Alphabet (GOOG) last week finally unveiled its plans to become a major Internet provider using fixed wireless technology.
This is not the pie-in-the-sky Project Loon and Skybender stuff, although those very experimental technologies could ultimately play a role. No, this is good, old-fashioned household Internet — except it gets beamed into your home wirelessly.
It’s not like Alphabet has been sitting on its hands with broadband. Slowly but surely, it has been building out fiber optic cable all over the country with its subsidiary Google Fiber. The company now has super high-speed fiber in places as diverse as Atlanta, Kansas City, Nashville, Provo and San Antonio.
But the process is slow and very expensive. Laying optical networks involves that dreaded, costly "last mile" into the home. That brings local city council hearings and permits and all sorts of other hassles. That’s why it’s interesting that Google Fiber is now officially committing to "fixed wireless" technologies. This avoids the dreaded last mile. The Internet is delivered over the air from nearby towers with something called millimeter-wave technology. No wires, no hassle.
In fact, this is such a big deal that the guy Alphabet brought on to do all of this, engineer Craig Barratt, reports directly to co-founder Larry Page. Barratt — a self-described wireless “megatrend” evangelist, Stanford Ph.D. and holder of 34 patents — previously ran wireless chipset maker Atheros Communications before it was acquired by QUALCOMM (QCOM), so he brings a wealth of expertise. And that expertise will come in handy because what he’s trying to do with Google Fiber has been tried many times before with little success.
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The expensive debacle of Clearwire and Sprint comes immediately to mind. However, the promise of improved millimeter-wave technology has many industry watchers buzzing about the potential for a reboot. Startups such as Starry believe the technology is ready right now to deliver better-than-fiber speed Internet over the air, magically. Even Facebook (FB) has gotten into the act with its Terragraph project, a powerful antenna that can beam broadband Internet over very long distances.
The obstacle to this Internet happiness is the establishment. AT&T (T), Time Warner Cable (TWC), Verizon (VZ), Charter Communications (CHTR) and Cox Communications are not about to hand high-speed Internet to Google Fiber. They will obfuscate and erect barriers, legal and otherwise at every opportunity. But the odds are good that broadband Internet is about to see large-scale disruption. There is a wireless wave coming, and GOOG is the way to play it even if the path toward that outcome is rocky.
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Unless you’ve been holed up in a cabin somewhere binge watching the latest season of The Unbreakable Kimmy Schmidt, you’re probably aware Amazon (AMZN) is unbundling its video-streaming service from Amazon Prime to become a stand-alone service. In theory, this makes it a formidable competitor for Netflix (NFLX), which, by the way, is the producer of Unbreakable Kimmy Schmidt.
But is that really true? The research analysts over at Bespoke Investment Group gave it a hard look and their sense, based on consumer polling, at least on a preliminary basis, is: "No, not yet".
The two most notable streaming services, Netflix excepted, are HBO Go and Amazon Prime. Interest in the former is growing by leaps and bounds. According to Streaming Media Providers, in January 2015 just 21% of viewers were even aware HBO Go existed. By April of this year, that number had catapulted to 61.6%. A new season of Game of Thrones had something to do with that. Still, based on the Bespoke analysis, subscriptions grew by about 2%. That is hardly a blip.
Then there is Amazon Prime. The subscription service, until this week, was essentially about free shipping with a video streamer thrown in for free. Fully 45.5% of Amazon shoppers in the U.S. subscribe to Prime but only 5% say the video service is the draw. It is true that Amazon does have some award-winning and critically acclaimed TV shows in Transparent and Mozart of the Jungle, as well as my favorites, Mad Dogs and Bosch, but that is not why people are grabbing Prime. If that is the case, viewers are unlikely to gravitate to the stand-alone service.
And finally, there is the whole Netflix loyalty dynamic. Say what you will about selection and even the recommendations cue, the service really does just work. It’s really kind of magical. Bespoke analysts found that three years ago, fully 15% of subscribers were looking to cancel the service. That number is now down to less than 10%. In short, rumors of Netflix’s death at the hands of the competition are both overly dramatic, so to speak, and premature.
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