Every time rumors about Google becoming a fiber broadband provider or wireless carrier surface, the speculation and adulation from the blogosphere is so predicable that it’s almost expected.  TechCrunch even predicted that it was only a matter of time that Google would attempt to become a new nationwide wireless carrier and that it was Government and AT&T lobbying preventing this from happening.  But this conspiracy theory is incredibly naive in light of the facts.  Few people are aware of what it takes to become a carrier and the amount of money it costs to build that infrastructure and maintain it.  The wireless market is also so fiercely competitive that some of the carriers are having a difficult time trying to survive in a crowded market.

This isn’t the first time the blogosphere went wild over speculation of Google becoming an ISP.  When Google announced what was essentially a lotto to build a gigabit broadband network for one lucky city (even though the Verizon FiOS network is already capable of Gbps throughput for tens of millions of homes when the market is ready for it), we had mayors of cities jumping into frozen lakes to try to beg Google to come to their city.  Despite the fact that Google is only intent on building in one city much less scale the entire nation and despite the delays, the remaining hype is still surprisingly strong.  The irony of all this is that some of the same cities begging Google to come in continue to neglect their existing network providers by delaying applications for right-of-way to lay new fiber for over a year.

Even before the Gigabit fiber announcement, Google abandoned the municipal wireless projects and left cities like San Francisco hanging, but memories seem to be short when it comes to Google.  Maybe Google is forgetting that the city of San Francisco proudly boasted to them that they had systematically delayed cell tower applications for years due to unfounded concerns of safety.  Does Google really believe that they’ll be given a free pass on red tape beyond the few desperate towns in high cost regions?

The bigger question for Google is whether they’re willing to switch to a much less profitable business.  AT&T has to employ nearly 300,000 employees to operate their nationwide broadband and wireless networks and they spent $19 billion in 2010 to upgrade their wireless network and $17 billion the year before that, and they’ll keep spending that kind of money next year to continue upgrading.  All of Google’s capital expenditures for 2009 added up to $0.8 billion so are they prepared to increase that spending to $20 billion and continue spending that every year to keep up with upgrades?  Google also employs fewer than 20,000 employees but are they prepared to increase that 10-fold?  Is Google also prepared to halve their profit margin even if they could become a successful carrier?  Are they prepared to halve their P/E ratios and cut their stock valuation in half?  Despite Google’s overconfidence in their own abilities, I honestly can’t see them being this dumb.

[Cross-posted at Digital Society]