Google is considering increasing its fiber broadband capacity

Google is ready to allocate several billion dollars for a much larger expansion of its fiber network: last week the company announced that it is in talks with 34 American cities about the possibility of making Google Fiber technology available to them.

Even if the plans are fully implemented – and there is no guarantee that they will – the company will still be a small fish in the US broadband market. However, the timing of Google Fiber’s first expansion plans since the announcement of the first three markets is enough to once again raise questions about the parent company’s unclear motives.

The company insists that internet services are great business, and executives still see the project as simply one that delivers what consumers (and local governments) want: blazing speed. “People want faster internet more than ever,” said Milo Medin, vice president of Google Access Services, in announcing the new initiative. Fiber optic networks are designed to support download speeds of 1 gigabit per second, which is almost 50 times faster than the average broadband connection in the country today.

However, there is probably more to the Google Fiber strategy than meets the eye.

It may or may not be a coincidence that Google Fiber’s announcement came less than a week after Comcast’s blockbuster $45 billion bid for Time Warner Cable, which created a cable/internet service provider covering two-thirds of the United States. The FCC’s 2010 net neutrality rules were ruled invalid by a federal court in January, raising fears that ISPs would start charging YouTube or Netflix to deliver beats to their customers. (The agency says it is preparing revised net neutrality rules.)

These changes have consumer advocates who fear broadband access will become concentrated in the hands of fewer powerful players, cheering Google’s vision for fiber-optic networks. “Our study highlighted the value that breakthrough deployments like Google Fiber and urban networks can deliver,” said Sarah Morris, senior policy advisor at the Open Tech Institute, a division of the nonpartisan think tank New America Foundation.

By disrupting the operation of its fiber optic cable, Google is threatening to introduce an alternative to cable and telecommunications services throughout the country. DirecTV, for example, is excited about the prospect of Google employees warming up the heat among ISPs that are rivals to the satellite broadcaster: “Frankly, the more competition in the broadband space, the better,” CEO Mike White said on an earnings call DirecTV.

Of course, Google hasn’t committed to anything beyond exploring opportunities in cities, and it’s conceivable that it will build very few actual networks as a result. Collectively, the 34 cities represent approximately 2.8 million households. Adding about 750,000 uploaded today by Google Fiber in Kansas City (both Kansas and Missouri); Provo, Utah; and Austin, Texas, the company would still reach just over 3% of American homes. That’s less than a quarter of Verizon Communications’ FiOS, the only other widely deployed fiber-optic network in the country, which had 18.6 million facilities at the end of 2013.

Google avoided FiOS markets altogether (not to mention colder climates that would make fiber more expensive to build), instead choosing areas covered by AT&T, Comcast and Time Warner Cable. If Google pulls the trigger, the expansion won’t be cheap: Installing fiber optic cables in all 34 cities will cost between $2.2 billion and $3 billion, Sanford Bernstein senior analyst Carlos Kirjner estimated.

Kirjner believes Google Fiber is what Google says it is: a great opportunity. Within six years, Google Fiber could reach 40 million homes and serve 20 million broadband customers and, by its calculations, generate annual revenue of $20 billion. The capital-intensive nature of Google Fiber is different from its parent company’s high-margin, cash-based search business, but that doesn’t mean it can’t work.

“I don’t think this company is thinking about two or three years,” Kirjner said. “They are thinking about a 10-year horizon.”