A cashless transaction.
Google will be rolling out its fiber to the home offering in Provo, Utah next week. The company signed the deal to buy the city-owned system on Monday. Negotiated and approved by the Provo municipal council in April, the final details were ironed out and Google took possession of the system this week.
Google got the system in exchange for a token payment and a promise to finish building out the FTTH system to everyone in the city, and provide free service for seven years at something like 5 Mbps to any resident that pays a $30 installation fee. Except for the lower installation fee ($30 versus $300), it’s the same pricing as on offer in Kansas City, including a gigabit option at $70 per month, or $120 with television service.
Except it’s not really a lower installation fee. Because Provo City is still on the hook for bond payments, residents will have to pay a $5.35 monthly fee to the City-owned electric utility during that time. Figured on a flat basis, the total tab for a household over the seven years is $450, plus the $30 installation charge, for a total of $480.
But figured from a consumer finance perspective, Provo comes out closer to even with Kansas City. Paying $300 upfront comes out about the same as making a $30 down payment and then paying off the $270 balance over seven years (at $5.35 per month) with a credit card-like interest rate of 16% annually. Google is getting the existing infrastructure and business instead of the monthly payments, but the value proposition is roughly equivalent.
It’s also picking up a $20 million to $30 million tab to finish extending the network to all Provo homes and paying for some other extras. And Google has to fully commit its mojo to boost take rates from the current 15–20% of households range to something more sustainable, likely in the neighborhood of 30–40%. It seems a fair deal for all, and a free ride for none.