The Next Catalyst for Google Stock
Alphabet Inc (NASDAQ:GOOG) stock has rewarded investors nicely over the past year, reaping a gain of about 43%. That’s an impressive run, especially when you consider that Google is massive, with a market cap of about $527 billion. But now investors are looking for the next catalyst that can send Google stock higher. Here’s one, and it could be a game-changer for GOOG stock and how you surf the Internet.
Over the past few years, Google has been laying down fiber optic cable, providing high-speed Internet in a few selected U.S. cities. The service, “Google Fiber,” is reasonably priced and incredibly fast, and it has proven to be very popular in the cities where it’s available. That has to do in part because it is a welcome alternative to often-despised cable giants Comcast Corporation (NASDAQ:CMCSA) and Time Warner Inc (NYSE:TWX).
With Fiber, Google says that its goal is to offer fast Internet service for less than what the cable giants charge. Google Fiber offers 1,000 Mbps for $70.00 per month. By comparison, the average Internet speed in the U.S. is 12.6 Mbps. (Source: “Average Internet Speeds Up, But U.S. Still Has Work to Do,” PC Mag, December 18, 2015.) Comcast recently launched a 2,000 Mbps service on its existing cable lines, but you might as well sell your house, as it costs $300.00 per month.
Although it is capable if it wanted to, Google hasn’t put the pedal to the metal in laying down cables across the entire country. Google can be a big threat to Comcast and Time Warner, but at this point, the company is a minor annoyance.
But there may be a reason that Google hasn’t charged full steam ahead, and it could be big for the search engine giant and Google stock.
Craig Barratt, CEO of the Alphabet division in charge of Fiber, announced the company is working on a plan to beam wireless broadband directly into homes across the U.S. (Source: “Google Fiber wants to beam wireless Internet to your home,” Re/code, April 14, 2016.)
Why is this a big deal?
If Google is successful in implementing the wireless service, it would send shockwaves across the broadband industry, as it would solve the so-called “last mile” problem. That’s the part of the broadband connection between the network in a given area and the building that wants Internet and it can be very expensive. Last mile connections are generally only viable in areas that are densely populated.
It’s hard to believe but there are still vast swaths of the country that do not have access to high-speed Internet. In 2015, 53% of rural Americans, about 22 million people, lacked access to high-speed broadband. (Source: “2015 Broadband Progress Report,” Federal Communications Commission, February 4, 2015.) This is simply because cable companies won’t make a profit laying down cable in the remote areas of Alaska, for example.
This is why the technology Google is working on could upset the industry. Wireless broadband will allow Google to bring Internet service to millions of Americans living in rural areas, something that the established cable giants have no interest in doing. It will also bypass the expensive and very long process of laying down fibre cables under city streets.
The technology could also be big for Google stock because it could pave the path for Google to roll out a nationwide network that will go head to head with the cable giants. I bet hundreds of thousands and maybe even millions would defect from the established Internet cable providers to Google’s Internet service. A Google nationwide telecom division would be absolutely huge for the company.
The Bottom Line on Google Stock
If Google gets its wireless broadband Internet off the ground and running, it could uproot an entire industry. And it could also significantly add to Google’s bottom line, which will be good news for Google stock shareholders.