UPDATE 4-Google to build high-speed Internet network

Wed Feb 10, 2010 6:18pm EST

* Test network will be up to 100 times faster

* Does not plan nationwide network

* Analysts see project as part of net neutrality debate

* FCC welcomes move ahead of national broadband plan

(Adds analyst comment, Verizon statement, background)

By Ian Sherr and John Poirier

SAN FRANCISCO/WASHINGTON, Feb 10 (Reuters) - Google Inc (GOOG.O) plans to build a super-fast Internet network for up to half a million people, a project that could pressure telecommunications companies to loosen their control of Web access in the United States.

The Internet company has locked horns with the likes of AT&T Inc (T.N) and Verizon Communications Inc (VZ.N) over the issue of net neutrality: Google wants telephone companies to permit consumers to run any Web application they want, while carriers do not want to lose control of networks they have invested billions of dollars to build.

In building the test network, Google wants to demonstrate a carrier could easily manage complex applications that use a lot of bandwidth without sacrificing performance.

Google said on Wednesday it does not plan to build a nationwide network and its goal is only to develop a trial service at a "competitive price" to 50,000 to 500,000 people, offering Web speeds of up to 100 times faster than most consumers get today.

"In a big way, this is about Google wanting to make a case for net neutrality," said PRTM consultant Daniel Hays, adding that Google wants to "demonstrate these services can be provided profitably at satisfactory levels of performance."

In a blog describing the new network, Google imagined a doctor discussing and looking at three-dimensional medical images with a patient far away, students joining a class from various locations in 3-D, or someone downloading a high-definition movie very quickly.

Google said the network would run on fiber optic lines to homes, but declined to give more details.

FCC WELCOMES MOVE

Google asked cities and states interested in joining the experiment to apply to Google by March 26 and said it eventually would build the network in a number of U.S. locations. here th-gig-our-experimental.htm

Federal Communications Commission Chairman Julius Genachowski immediately hailed the move, saying "big broadband creates big opportunities." The FCC is about a month away from submitting a national broadband plan to Congress.

Google's "significant trial will provide an American test bed for the next generation of innovative, high-speed Internet apps, devices and services," Genachowski said in a statement.

Google has long argued it can sell more Web ads -- the way it makes money -- by encouraging Internet use.

Analysts said they did not think Google would end up competing directly with carriers as it would cost the Internet company hundreds of billions of dollars to build a nationwide broadband network from scratch.

"If somehow they were able to widely deploy this, it would be bad for the cable and telecom folks. I'm skeptical the economics will work to allow them to deploy it widely," said Hudson Square Research analyst Todd Rethemeier.

A Verizon spokesman described the Google move as a "new paragraph" in the "exciting story" of Internet development.

AT&T declined to comment.

Google has had mixed success in previous attempts to become an Internet service provider. In 2006, it partnered with EarthLink Inc (ELNK.O) in an attempt to provide free wireless Internet access to the entire city of San Francisco. The plan fell through in 2007 over financial concerns.

At the same time, however, Google built a free wireless network across its headquarter's city of Mountain View, Calif.

Each of those attempts, however, leveraged wireless broadband access. This time, Google is dealing in hard lines.

HOW MUCH WOULD IT COST?

Oppenheimer & Co analyst Timothy Horan said he suspected building out the trial broadband network would cost Google about $1,000 to $2,000 per subscriber if it bought unused fiber lines already underneath many cities.

"They can buy a lot of this stuff fairly inexpensively that's out there already," he said, adding that communications service providers, such as Level 3 Communications Inc LVLT.O, would have lines to sell to Google.

Google said it would pay for building the network itself without seeking financial partners or government subsidies and then charge consumer and business customers.

"We'll deliver Internet speeds more than 100 times faster than what most Americans have access to today with 1 gigabit per second, fiber-to-the-home connections," Google product managers Minnie Ingersoll and James Kelly wrote in the blog.

Google said it wanted the project to become an open-access network, enabling products such as Internet telephony.

"I think there are a lot of partnership opportunities and we are definitely interested in having those discussions," Ingersoll said.

Mountain View, California-based Google's shares fell about 0.4 percent to close $534.44 on the Nasdaq. (For a BREAKINGVIEWS column, click on [ID:nN10155758]) (Additional reporting by Sinead Carew and Gabriel Madway; editing by Peter Henderson, Tiffany Wu and Andre Grenon)

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