Landlords face down Google: who benefits from broadband?

by Steve Blum • , , , , , ,

Complex issue for Kansas City complexes.

Google Fiber’s offer in Kansas City of at least 5 Mbps Internet service for at least seven years for a one-time $300 installation fee is a rocking good deal if you own a house, or even if you’re a renter who expects to be around for a couple of years. But the economics are different for apartment buildings, where landlords have to pay the fee and tenants get the free service.

According to a story in the Kansas City Star, some apartment owners are taking a pass on the offer. Google is willing to either connect all the units at a location, for $300 each, or none of them. The owner of a 100 unit apartment complex would pay $30,000 to get renters connected. If residents buy premium services – gigabit access at $70 a month or $120 with TV service added – Google will refund the installation fee at the rate of $25 a month. If.

There’s a huge helping of hardball negotiating involved. Property managers are not going to take the first offer Google puts on the table, at least not until they’re convinced it really is take it or leave it. Even then, some might want to hang on to perks offered by competing carriers for access to tenants.

It’s easy to paint landlords as greedy and short-sighted, but the vast majority are economically rational. Once they’re convinced they’re seeing Google’s best offer, the ones who see a sufficiently high return on investment will sign up. The others – a group sure to be weighted towards lower cost and public housing – will not.

Which matters for the policy debate here in California over broadband grants for public housing and rules regulating who can get telephone ratepayer-funded subsidies for infrastructure projects in under and unserved areas, rural and urban alike. This stand off in Kansas City is worth watching from Sacramento.