Google's goad sinks a little deeper into Kansas City

7 May 2013 by Steve Blum
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Wanted in Grandview.

Grandview, Missouri is latest addition to Google’s wish list of Kansas City suburbs. The city council – board of aldermen as they call it in Missouri – took a no-brainer decision tonight to invite Google to expand its existing fiber to the home network into their community. Google’s response is to say thank you, but “it will still be awhile before we can build fiber in Grandview — we need to plan and engineer our network there first.”

Last week, it was Shawnee, Kansas that signed on. So far though, Google has only built in the Missouri and Kansas sides of Kansas City proper. Six other suburbs are also theoretically in line for Google Fiber.

I don’t doubt Google’s sincere interest in expanding its Kansas City area footprint, particularly into jurisdictions that are intertwined with the two major cities. To a great extent, the success of telecommunications and subscription television business models is determined by economies of scale. Although Google’s primary motivation is strategic – the ultimate goal is to push telecoms companies into FTTH builds – it will still want to see a tactical return on its Kansas City investment.

The way to do that is to expand into every nook and cranny in the Kansas City market that 1. has sufficient household density and income to meet internal targets and 2. makes sense from a network architecture perspective. So long as the construction and maintenance costs pencil out, the rest of it is either largely paid for – marketing and operations – or purely marginal – only incurred if a household signs up. Video programming fees, for example.

Growing its Kansas City footprint as far as makes sense and no farther, puts the legacy incumbents – AT&T and Time Warner – in danger of seeing lucrative core areas hollowed out and being left to support far less profitable fringe areas.

Danger causes fear. Fear motivates corporate apparatchiks. Google just needs to keep the pressure constant and credible.