How Much Dark Fiber is Google Buying?

Anyone know?  I'm still struggling with how the company can be spending 2x as much in CAPEX as its closest competitor, Yahoo!, as well as with where all that money could be going (CAPEX estimates are around $1.3 billion this year). 

At the Analyst Day, CEO Schmidt referred to the company making several "big bets."  Rumor has it the purchase of dark fiber is one of them.  So the questions are:

• How much fiber is Google buying?  Enough to consume a big slug of that $1.3 billion?

• Why is Google buying it?  As insurance against traffic-based pricing, if the Net neutrality lobbying campaign fails? 

All information appreciated.  Will keep sources confidential.  Please write to share@internetoutsider.com or comment below.  Thanks in advance.

Comments

[TallTroll]

I provided some views on this in response to the earlier thread.

The short version is that if they were to attempt to provide WiFi to the urban areas of the US (even by 2000 figures), the cost would exceed $30 billion. Even attempting to cover just 10% (presumably the most profitable 10%) would cost over $3 billion, therefore.

There is also a major tech upgrade underway, codenamed "BigDaddy", which must be costing at least $100 million - not an insignificant amount. There's also an openended commitment to providing ever growing storage for Gmail accounts, and as user numbers and storage grows, that number is probably rising quite fast.

And so on, and so forth. Tech on the Google scale costs, and big because they aren't restricting themselves in the way that many of their competitors are. Amazon spend loads on what they do, but they only really do one thing (A9 doesn't really count, it's no more than a way of collecting additional user data in a different setting)

[King Troll]

All your posts are about Google. I don't like your site anymore bro. Whjat the fuck man. Write about other shit. Why do you only focus on fucking GOOGLE bro!. WHY WHY. Enough already.

[John Vanhara]

Please don't get discouraged by people writing stupid comments. I am reading this blog long time, but never wrote any comment. I really appreciate what you are doing. Good job! John

[Still Inside]

One thing you learn by being in the business world for a while is that for every right answer there are thousands and thousands of wrong answers.

If GOOG is making "several big bets" (and presumably not telling stockholders what those bets are) then they are just buying lottery tickets on behalf of millions on morons--and taking a nice vig in the meantime in the form of the management team selling $billions in stock. Why can't they bet their money on a business that they know makes a them a lot of money? You know, like an Internet search engine or something.

GOOG is not the first tech company with gigatons of cash. Anybody want to guess why the other guys haven't thought of gambling away their cash hords in just a few quarters on some fun projects? Maybe because it's immoral or something? That branding your stock as one thing while betting your company's future on something completely different amounts to fraud?

One thing you have to say about GOOG, is that they've set themselves up in an all-or-nothing world. If they hit some kind of homerun with one of these bets, then they will be big heros. If they miss, even by a little bit, then the mangement team is in deep, deep trouble (as in, deeper trouble than simply being fired).

SI

[TallTroll]

>> like an Internet search engine

That costs money, or barely breaks even at best. It's the advertising product, AdWords that brings in the pennies. The search business provides the avenue to sell advertising, but as Google are keenly aware, it could be killed off overnight

They absolutely have to diversify the variety of traffic streams to the advertising business to survive, and grow. AdSense is one way (ads on other peoples sites), news / base /groups / etc are a minor trickle, local has yet to seriously take off in terms of revenue, although it probably will. WiFi could be another good provider of traffic, if you've got the user at the point of connection, you can ensure your ads get shown. Froogle might make money one day, and so might base, but they'd need to do some deals to make it really happen.

Considering that the ad business is likely to grow by about 10 times over the next few years, I don't think they are too worried yet

[Dimitar Vesselinov]

Vint Cerf podcast
http://www.podleaders.com/vint-cerf-podcast/

[Neal Lachman]

Dark fiber is worthless unless you are going to light it.

Google is doing a good thing by buying dark fiber infrastructures. But how far will it take them? These fiber networks are not extended to homes (Fiber-To-The-Home) or offices (Fiber-To-The-Office), the end-users. That would cost almost $650 Billion for the entire USA given that there are 81 million buildings in the USA.

Google is buying capacity to build POPs and connect data centers. This will increase the speed of results, it will supply sufficient capacity for high capacity usage, and it will help Google to be able to keep on delivering quality services.

[Walter]

SI, you seem to have a great deal of uncommon common sense.
What philosophy is it that says go with the simplest explanation until it's proved wrong?
Just because Page and Brin developed a search engine concept based on what users want instead of what advertisers want doesn't vault them to omnipotence. The genius required to create the Google concept doesn't automatically carry over to managerial genius or fiduciary genius.
The Google problem is coming up with the next concept that continues the genius (and earnings growth). And apparently no one, including Brin and Page, know what that will be.
I wouldn't even remotely hint at fraud. But certainly the possibility of managerial and fiduciary incompetence hasn't been eliminated.
Two dilutive stock offerings in the last 7 months with absolutely nothing to show! A high PE stock better be able to generate spectacular growth with additional financings if it wants to maintain its high PE.
Amazon stock needs to almost triple to get back to where it was 7 years ago. What happened with that genius!

[Still Inside]

To be clear, I never wanted to imply that the GOOG management is willfully engaged in fraud. However, running a public company is a very strict affair, and as I've said here before, if they "miss by miles" again, people are going to come after the management team personally.

(As a side note, the bricklayers union ought to stick to their bricks and stop messing around with complicated tech company stocks they don't understand. The two-tiered stock structure is more of GOOG's absurd arrogance, but it was also part of the deal when the pension fund bought the stock).

Enough on that. On to search technology.

Ironically, S&B invented a better search algorithm and made it happen, but it was another invention--by a company once known at Goto.com (then called Overture, then bought by Yahoo)--that invented the business model that's allowed them to make money on their invention.

GOOG did good by grabbing that other invention and adding it to theirs.

In like fashion, they don't need to invent the next Internet Search Engine themselves, they can get one of their hundreds of PhD's working on the problem. Or maybe all of them. Short of that, they can aquire virtually anything they could possibly need to solve the problem.

Bill Gates once said, "I want the 'Next Microsoft' to be Microsoft".

Unfortuntely the "Next Google" is in danger of not being Google (and by a strange coincedence, right now it's in danger of being Microsoft).

SI