Google May Be Your Next Cable Television Provider

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Google May Be Your Next Cable Television ProviderIf you're fed up with escalating cable bills, fuzzy satellite television reception, and unresponsive customer service, Google (GOOG) is starting to think inside the box.

The world's leading search engine may be ready to launch a broadband television service as early as next year, according to The Wall Street Journal.

Hold up, though. Before you crank call your provider -- shouting "Google me" as you let out a menacing laugh -- it's important to realize that this rumored premium service would only be offered to select homes in Kansas City at first.

It's Kansas City, after all, that was selected as the test city for the Google Fiber initiative that will bring lightning-quick Internet speeds to some neighborhoods by early 2012. Sources tell the Journal that a former cable executive that Google recently hired is making the rounds with major networks and broadcasters to gauge their interest in participating in Google's pay television offering.

The talks may be exploratory, but the service makes perfect sense. There's a reason that cable companies bundle television, Internet, and telephone services as discounted packages. All three offerings come from the same wiring, so it's just good business to maximize that investment.

Finding Some Extra Coin Between the Couch Potatoes

Television is a $150 billion industry once you factor in monthly subscriptions and advertising. Google is not only the global leader in online advertising but the top dog in digital video advertising through YouTube. There is no reason that Google can't work with magnetic cable channels to deliver both subscription revenue and more effective display ad targeting.

Consumers aren't as loyal as you may think to their existing cable and satellite television providers. Consider some of the comings and goings at the leading players during this recent quarter.
  • Comcast (CMCSK) lost 165,000 net cable subscribers.
  • Dish Network (DISH) shed 111,000 satellite television accounts.
  • Dish rival DIRECTV (DTV) tacked on 327,000 more customers than it lost during the quarter.
  • AT&T's (T) U -verse gained 176,000 new homes.
That's a flurry of activity for the months of July, August, and September.

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Clearly there are a lot of people who are perpetually unhappy with their service. Google has several incentives to be a player here beyond simply Google Fiber in Kansas City and its pole position in digital advertising.

There's Google TV, the tech giant's poorly executed foray last year into smart television platforms. Google failed to get the major broadcasters and networks on board, leaving buyers of Google TV sets blocked from access to streaming content from cable channel websites. Rolling out a premium service in Kansas City could also mean making it available to Google TV owners elsewhere.

Oh, and we can't forget about Apple (AAPL).

Cupertino on the Couch

Several analysts believe that Apple will introduce a high-def television as early as next year. It was one of the last projects that Steve Jobs was involved with at Apple.

A television based on Apple's proven iOS platform will be compelling for many reasons, but it is Apple's healthy relationship with Hollywood that has to be worrying Google. It would be easy for Apple itself to throw its hat in the pay television market, and it gives Google every incentive to get there -- and grow -- before Apple dives into the water.

Everything in the tech world is basically boiling down to Apple vs. Google. It's happening with smartphones and tablets. The battle may as well break out in your living room, too.

One Can Only Dream

Wouldn't it be great if a pay television service actually let you pay for only the channels you want to watch instead of billing you for all of them in a package that has no reason or rhyme? Folks who watch Fox News may never click over to MSNBC -- and vice versa. Empty nesters may have no need for Nickelodeon. Somewhere out there, I'm sure, there's a guy who's never watched ESPN.

Cable pricing is out of whack, and that is largely the byproduct of channels that demand high rates for networks that few people are actually watching. If QVC went away, how many people would actually notice?

Every television viewer is different, and Google has a real opportunity here to roll out a service that has the viewer's best interest at heart -- and not the content creator's.

There will be resistance, of course, but Google has probably learned a lot since last year's Google TV gaffe.

There's a golden opportunity out there for Big G. All Google has to decide now is whether it really wants to be a television star.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.
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