Everyone knows that Google is the least evil corporation in the world (or so we’re told) and that’s why nearly everyone is celebrating Google’s plans to show those greedy ISPs the proper way deploy broadband networks.  Google cares more about doing good than making a quick buck while those greedy telecoms and cable companies care more for their profits than giving us the ultrafast broadband networks we deserve.  [♪ queue John Lennon's "Imagine" ♪] Now just imagine how much better the world would be if the ISPs could only be more like Google.  In fact, let’s quantify all the good that could be done by projecting the kind of jobs and investments that ISPs would be making if they were more like Google.

Google in 2008 had $21.8 billion in revenue and they spent $2.36 billion in capital expenditures (CAPEX) and they employ nearly 19.8 thousand workers.  The CAPEX spending also produces more jobs because the companies that sell goods and services to Google can employ more people.  AT&T took in $124 billion in revenue in 2008 which means they should be investing $6.9B and employing 112,593 workers if they were good like Google.  So let’s see how greedy AT&T is by looking at their actual numbers.  AT&T in 2008 spent $20.3B in CAPEX and they employ 288,660 workers.

Wait [♪ stop the music ♪], AT&T spent more and employed more as a proportion of their revenue than Google?  Looks that way and AT&T would have to lay off 176,067 workers if they wanted to be “good” like Google.  In fact if we included other major ISPs like Verizon and Comcast, the three major ISPs would need to lay off 391,892 workers and cut CAPEX by $16.2 billion to be more like Google.  The reduced CAPEX spending would cost even more jobs in the telecommunications industry that supports the telecoms and cable industry.  Google’s stinginess actually isn’t a surprise since the dotcoms who want Net Neutrality invest and hire ten times less than the Internet infrastructure companies they want to rein in with onerous regulations.  And if those regulations pass and kill the open bandwidth market, the ISPs might literally start looking more like the dotcoms in terms of their spending and hiring and that would be a real tragedy.

It sure looks like Google is doing “good” when it comes to stock valuations but not so good when it comes to putting jobs and investment over profit.  With less than half the earnings of AT&T, Wall Street values Google at a market cap of $170.8B while AT&T is only valued at $148.67B.  It would appear that investors see less liability in the relatively stingy CAPEX spending and the stingy payroll that Google operates and rewards them with higher valuations.  It turns out that if Google hired as many people and invested as much as AT&T as a proportion of their revenue, they would have to add 30,940 jobs which is 2.6 times the current levels and they would need to spend an additional $1.22 billion in CAPEX.

Now it appears that Google might be spending that extra billion in CAPEX and hire some extra workers if they actually go through with their plan to implement their experimental gigabit broadband network.  But Martin Peers of the Wall Street Journal thinks that we might want to hold the applause based on similar concerns I raised that Google’s Broadband plan doesn’t scale to national levels.

It’s no accident that Google has no intentions of deploying nationwide because they’re simply going to cherry pick the cheapest regions to deploy where the fiber runs are the shortest, the regulations are least onerous, and where they can deploy cheap aerial cabling.  It’s highly doubtful that Google will target the 6% of homes in American that have no wired broadband today because those homes can cost many times more at $10,000 per home to wire.  Google at most will deploy their broadband service in 1 out of 600 people but will probably settle closer to the low end projection of 1 in 6000 people because it’s unlikely they’ll want to double their CAPEX spending and be more like the ISPs.  At the end of the day they’ll simply claim that their cherry picked deployment should be a model for the rest of the nation’s broadband providers to follow even though the argument is absurd.

[UPDATE 11:20PM - Rich C. pointed out in comments that Google actually slashed their CAPEX spending in 2009 by nearly 66% down to $809M even though their revenues increased.  It doesn't sound like they're interested in doubling much less sustaining their CAPEX spending.  So as stingy as Google was about spending in 2008, they're even more stingy in 2009 by cutting CAPEX and laying off workers.]

While it’s possible that something good can come of this and some lessons could be learned, there’s nothing wrong with a little bit of healthy skepticism.  So before everyone jumps on the Google = good and ISP = evil bandwagon, let’s examine the facts and take their broadband plan with a grain of salt with cautious optimism.