Is Google making a reasonable deal? I.e. if they didn't have an advertising business to subsidize this with, would the terms still make business sense?
Do roads make economic sense if we didn't have a federal government to subsidize them? Probably not: Texas derives around 58% [1] of its highway costs from vehicle-related fees (e.g. registration, gas tax, etc.) and the rest is subsidized from unrelated sources.
Then again if we did not have a road system, our economy would be in poor shape, because it is harder to get the store to buy things, and to transport the things around. So from that perspective roads are an economic net positive even if they were 100% subsidized from unrelated businesses.
Gigabit internet is similar to roads. It probably can't/won't be funded 100% by the people who use it. At the same time, it is important infrastructure that opens up new avenues for economic opportunity, and I suspect that any major city that had gigabit as available as roads or electricity would find that the benefits exceed the costs, be they subsidized or otherwise.
It's one thing for cities to subsidize infrastructure with tax dollars. Another for a private company to do it as a tie-in to its online services/advertising business. Still another for that company to berate ISPs while doing it, for not building infrastructure they themselves probably wouldn't without the cross-subsidy or synergy from their other businesses.
Generally being a sole infrastructure provider is a very secure investment. This is because you can overcharge until a competitor enters the market and then when competition appears you can undercut them as you no longer need to recoup capital costs while your competitor does. This can stop competitors entering the market as there is not an incentive to do so.
There are a couple of factors that make this a reasonable investment for Google even though they're not the incumbent. The first is the old infrastructure is old enough that it is not capable of offering the same service as the new infrastructure without a significant amount of extra capital investment. Google also can cancel out some of what would be normal capital costs associated with a new entrant because they have related in house skills/services and the clout to bypass some regulatory capture.
This means that the incumbents lose a lot of their advantages as they're playing catch up too and they have to work-in legacy systems. They can't offer the same service on their old infrastructure and have to offer a lower price until they can. To make matters worse they don't want to be too obvious in what they can offer as they could be stung by the state in other places if they act in a way that shows they are consistently abusing their monopoly or acting anti competitively.
It's probably true that Google's investment is set to make money but I'd guess once you factor in opportunity cost it's not the smartest investment. But consider the other advantage they have is that they're not working in a vacuum, improvements in internet usage improves their core business, so even if they get out competed in this market it can help their overall bottom line.
Heh, cable companies are in the advertising business too.
What's funny in the new internet age they're making an even greedier grab to triple dip - charge the content providers, charge the end user, and charge advertising clients.
Probably not by itself. However, it looks like Google is doing a very good job on managing the costs in terms of physical disruption, custom hardware, etc. I suspect that they aren't losing much and probably are turning at least a small profit.
However, Google doesn't care. They identified Comcast, Time-Warner, etc. as an existential threat that can get between them and their customers. As such, Google doesn't really care about losing some money as long as it wipes out the monopoly position of the big ISPs.
Do roads make economic sense if we didn't have a federal government to subsidize them? Probably not: Texas derives around 58% [1] of its highway costs from vehicle-related fees (e.g. registration, gas tax, etc.) and the rest is subsidized from unrelated sources.
Then again if we did not have a road system, our economy would be in poor shape, because it is harder to get the store to buy things, and to transport the things around. So from that perspective roads are an economic net positive even if they were 100% subsidized from unrelated businesses.
Gigabit internet is similar to roads. It probably can't/won't be funded 100% by the people who use it. At the same time, it is important infrastructure that opens up new avenues for economic opportunity, and I suspect that any major city that had gigabit as available as roads or electricity would find that the benefits exceed the costs, be they subsidized or otherwise.
[1] https://www.icloud.com/iw/#numbers/BAKsWA7R5a0YQGg3ptGBpPlvQ...