Expanding Gigabit Internet Services Will Boost AT&T And Google Stock

  • AT&T will start deploying its gigabit Internet service in 38 new metropolitan areas in the US beginning next year.
  • AT&T gigabit Internet is 20 times faster than previous AT&T residential Internet services.
  • The roll-out will include San Francisco, Oakland and San Jose in the Bay area.
  • In related news, Alphabet is planning to expand its Google Fiber gigabit Internet service to Chicago and Los Angeles.
  • The growing popularity of high definition video and virtual content is likely to create more consumer demand for gigabit Internet connectivity.

AT&T (NYSE:T) announced that it will start rolling out its ultra-fast GigaPower Internet broadband service in 38 new metropolitan areas in the US beginning next year.

San Jose Mercury News notes that AT&T's Internet broadband service is coming to the Bay area - San Francisco, Oakland and San Jose. Already available in parts of Cupertino and soon Mountain View, the service offers speeds of up to a gigabit per second, about 20 times faster than the fastest residential Internet service AT&T currently offers and about four times faster than the speediest service available through Comcast, which is the Bay Area's dominant broadband provider.

"Our customers are asking for faster speeds, and we're building out faster speeds for them," said Marc Blakeman, vice president of external affairs for AT&T's California operations.

In Cupertino, AT&T is charging $110 a month for stand-alone Internet service - $180 a month including voice and TV - to the customers that allow the company to track their online activities and send personalized ads. Those who opt out of tracking pay $29 more a month for each package of services.

"Customer demand for AT&T GigaPower and sales have exceeded expectations since launching speeds up to 1 gigabit per second in Austin,” said AT&T executive VP Brad Bentley. "The faster speeds offered through AT&T GigaPower keep consumers and small businesses connected as they are accessing more content on more devices. This improves a customer’s experience when they are connecting to the cloud, hosting a video-conference, streaming videos and music, playing online games and more."

AT&T GigaPower first launched in Austin, Texas, about two years ago. The AT&T GigaPower network is now available to more than 1 million residential users, and the company expects to more than double availability by the end of 2016.

In related news,Alphabet Inc-A (NASDAQ:GOOGL) is planning to expand its Google Fiber gigabit Internet service to Chicago and Los Angeles, the two largest metropolitan areas that Alphabet has targeted so far.

Google Fiber offers three options: a free internet option, a 1 Gbit/s internet option at $70 per month, and an option including television service (in addition to the 1 Gbit/s internet) at $130 per month. The paid services include content storage options on Google Drive, and DVR for the television service. Google Fiber was first introduced to Kansas City metropolitan area and now is available in a growing number of locations. As of March 2015, Google Fiber had 27,000 television subscribers.

Deploying Google Fiber in new areas is an expensive undertaking that requires digging up city roads to bury fiber-optic cable. But it appears that consumers want to get Google Fiber in their area as soon as possible, and therefore city authorities all over the US try hard to accommodate Google’s requests for zoning permits, road works and other facilitations.

"While we can’t guarantee that we’ll be able to bring Fiber to Chicago and L.A., this is a big step for these cities and their leaders," said Jill Szuchmacher, Director of Google Fiber Expansion. "Planning for a project of this size is a huge undertaking."

Alphabet, which sits on a lot of cash, can take the time and burn the money needed to achieve massive Fiber penetration, and then stream Adsense ads to all customers. The Wall Street Journal notes that, despite the difficulties and expenses involved, Google Fiber’s strategic value is high.

AT&T's and Google's plans to expand their broadband Internet offer are a response to growing demand from consumers, which are increasingly using bandwidth-hungry services like Netflix (NASDAQ:NFLX), streaming video, YouTube, Hangouts, Skype, and online Virtual Reality (VR) games and social worlds. "The major (telecommunications) players recognize that everything is going be coming over the Internet, and they need to have the capacity for it," said telecommunications analyst Jeff Kagan.

In fact, the consumer demand for more and more bandwidth has been a constant since the inception of the Internet, and there are no indications that it will plateau anytime soon. On the contrary, the growing popularity of high definition video and virtual content is likely to create more consumer demand and opportunities that will boost the stocks of the telecommunication companies, like AT&T and Google, which are betting aggressively on gigabit Internet.

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