Alphabet is putting serious pressure on Google Fiber to cut costs

Alphabet is putting serious pressure on Google Fiber to cut costs ,

Google parent company Alphabet is shaking things up at its gigabit internet division, according to a report today from The Information. The unit, previously known as Google Fiber and now called Access, is shifting its focus to wireless technology, and not ultra-fast internet delivered through fiber-optic cables. More pressing, however, is a demand issued by Alphabet CEO Larry Page to reduce customer acquisition costs to one tenth their current level while asking Fiber chief Craig Barratt to cut the unit’s workforce in half, from 1,000 people to 500.

The changes represent a rift at Alphabet over how it handles what were once Google’s most ambitious projects. Some of these ideas, like the self-driving car project, have commanded immense resource investment because they represent the company’s grandest ideas for the future. Yet Page and co-founder Sergey Brin spun out some of those projects from Google itself when it restructured as Alphabet last August, including Fiber, anti-aging biotech division Calico, and smart appliance maker Nest. The restructuring has created a heightened focus on those units and how much money they’re spending on the long road to profitability.

Alphabet CEO Larry Page wants the Fiber unit cut in half

Now, the fate of Fiber is uncertain as the team shifts its focus toward providing internet with lower-cost equipment and less employees. The unit has reportedley only signed up 200,000 subscribers by the end of 2014, despite setting a lofty goal of 5 million subscribers by the end of 2015. Fiber is currently available in seven metropolitan areas with plans to launch in 16 more cities. It cost the unit more than $1 billion to lay down fiber optic piping in Kansas City, Recode reported in May, and the cost is expected to continue rising with each new market.

According to The Information, Alphabet CFO Ruth Porat has been a staunch defender of the Fiber team, telling Page that its business model is viable and needs more time. However, both Page and Brin have expressed discontent with both Fiber’s overly aggressive rollout strategy and the high cost of deploying fiber optic networks. That's supposedly led to the shift toward wireless delivery.

Google Fiber is switching to wireless internet delivery

It’s unclear how the unit will crack the technical problems inherent to high-speed wireless delivery. Alphabet chairman Eric Schmidt has suggested that advances in millimeter wave technology could provide a solution because it’s "cheaper than digging up your garden," he said on a shareholder call in June. Millimeter wave tech is a promising new technique for delivering high-speed internet wirelessly, and it’s being employed by former Aereo founder Chet Kanojia with his new company Starry. And in June, Google Fiber acquired San Francisco-based ISP Webpass, which does provide high-speed wireless internet to select locations around the country.

Earlier this month, The Wall Street Journal reported that Google Fiber would start relying on wireless transmitters to start delivering internet from fiber lines to homes in cities like Los Angeles, Chicago, and Dallas, with as many as 24 other locales slated for potential testing. The project is "in early stages today, but we hope this technology can one day help deliver more abundant internet access to consumers," Google confirmed to The Financial Times. Still, it's unclear whether the unit can achieve the same gigabit internet speeds with wireless tech that it produces with fiber.