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Big budget cuts ordered for Google Fiber, likely putting the brakes on rollout

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Google’s ambitious fiber broadband plans have cost the company quite a bit of money, and were said to be worth the cost as recently as this year. Reality might be a different story altogether, as it now appears Google Fiber is the target of some substantial budget cuts.

A report in The Information claims Alphabet chiefs Larry Page and Sergey Brin have ordered huge cuts to the operating expenses of Fiber. Half of Google Fiber’s 1,000 employees stand to lose their jobs, and it might mean the postponement and possible cancellation of any future projects until questions on how to complete the rollout in a cost-effective manner are answered. Alphabet is Google’s parent company.

The problem lies in the sheer cost of building out these fiber-optic networks. An earlier story by Recode suggested that the rollout in Kansas City — the first city to be wired by Google five years ago — cost Alphabet some $1 billion to complete, and future rollouts will likely cost far more.

As a result of the substantial cost, Fiber has the daunting task of trying to attract enough customers to offset those expenses. Google execs in 2011 — in the days before the Kansas City network was switched on — bragged about customer numbers of five million within a few years in networks coast to coast, but actual results have been nowhere close to that.

Fiber is now in seven markets — Salt Lake City being the most recent — with five other installations expected to go online in the coming months. However, sources tell The Information that actual subscriber numbers are nowhere near the company’s original projections.

A Wall Street Journal story earlier this month also suggests that Google isn’t sure its current strategy of fiber-to-the-home is the right one, and may use wireless technologies instead to accelerate its rollout. Using wireless would cost Alphabet a fifth of what it costs for a fiber rollout, although Page apparently wants it to cost half that.

The result of Fiber’s apparent struggles seem to also be causing some disagreement among Alphabet’s top brass. While Page seems to be serious on getting costs under control, Google and Alphabet Chief Financial Officer Ruth Porat has apparently stepped in to argue that the costs are justified, The Information reports.

Confusion over what the future of Fiber might be could also be why its CEO Craig Barratt apparently considered leaving the company earlier in the year, and might further imperil future rollouts amid leadership questions if Barratt would end up leaving the company..

Representatives for Fiber have declined to report on the rumors.

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