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Google Fiber is ending a free-Internet offer in its first city

What the changes in Kansas tell us about Alphabet unit's ambitions.

Google Fiber

When Google Fiber first arrived, it came with a compelling pitch: Pay a one-time construction fee, and you get Internet access for free after that.

Now Fiber is dropping that option for new subscribers in Kansas City, its first market. In its place are two new plans: A faster option, Fiber 100, that costs $50 per month with no construction fee or contract; and a broader implementation of its agenda to wire economically underserved neighborhoods for free.

It’s unclear what Fiber’s exact motivation is here. A rep confirmed the pricing changes, but declined to comment further.

So let’s speculate!

It could signal that Fiber — the most expensive unit for parent Alphabet, besides Google — is facing more pressure to turn into a viable, competitive broadband and cable business. That means reaping real margins. And the new pricing model — no more wiring up houses essentially for free — could help Fiber get to better margins.

The pricing change could also be a way to get more subscribers onboard. Fiber hasn’t shared how many subscribers it has or what plans they choose. But by scrapping the free tier, Fiber will also stop charging a substantial initiation fee that may have kept subscribers away. The free option, which is still available in Fiber markets Austin, Texas, and Provo, Utah, required a $300 installation fee but no monthly payments thereafter.

The new plan doesn’t require that; perhaps it’s an attempt to go after more urbanites — think apartment complexes — that may balk at installation fees. It’s also faster: 100 megabit-per-second download and upload speeds, versus 5 megabit downloads and 1 megabit uploads for the free tier that’s being retired. Incumbent rivals, like Comcast* and Time Warner Cable, have similar offerings.

Finally, the price tweak underscores how Fiber is fiddling with various methods in its expansion into new cities, something it has set out to do much of this year. Fiber played by a relatively similar operational plan in its early cities, but has diverged since. In Atlanta, for instance, Fiber launched without a free tier. It has also moved to ship fiber to several more urban communities, a plan that could, at minimum, increase Fiber’s name recognition.

It’s still offering a free Internet service in Kansas City, although it will come from a program — coordinated with the Obama Administration — to reach as-of-yet-unspecified “digitally divided neighborhoods.” While Fiber is clearly committed to this project and potential subscribers, they aren’t the paying ones that will help in building out a profitable cable business.

According to correspondence sent to current Kansas City subscribers, Fiber users who are on the free tier currently have until May 19 to keep their initial agreement, which lasts seven years. There and other markets, Fiber also offers a $70-per-month option for super-fast “gigabit” Internet, and another at $130 per month that also includes TV service.

Fiber doesn’t sell many TV subscriptions. Some of its bigger competitors have recently cut prices to match or undercut Fiber’s offerings in its new markets, although the nitty-gritty of the plans differ.

* Comcast owns NBCUniversal, an investor in Re/code parent company Vox Media.

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