What is Google up to? Interesting speculation in Business 2.0. Excerpt:
What if Google wanted to give Wi-Fi access to everyone in America? And what if it had technology capable of targeting advertising to a user’s precise location? The gatekeeper of the world’s information could become one of the globe’s biggest Internet providers and one of its most powerful ad sellers, basically supplanting telecoms in one fell swoop. Sounds crazy, but how might Google go about it?
First it would build a national broadband network — let’s call it the GoogleNet — massive enough to rival even the country’s biggest Internet service providers. Business 2.0 has learned from telecom insiders that Google is already building such a network, though ostensibly for many reasons. For the past year, it has quietly been shopping for miles and miles of “dark,” or unused, fiber-optic cable across the country from wholesalers such as New York’s AboveNet. It’s also acquiring superfast connections from Cogent Communications and WilTel, among others, between East Coast cities including Atlanta, Miami, and New York. Such large-scale purchases are unprecedented for an Internet company, but Google’s timing is impeccable. The rash of telecom bankruptcies has freed up a ton of bargain-priced capacity, which Google needs as it prepares to unleash a flood of new, bandwidth-hungry applications. These offerings could include everything from a digital-video database to on-demand television programming.
Why would Google want to do this? Answer, it could save it lots of money — especially as it rolls out bandwidth-hogging services.
Every time a user performs a search on Google, the data is transmitted over a network owned by an ISP — say, Comcast — which links up with Google’s servers via a wholesaler like AboveNet. When AboveNet bridges that gap between Google and Comcast, Google has to pay as much as $60 per megabit per second per month in IP transit fees. As Google adds bandwidth-intensive services, those costs will increase. Big networks owned by the likes of AT&T get around transit fees by striking “peering” arrangements, in which the networks swap traffic and no money is exchanged. By cutting out middlemen like AboveNet, Google could share traffic directly with ISPs to avoid fees.
More…From today’s Good Morning, Silicon Valley
A $79 billion market value, nearly $3 billion in cash on hand, and Google needs more money? Apparently so. As the first-year anniversary of its landmark IPO approaches the wildly successful Internet bellwether is planning a secondary offering. In a filing with the Securities and Exchange Commission, the company said it plans to sell up to 14.8 million shares. Based on Google’s closing price on Wednesday of $285.09, the company could raise $4.2 billion — roughly 5% of its current market value. The move left analysts scratching their heads. “Exactly what they want the cash for will be a big, big question,”
So what do they need the money for? Something Very Big, obviously. Costing, well, about $6 billion. Stay tuned.