Google reportedly in talks to lay undersea cable

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Google seeks parity with the telcos

As Google grows it has become one of the largest networks and buyers of telco
services. Being an investor in undersea cable consortium may be a great
investment, a great way to acquire network capacity across the Pacific at cost, and
most importantly, ability to be in parity with their telco suppliers. If this is true,
this will change their strategic position from a buyer to buyer/supplier of long-
haul fiber capacity.

I am not very positive about such move for sevaral reasons:

- Historically vertical integration hasn't been very successful in this industry; in
fact, most investments in "non-core" businesses carry much higher risk than in
one's core business. Typical example is the power companies that invested in
Internet businesses. Why else would AT&T/SBC outsource everything else except
the DSL line itself to Yahoo!?

- Google is virtually a monopoly in search and lately has been acting a lot like an
"evil empire". Do we really want them to own telecom infrastructure?

- Google is enjoying a position of (almost) monopoly in the search market, which
allows them to cash out positive cash flow and great margins and to invest in
ventures like that. What is going to happen when the margins in search go down?

As a side note, this has nothing to do with broadband penetration in the US (or
any other country) or with Net neutrality.

Posted by: tempo_x83   Posted on: 09/23/07 You are currently: a Guest | Members login | Terms of Use

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