NEW YORK (
) -- A decade ago, in my book
, I wrote about how
was done in by "kittens."
I was actually writing about a technology called Wide Division Multiplexing (WDM), which lets you multiply the data-carrying capacity of a fiber cable many times by using light in a variety of colors, not just white on-and-off pulses.
Back in the late 20th century, Enron tried to monopolize Internet data traffic by running it through a market, the way it was running natural gas through a market and costing Californians' millions. The effort failed, because WDM cut prices on data transmission so dramatically. The power of abundance undercut any effort to create scarcity.
It was as if Enron had two cats, I wrote, capitalized the value of all the kittens they might produce, then learned that other people could also breed cats. Cats are what economists call widgets, since they have endless utility and no discernible economic value. Something like data bits.
Around the time I published my book,
(GOOG - Get Report)
began buying up "dark fiber." That is, it bought fiber lines that were not turned on, due to overcapacity, at bargain prices.
Ever since, the heart of its business model has been to encourage use of Internet resources, as its own infrastructure had the industry's lowest costs. The more the Internet is used, the more vital its cost advantages become. Hence the headline -- take all the kittens you want, Google will make more.
In contrast to Google, companies like
, and to a lesser extent cable operators like
Time Warner Cable
, see infrastructure as a cost. Wires are expensive because it takes money to roll trucks into neighborhoods and string them one-by-one. They want to practice an economics of scarcity.
So while Google can run 1 gigabit/second downloads, and 100 Mbps uploads, in Kansas City, and soon Austin and Provo, through its
, Verizon can offer only one-fourth the speed, at four times the cost, on its
FiOS Quantum system.
Few places have Google Fiber, so Verizon, AT&T and the cable companies figure they have the power Enron sought. They're the local gatekeepers to your Internet, and you pay what they say. By expanding Google Fiber, Google gives this strategy a sell-by date.