Free Wi-Fi? Get Ready for GoogleNet.

From Business 2.0

What if Google (GOOG) wanted to give Wi-Fi access to everyone in America? And what if it had technology capable of targeting advertising to a userís precise location? The gatekeeper of the worldís information could become one of the globeís biggest Internet providers and one of its most powerful ad sellers, basically supplanting telecoms in one fell swoop. Sounds crazy, but how might Google go about it?

First it would build a national broadband network -- let's call it the GoogleNet -- massive enough to rival even the country's biggest Internet service providers. Business 2.0 has learned from telecom insiders that Google is already building such a network, though ostensibly for many reasons. For the past year, it has quietly been shopping for miles and miles of "dark," or unused, fiber-optic cable across the country from wholesalers such as New Yorkís AboveNet. It's also acquiring superfast connections from Cogent Communications and WilTel, among others, between East Coast cities including Atlanta, Miami, and New York. Such large-scale purchases are unprecedented for an Internet company, but Google's timing is impeccable. The rash of telecom bankruptcies has freed up a ton of bargain-priced capacity, which Google needs as it prepares to unleash a flood of new, bandwidth-hungry applications. These offerings could include everything from a digital-video database to on-demand television programming.

An even more compelling reason for Google to build its own network is that it could save the company millions of dollars a month. Here's why: Every time a user performs a search on Google, the data is transmitted over a network owned by an ISP -- say, Comcast (CMCSK) -- which links up with Google's servers via a wholesaler like AboveNet. When AboveNet bridges that gap between Google and Comcast, Google has to pay as much as $60 per megabit in IP transit fees. As Google adds bandwidth-intensive services, those costs will increase. Big networks owned by the likes of AT&T (T) get around transit fees by striking "peering" arrangements, in which the networks swap traffic and no money is exchanged. By cutting out middlemen like AboveNet, Google could share traffic directly with ISPs to avoid fees.