Here’s The Truth About Who Pays for Google Fiber

We mentioned before that Google (NASDAQ:GOOG) has taken a step toward dominating the Internet with Google Fiber. Compared to advancements in computing and storage, Internet technology has largely stagnated, and Google is promising to change this, with speeds of up to one gigabit per second, or about 100 times faster than the current average broadband connection. So Google Fiber is great, and companies like Verizon (NYSE:VZ) and Comcast (NASDAQ:CMCSA) will have to watch their backs if they don’t want to get outgunned.

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But like with any good battle for market share, there’s more here than meets the eye. Internet is effectively infrastructure, and FCC commissioner Ajit Pai has praised the relationship between Google and Kansas City, saying, “It is critically important that states and local communities adopt broadband-friendly policies when it comes to rights-of-way management.” That is, when government got out of Google’s way, the company came in and did a public good. “Deregulation promotes private investment.” Deregulation may be putting it lightly.

Fred Campbell, a former FCC official, reports, “Google received stunning regulatory concessions and incentives from local governments, including free access to virtually everything the city owns or controls.” This includes office space, power, marketing and direct mail connections, and in one county permission to hang its wires on utility poles, which are usually off-limits to communications companies.

The (blurry) line here is whether or not the relationship between Google and Kansas City was one of regulatory concessions or subsidy. When the government offers office space, electricity, and man-hours (including extra employees specifically to manage the Google project) for “free”, those are all paid for by the tax payers.

Mercatus Center scholar Jerry Brito argues that fees for rights of way access and internalizing the cost of supervision are required to compensate for “the costs of what they’re imposing on the community.” Waiving them for Google jeopardizes free-market competitive efforts and undermines a level playing field.

Google expects other cities to be “bidding” on who gets Fiber next. If this means more Kansas City style subsidization, Google could quickly find itself controlling not just how people use the Internet, but how they access it. Verizon, Comcast, and other smaller cable companies may not stand a chance.

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