When consumer demand exists, the market will satisfy it. Earlier this summer, Google unveiled a new product, Google Fiber, which provides super-fast Internet. How fast is super fast? As the New York Daily News reported “Google promised to provide Internet access at speeds of over 100 times faster than today’s average broadband rate…” Now that is fast.
While Google’s formal announcement for Google Fiber only took a few minutes, preparation and creation of the service has been a long time coming. In spite of significant financial hurdles and with careful consideration, Google has chosen to take the risk and – when the time comes – rightfully reap the reward for the creation of Google Fiber.
Google’s decision to begin to build out its new Google Fiber service was certainly not a rash one. As the Kansas City Star reported, “… no matter how badly the corner geek wants Internet speeds of one gigabit-per-second… he won’t be able to get it unless about 10 percent of his neighbors also register for Google hook-up.” There’s a good reason for this. A company doesn’t want to waste its money and resources on an area or product that is without demand among consumers. Google didn’t have to be too concerned about this though. It was reported that “More than 1,100 communities pleaded with Google to make them the company’s Internet service Guinea pig.”
Unlike Washington, which can invest in an unwanted technology and not care about the outcome – because it’s not responsible for the bottom line – a private company doesn’t have the “privilege” of acting so recklessly. Its decisions and their subsequent successes or failures will directly determine whether the company’s doors remain open. As a private company held by investors and stockholders, Google is free, if not encouraged, to make investments such as the one its pursuing in Kansas City. But the government is not. Google’s accountability rests with its stakeholders and board members and with their permission and support, the company may act as it chooses, which likely means maximizing its profits all while benefitting its costumers.
While there are many, one of the fundamental differences between government and the private sector is that a private industry exists to meet the demands of its customers. Government is more concerned with controlling the options that people have in the market – often with the underlying objective of influencing and shaping behavior. This is precisely what the cap-and-tax scheme would do.
Government should not impair a company from investing or beginning a new project by implementing onerous, innovation-stunting regulations; it should not be subsidizing favored industries over others. When Washington becomes involved in choosing winners and losers in the market, it restricts consumers’ choices by severely limiting options, unnecessarily increases costs and quashes productivity and incentives to innovate. As Google can attest to, when a company has a product people want, a government handout is not needed. That’s why “It [Google] asked for no up-front subsidies.”
After careful and extensive consideration, Google is acutely aware that its actions to build out Google Fiber are expensive. Before moving forward, the company assessed the positives and negatives that came with the development of this new service and in the end still determined the project was worthwhile. There’s no denying (Google certainly has not) that Google Fiber is outside of its comfort realm and traditional line of products, but that’s the beauty of a free market. Google’s decision was well-informed and at the end of the day they found the potential benefits to far exceed the incurred costs. Google’s Fiber blog said it even better: “choice is better than no choice. Competition and choice help make products better for users.” Google believes in competition and the ability of its product to fill a void currently unmet by the market.
Not only has Google Fiber been an expensive project, Google also confronted years and years of government policy stacked against it.
While deregulation is a tremendous step in the right direction, the newcomers to the scene, like Google, AT&T and others, still face an uphill battle. As the Star piece points out, “They [Google and others] don’t just have to convince people to buy their services. They must also convince consumers to go through the hassle, and often installation expense, of switching from the incumbent cable provider.”
The invention and roll-out of Google Fiber is a textbook example of how well capitalism can work when the government stays out of the way. Rather than inserting itself unnecessarily in an industry, Washington should act in a restrained manner and certainly not implement crippling regulations that could act to deter Google from engaging in such innovative endeavors as this one in the future. Google’s creation of Google Fiber also demonstrates how challenging and expensive it is for a company to build out a network. Precisely why the government should have no hand in doing it.