> However going head to head with AT&T in Austin will not help this effort. AT&T is signaling Google and, more importantly, other potential gigabit internet service providers that it will compete with you and thus reduce your margins in a very capital intensive (i.e. risky) business.
Lots of firms with an established role in a market "signal" things like that when a competitor is heading to market with a new product ahead of them. Fewer of them follow through effectively.
The situation is very special in capital intensive industries like this. When you have to invest and thus borrow huge sums of money to create a business everyone involved is keenly aware that competition can put the entire investment at risk. Many times in the past firms and whole industries have gone bankrupt (e.g. cars, airplanes, steel).
This is why capital intensive industries typically are dominated by a small number, often just one, of big firms. This has been well studied in a branch of economics called Industrial Organization.
> The situation is very special in capital intensive industries like this.
Sure, if Google didn't have the money lined up for Austin when they announced Austin, AT&T's signalling could jeopardize it, but, because its such a capital intensive industry (and because its not Google Fiber's first time around the block, either), that's unlikely.
What would jeopardize Google Fiber's longer term effort is if AT&T actually delivered something in Austin that made Google Fiber there unprofitable (and even then, it really only threatens Google Fiber if Google doesn't perceivea greater benefit to its other services from getting widespread affordable 1Gbps service to consumers than the loss from continuing to expand Google Fiber.)
> This is why capital intensive industries typically are dominated by a small number, often just one, of big firms.
Yes, because its hard for anyone to get the capital to make the outlay to compete, regardless of "signalling" by existing market players. Usually, anyone who has the capital has a less-risky way to invest it than trying to break into a capital-intensive industry with established players.
However, if a big player in another major industry with enormous resources to which the actions of the established players in the capital-intensive industry are a risk (as is the case with Google vis-a-vis the telecoms) is involved, there is a different story, as that player's interest in the industry extends beyond the gains that can be made in that industry. (Actually, that doesn't change the long-term trend of concentration, it just makes it more likely that the trend will be bucked in the short-term by the introduction of a new player.)
Lots of firms with an established role in a market "signal" things like that when a competitor is heading to market with a new product ahead of them. Fewer of them follow through effectively.