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Google picks the right neighborhoods to build fiber in Kansas City

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Google Fiber strategy of cherry picking neighborhoods in the Kansas City area seems to be working. A study done by an investment research company shows that 75% of the homes in medium to high income areas that are passed by Google Fiber are subscribing to it (h/t to Fred Pilot at Eldo Telcom for the pointer). In low income areas, the study claims that 30% of homes passed are taking Google’s service.

Bernstein Research commissioned the study, which involved knocking on the doors of 350 homes in Google’s current – and limited – service area. Bernstein is a “sell side” research house, which means that its clients are analysts and underwriters who package and sell deals, not those that buy stocks.

The full study hasn’t been made public – that’s for Bertstein’s paying clients, and rightly so – but the company came to the conclusion that 1. it expects Google Fiber to get a 50% or better take rate for high speed Internet service when it expands its footprint to the entire Kansas City metro area (presumably not Overland Park, though), 2. four-fifths of those subscribers will take both TV and Internet, and 3. another 10% will opt to pay $300 upfront and take a 5 Mbps down/1 Mbps service for no ongoing, monthly fee (free, in that sense).

The research also concludes that the 30% take rate for low income areas (which is not the same as saying low income households) means that Google isn’t cherry picking, but since all the initial build-out areas – low, medium and high income alike – were chosen on the basis of consumer interest, I’m not sure how that follows.

Berstein’s bottom line conclusion is that Google Fiber is doing so well that it should be regarded as a long term business strategy, with at least U.S.-wide ambitions, rather than a goad to incumbent telecoms players or a test-bed for new services. The bits and pieces of the data that were made public are certainly consistent with that notion, but hardly proves it. The proof will come if and when Google decides to step out with fiber builds to a much longer list of metro areas. That’s a question that won’t be answered until the end of the year, if then.