The Cost of Connectivity: How Does Google Fiber in Kansas City Compare to Other World Cities?

On July 26th, Google officially announced its plans for the rollout of much-anticipated Google Fiber, available to residents in both Kansas City, Mo., and Kansas City, Kan. Many have heaped praise on the tech company for taking steps to offer next generation connection speeds at reasonable rates. But how does Google’s offering stack up against packages currently available in other U.S. cities and around the world?

At first glance, the pricing plan seems pretty attractive. Google will provide residents with a symmetrical 1000 Mbps connection (or a gigabit) for a monthly rate of $70, and a bundle of Internet and television service for $120 per month. For those individuals who either don’t want or can’t afford this package, Google will offer a free tier with speeds of 5 Mbps downstream and 1 Mbps upstream. Customers need only pay a $300 installation fee for the fiber connection--either upfront or spread out over 12 monthly payments of $25--to be guaranteed free Internet for the next seven years (a guarantee which also applies to future tenants if the individual who originally signed up leaves).

In our recent report on the cost of connectivity, we surveyed the high-speed residential Internet offerings in 22 cities worldwide and compared them in terms of top speeds, “triple play” bundles, and the best package available for $35. The results were not pretty for the United States, with major metropolises like New York, Washington D.C., and Los Angeles consistently landing toward the bottom of the rankings. On the whole, we noticed a trend of U.S. carriers offering slower speeds at higher prices in comparison to their international peers.

After last week’s announcement, we took a look at how Google Fiber would fit into these rankings. We found that while the gigabit speed will place Kansas City on par with world speed leaders, it is not revolutionary in terms of affordability. Consumers in other countries have been able to get speeds of over 100 Mbps for the equivalent of $30-$40 USD--and can already subscribe to a gigabit connection in Hong Kong for less than $50.

The Gigabit Connection

All prices shown in USD adjusted using the World Bank’s Purchasing Power Parity (PPP) metrics.

*EPB and KPN only offer bundles of Internet, TV, and phone for their highest speed tier.

Free Internet for Seven Years

While the gigabit connection is impressive, the free Internet tier is actually more significant development for the U.S. broadband market. As municipal broadband expert Chris Mitchell pointed out, for a company the size of Google, providing thousands of 5/1 connections will cost next to nothing. Correspondingly, the same is true of operators like Comcast and Centurylink, which still see profits even off of the “discounted” $10/month packages they offer to qualifying low-income subscribers.

Delivering services over fiber infrastructure will also be far more reliable than DSL technology, which fared the worst in the latest version of the FCC’s Measuring Broadband America report. Having a fiber-to-the-home connection will position customers to more easily upgrade to much higher speed tiers in the future.

Finally, Google has also guaranteed their free monthly service for seven years. Most incumbent carriers offer 12 or 24 month guarantees, which are then followed by consistent price increases.

Comparing the cost of Google Fiber over a 2-year period

*Estimate based on the assumption that ISPs do not raise their rates after the initial 12 months. It also does not include installation fees, modem rental fees, or other costs.

A Step in the Right Direction

Overall, Google Fiber is a positive sign. The attempt to make a next generation network available for moderate prices in a major metropolitan area is a move, which, if nothing else, highlights the stagnant state of broadband competition that Google’s speeds and pricing could be considered so innovative. Recently, competition has been limited to the realm of providers offering increasingly expensive top tier speeds (new services, which are both slower and more expensive than Google Fiber).  Moreover, by proving that it’s possible to offer a 5 Mbps connection (which is slightly above the 4 Mbps definition for broadband adopted by the FCC in 2010) for free after installation fees, Google has demonstrated how lucrative it is for carriers to charge $20 to $45 or more a month for comparable services.

However, when placed in a global context, Google Fiber suddenly appears less like a major step forward and more like a much-needed attempt to stop the U.S. from falling further behind.