Telecom Economics Drives Google to “go it alone”

“Google Inc. is deep into a multipronged effort to build and help run wireless networks in emerging markets as part of a plan to connect a billion or more new people to the Internet. … Providing …networks would allow Google to circumvent incumbent cable companies and wireless carriers….Google sees its revenue-generating …services as ‘inextricably linked to the infrastructure’…. Google has long been involved in public trials to prove the technology—which operates at lower frequencies than some cell networks, allowing signals to be more easily transmitted through buildings and other obstacles and across longer distances—can work. ”

The economics that drive Google to do this are the same economics that can and should drive Oil & Gas companies. The business case is that to deploy the value add services in an under-served (rural) area, you need infrastructure. And in getting that infrastructure, in the current climate, it is often cheaper to build it yourself (this presumes the company has the ability to fund the capital). The incumbent telecom companies have not changed their cost structure in many years and in the mean time the cost to build has come down. So, using the services that need to be delivered as a lever, it’s driving companies to look at the cost to build it themselves vs the cost of the incumbents. Over the 200+ telecom projects I have participated on, the payback period is often less than 3 years.


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