Google Fiber could leverage telco, cable acquisitions

Google Capital is joining private equity firm TPG Capital in the buyout of Texas cable operator Grande Communications and RCN Telecom Services. RCN operates cable and fiber networks in major metro areas including New York, Boston, Chicago, Washington, D.C., and Philadelphia, as well as in eastern Pennsylvania. Grande operates cable networks throughout Texas and has brought high-speed fiber to San Antonio, Dallas and Austin.
TPG is paying $1.6 billion for RCN and $650 million for Grande, according to Bloomberg, with Google Capital acquiring minority stakes in both companies. Both companies are currently owned by another private equity firm, Abry Partners. Jim Holanda serves as CEO of both companies and will continue in that role.
Although Google Capital is separate from Google Fiber, the latter is likely to be impacted by the deal. In Texas, Grande and Google Fiber have been direct competitors, in some cases promising 1 gigabit per second speeds to the same neighborhoods. Now, Google Fiber may have access to Grande’s fiber as a result of Google Capital’s stake in that business. Google Fiber could also gain access to more East Coast markets through the RCN acquisition. So far, Google Fiber has focused on cities in other parts of the country.
Google’s fiber builds have apparently turned out to be costlier than expected, and now the company is reportedly trying to lease fiber or leverage municipal networks in some cities. Google is also experimenting with wireless technologies that could substitute for fiber to the home.
Telecom companies are keeping a close eye on Google Fiber because they do not want to lose broadband customers, especially after investing heavily in their own fiber networks.
AT&T agreed to deliver broadband over fiber to more than 12 million Americans as a condition of the Federal Communication Commission’s approval of its DirecTV acquisition. As part of a separate agreement with the government, AT&T also has promised to extend internet service (but not high-speed broadband) to more than 1 million rural homes and businesses with help from the Connect America Fund.
Verizon Communications agreed to expand internet access in California and Texas as a condition of the FCC’s approval of Verizon’s sale of fiber assets in those states to Frontier Communications. Verizon also has agreements with a number of U.S. cities under which the carrier has committed to deliver broadband to homes.
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