fiber line. That technology reduces the amount of fiber it needs to lay before serving a community, and it`s something Google Fiber itself has been working on since the beginning of the year.

This Stuff Gets Expensive

Before diving into how WebPass can help Google Fiber grow, let`s take a look at its current expenses and the issues it could have scaling.

Alphabet doesn`t break out Fiber`s financials on its own, instead lumping them in with the rest of the other bets segment. Other bets` capital expenditures totaled $280 million last quarter, up from $232 million the year before. Last year, Alphabet spent $869 million on other bets` capital expenditures. During Alphabet`s second-quarter earnings call, CFO Ruth Porat said the other bets` capex "primarily reflect[s] ongoing investment in our Fiber business."

It`s no surprise Fiber is expensive. Both Verizon (NYSE: VZ)...

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