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Kagan's Column: Google Says Hi to Wi-Fi

Cable operators and telcos were googled twice this month: On Oct. 1, when Google was named as one of a dozen applicants for a citywide Wi-Fi system in San Francisco, and a week later, when Google invited Comcast to join in a bid to buy into Time Warner's AOL, already entertaining interest from Microsoft. Shades of my Sept. 26 reference to convergent media armies: "Internet and wireless troops think they've built a better war machine for broadband."

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Some in cable have shrugged off the Wi-Fi threat, thinking that it lacks the key to the consumer puzzle: a direct line into the house. But some of the same people also thought, back in 1994, that direct satellite-without the street cred of an endpipe-would flame out. It didn't. And I don't think Google will. It not only believes it can blanket San Francisco-a Comcast market-with just 50 Wi- Fi pole positions; it wants to be its competitor's partner in Internet access as well. Google apparently has a burning desire to be everywhere. Back when cable didn't have capital, it had balls and brains. Google has all three.

It also has at least 11 competitors for the right to provide San Fran with a wireless broadband system that would be free to the user. At least that's how it sounds in the newspaper headlines. Deeper down the column in the San Francisco Chronicle's Oct. 1 report, one applicant, MetroFi, says it will provide a 300 Kbps Internet service with advertising and no tech support for free, but will offer one with support and no ads for $19.95/mo. It's not hard to envision the winning bidder will wind up with revenue even while the city trumpets the freeness of it all.

Google says it has no plans beyond San Fran but if it wins the bid, in my view, it would have no choice but to change its plans. What other $85 billion company would quit with just one market? Earthlink is worth only $1.4 billion, but it has won the Philadelphia Wi-Fi franchise. Could Google buy Earthlink or would it just use Wi-Fi interests for partnership bargaining? Meanwhile, it is inevitable that someone aggressive will want more fiber in his diet, by dining on all the bankrupt cable lying under cities and oceans. It would also come as no surprise that the barbarians at this gate would live in Silicon Valley, where the traffic lights read "Stop Big Media" and "Go Open Networks."

Even before the Oct. 13 Wall Street Journal break of the Google-Comcast- AOL story, there were two articles in The New York Times on Oct. 3 that, with Google Wi-Fi on page 1 of the WSJ, sent teams of media strategists into action. 1) Yahoo has joined with corporations, nonprofits and universities to digitize hundreds of thousands of books and make them available free on the Internet. This competes with a similar plan by Google, but differs in that content would be open to all users, versus Google's closed system. 2) Blinkx, a video search engine (coincidentally based in San Fran), activated MyBlinkx TV (www.blinkxTV.com) to take Internet searchers directly to video clips, rather than to a list of clips. It has been rumored that Blinkx is a target of Rupert Murdoch, who seems to be Big Media's sole Web-stalker.

Telcos rang the alarm first. Cell phones are taking video calls. Internet video is heating up (see Yahoo and Apple iPod). New mesh network technology is boosting Wi-Fi strength. Google everywhere is a very loud wake-up call to the media giants.

Analyst/investor Paul Kagan is chairman/CEO of Kagan Capital Management in Carmel, Calif. He owns shares in Google, Comcast, Time Warner, Yahoo and Rupert Murdoch's News Corp. Information in his column is not intended to be a recommendation to buy or sell securities.

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Kagan's Column: Google Says Hi to Wi-Fi

Cable World, Oct 24, 2005

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