Alphabet restructuring positions Google Fiber to go big

by Steve Blum • ,

Google Fiber is about to become a standalone venture, owned by Alphabet. That’s the holding company announced last week by Google which will own the core business – still called Google – and a raft of separate entities that don’t have much in common with that core business. Things like Google Fiber, Nest, Calico and the Google X incubator that nurtures out of the box ideas like Project Loon.

For now, Alphabet will own 100% of all these companies. Google stock will simply become Alphabet shares, and even trade under the same GOOG ticker symbol. But it doesn’t have to stay that way, and that has huge implications for the future of Google Fiber.

I wrote earlier this year that Google Fiber was nearing the point where it had to either go big or go home. The main limit on its expansion potential was the fear of what would happen to Google’s share price if Wall Street analysts starting reckoning it more as a capital intensive, low return on investment telecoms company and less as the web and mobile powerhouse it is. But make Google Fiber a relatively minuscule and separately capitalised line in the holding company’s financial reports, and the core company with its astronomic value becomes untouchable.

With a ring fenced capital structure, Google Fiber is also free to take on outside investors and strategic partners. Which means it’s gone from being a ticking time bomb on Google’s balance sheet to a sexy poker chip that can be traded and bet with impunity.

Viewed in Alphabet’s light, recent revelations that Google Fiber is moving into Arizona and expanding its Texas territory to San Antonio look like the beginning of a breakout move, and not a mere tidying up of loose ends.

The decision has been made: Google Fiber is going big.