Google: Real Estate's New Rainmaker?

Google's recent announcement that it will begin building and testing an experimental cutting-edge broadband network in select cities was the opening shot in the Internet speed race. Headlines have focused on telecom and cable companies running scared as the Mountain View, Calif. search giant wires up to 200,000 residences with Internet service 100 times faster than what's currently available.

But, in an age where speedy Internet access is as vital to a home's basic utilities as running water, the bigger issue may be what Google's grand experiment means for the average homeowner. Will Google become a real estate rainmaker?

As Om Malik noted on GigaOm, Google's fiber-optic plan has been estimated to run between $3,000 and $8,000 per home at a total cost of $60 million to $1.6 billion. Not too rough for a company with $25 billion in cash, but an unlikely proposition--at least initially--for existing broadband providers.

For residents of the select communities hand-picked by Google, connection speeds will reach 1 gigabit per second, as compared to current "high-speed" home Internet connections which often function at less than 10 megabits per second.

Right out of the gate, the drastic inequity of access is likely to play havoc with real estate values, inflating the prices of homes with Google service, much the way homes in good school districts sell at a premium. Not surprisingly, cities such as Houston, Portland, Ore., and West Sacramento, Calif., have launched lobbying campaigns on Facebook in an effort to be among the chosen.

"If Google only opens up this service in certain metropolitan areas, like San Francisco and Portland, where real estate already sells for a price premium," UCLA economics professor Matthew E. Kahn tells, "it will further elevate prices in those areas." Kahn instead suggests that troubled cities such as Detroit should consider paying Google to select them as a Google Zone to help stimulate the local economy. "Detroit could become the capital of, say, digital animation, if it had access to Google's network," he says.

Already, the telecom and cable companies have been stratifying the broadband landscape. Verizon, for example, has colonized the New York suburbs of Westchester County with its FiOS fiber optic network, while nearby residents of Connecticut's Fairfield County must settle for AT&T's slower and inferior U-Verse service.

But Google's ultra-fast proposition has the ability to warp the real estate landscape in ways previously unimaginable. In Los Angeles, data-rich information businesses might encourage their employees to work from home instead of braving the daily smog-clogged commute. No more traffic jams? In the past "location, location, location" referred to crime-free blocks and proximity to cultural diversions. But now a bad neighborhood could turn "good" just by getting a shot of Google's speedy Internet juju.

With its broadband test, Google clearly intends to encourage usage of its YouTube video service, but other functions will quickly emerge. Imagine downloading all the music ever recorded in less than an hour. Or flipping between radio stations around the globe with no dropout or delay. The porn business would probably benefit, but so would online universities. Will we ever leave our houses again? Not unless there's enough bandwidth to beam beer into your man-cave.

Google has its reasons to explore the outer reaches of Internet access, creating an online testing ground for its next generation of whiz-bang products. It also hopes to urge the Federal Communications Commission to accelerate its establishment of an open-access high-speed landscape.

Meanwhile, homeowners can fantasize about the real-estate windfall they will no doubt enjoy if the Google fairy lights upon their humble abode and opens up a can of 21st-century warp-speed whupass.

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