ISP Stocks: Will Google Fiber Unseat Big Telecom?

James Dennin, Kapitall: Google Fiber will be 100X faster than the internet provided by your typical ISP. Should ISP stocks be worried?

Comcast (CMCSA) recently announced it plans to pursue a merger with Time Warner Cable (TWC). Assuming it gets approved by the Federal Trade Commission (FTC), it will be the largest broadband provider in the country by far and cover 19 of the 20 largest metropolitan areas. 

However, they face a powerful competitor in Google (GOOG), who recently annouced they will roll out their Google Fiber service to 34 cities this year. The tech giant's new internet service provider (ISP) is the fastest in the world, running about 100 times the speed of typical broadband. 

When Google Fiber moved to Austin,  AT&T (T) was forced to roll out its new high-speed service ahead of schedule to keep customers from making the switch. 

Google faces a problem in large installation costs. Many of the 34 cities that have been identified as possible expansion targets already have some sort of fiber-optic infrastructure in place. Does Google really want to become an ISP, or does it just want to force other companies to speed up their service? 

This strategy makes sense for Google, because if the internet is faster Google can show you more pages — hence advertisements, which is still how the company makes most of its money. It also rolled back a planned expansion in Kansas City after AT&T paid Google to use AT&T's utility poles rather than build their own.

This suggests that Google is more than willing to work with the traditional telecom industry provided they speed things up. However if the Comcast-Time Warner merger is approved, the market will become much less competitive. This could make an option like Google, which has high up-front costs but much lower maintenance costs, much more attractive to consumers. 

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