This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Google Has Kittens

Stocks in this article: GOOG T VZ CMCSA TWC

NEW YORK ( TheStreet) -- A decade ago, in my book Moore's Lore,, I wrote about how Enron 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, Google (GOOG) 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 Verizon (VZ) and AT&T (T), and to a lesser extent cable operators like Comcast (CMCSA) and Time Warner Cable (TWC), 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 Google Fiber, 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.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs