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What does Google get from supercharging Kansas City’s Internet?

We get it: Google Fiber is amazing. Netflix says it’s the most consistently fast ISP in America. Analysts from BTIG Research visited Kansas City last month and were “blown away,” by the service, according to Business Insider — which makes me think of a couple of guys in suits plugging in their laptops and getting blasted across a hotel room — and tech startups are banding together and buying houses on the fiber build-out roadmap to circumvent Google’s current “residents only” policy (although according to the Google spokeswoman I talked to, this will soon change). The lure of symmetrical gigabit Internet, affordably priced and consistently delivered, is a strong one. Shangri-La is real, and it’s wearing a Chiefs jersey.

If Google Chairman Eric Schmidt is to be believed, Shangri-La may also be coming to a town near you. Yesterday, at the New York Times Dealbook Conference, Schmidt told the audience that the Kansas City rollout was “not an experiment,” and that Google is “trying to decide now” where next to expand the service. That got lots of people talking about how far Google may be willing to take its fiber bet, speculating that a nationwide rollout of gigabit Internet by the search giant might only be a matter of time.

That’s not going to happen.

Google is going to keep its future plans very close to the vest as the Kansas City “non-experiment” pans out, but analysts with Goldman Sachs last week released their own report on the estimated cost of Google carrying its next-gen broadband to every home in America. That number: $140 billion. Google currently holds $46 billion in cash, about $100 billion shy of the necessary amount, which only makes clearer the truly monumental scope of such an undertaking. What’s more, Google only spends about 10% of its reserves each year on capital expenditures. If you take this into account, the math is simple. Google can’t afford to become an ISP. When I asked a Google spokeswoman if the company had plans to expand even beyond Kansas City in the foreseeable future, her response was telling: “We are very committed to our users in Kansas City.”

This is upsetting for a great many reasons. Although the speed of Google fiber is like Spanish Fly for many of today’s data-hungry users and businesses, it is Google’s overall approach to the business of broadband delivery that’s so refreshing. The prices are reasonable — $70 a month for up to one Gbps — yes, about 1,000 times faster than basic DSL service — or 5Mpbs for free and guaranteed for 7 years, as long as you pay the $300 installation fee. Add another $50 and you get all that speed plus about 200 channels of uncompressed HD television. TV comes with a 2TB DVR that records 8 programs simultaneously, 1 TB of Google Drive cloud storage, and a Nexus 7 to use as a remote control. No data caps.

And the best part is that when Google tells you it is coming to set up your service, it will actually show up, no nebulous and Kafka-esque time slots, no being forced to take a whole day off of work only to wait in vain for the installation van that never comes. It’s almost as if Google is trying to embarrass the cable and phone companies that the rest of us have to put up with. “It doesn’t have to be this way,” whispers Sergey Brin in his vaguely Russian accent.

Why Fiber?

If you are one of the lucky few Kansas City natives to have already signed up for Google Fiber, I don’t begrudge you one megabit; your ancestors had to deal with the Dust Bowl, you deserve a little extra bandwidth. But at its heart, Google’s attempt at being its own ISP is much more about forcing the entrenched service providers — the Verizon’s and Time Warner’s and AT&T’s of this world — to step up their games than it is about making this particular business a raving financial success. When I asked the Google spokeswoman what the ultimate goal of all this was, she replied that Google wants “to make the web better and faster for all users.” The implication is that they don’t necessarily want to do it all by themselves.

The way I see it, Google must feel like we are still living in the age of the 56k dialup modem. According to the research group LRG, 90% of households in the US that have a computer at home now have a broadband Internet connection. That’s a staggering figure, a number that would have seemed unfathomable just 5 years ago. The problem, however, is that even with all our broadband connections, we still only rank 15th in the world according to Akamai’s fast broadband list. Think of all the innovation that has come about as a direct result of that broadband connectedness: The web as we know it has been completely revolutionized by Internet speed. Youtube, Netflix, Dropbox, Instagram, the list is endless. All this with speeds in 2012 in the US averaging around 6 Mbps. Keep up this line of thought and you realize the inherent value to Google in moving us all to the web’s next chapter; remember, Google is first and foremost an advertising agency masquerading as a tech company. Every major innovation it has introduced in the software and hardware realm — from Gmail to Android to Chrome — has been in service of expanding and refining its ability to advertise to you. And who knows, who has the slightest inkling how profoundly affordable gigabit Internet could change the way we all use the web. No, Google doesn’t really want to own the pipes you use to get online — it could care less who owns them — Google just wants new ways to sell you stuff. That whole process starts with the ISP’s, and if those dinosaurs are unwilling or unable to move fast enough — hey — maybe Google will show them how it’s done.