KANSAS CITY — An article from Forbes’ website on Wednesday sets out to answer a straightforward question about Google’s new one-gigabit Internet service in Kansas City:
How the heck is it so cheap?
At $70 per month, the ultrafast connection speed isn’t much more than the typical broadband service. But as Christopher Mitchell points out in the Forbes piece, that’s because most broadband providers have been cleaning consumers’ clocks and wallets for some time:
On one side of the equation is the fact that big cable companies (Time Warner Cable,Comcast, etc.) have long been ripping off consumers by pricing their services far above cost — something they can easily do because they face so little competition.
How Google can offer its own service so low is another matter, and one Mitchell finds more interesting. It’s also, certainly, more complicated.
In moving bits of information around the world, Internet providers must pay intermediary networks that host Internet traffic. Since Google owns many prominent websites, as a network it can create relationships among peer networks that work in its favor. As Mitchell writes:
Google probably has the most favorable peering agreements with others because they all want cheap access to YouTube and the various other Google services. And Google can peer with others anywhere – they probably have a presence at every major interconnection location.
In other words, the web giant that became an Internet service provider can sell its Internet service so cheaply because it is still a web giant, too.