From Google News

AT&T Inc. is following plans by Google Inc. to offer ultrafast Internet service in Austin, Texas, by the middle of next year, focusing the service on neighborhoods that demonstrate the most demand.

The build-out promises Internet speeds of up to a gigabit per second, or about 100 times faster than those found in many U.S. homes. But it poses a conundrum for some advocates of faster Internet service.

The upgrade is economical because the carrier is targeting the most promising areas. That means communities that can't afford fast Internet could fall further behind on the digital curve.

The issue could become more acute if experiments like this one in Austin and Google's earlier effort in Kansas City, Kan., begin to spread across the country.

AT&T Chief Executive Randall Stephenson expressed an interest in building out fast Internet service in other towns and cities now that the terms are improving.

"They're actually beginning to accommodate and tailor terms and conditions that makes it feasible for us to invest," Mr. Stephenson said at an investors conference in New York last week. "That being the case, you will see us do more and more cities around the country."

Google said in April it would expand its own fiber-optic network program to Austin. At the time, AT&T committed to upgrading its Internet and video service in the city if local authorities gave it the same terms.

AT&T said Monday it will begin offering upgraded service with speeds up to 300 megabits per second in December, with higher speed 1 gigabit service available in mid-2014.

AT&T already sells its U-verse Internet and video service in Austin. The service uses fiber optic cables, but the fiber needs to be extended to buildings for the new higher-speed connections.

The carrier didn't disclose the prices for the service but will open a website Tuesday where Austin residents can ask to have the service extended to their neighborhoods.

Google used a similar model in planning its Kansas City high-speed networks to only reach neighborhoods guaranteeing high demand for the service through preregistrations. In Kansas City, Google charges $70 a month for its ultrafast Internet service, before taxes and fees.

Most cable and phone companies were required by franchise agreements with regional governments to build out most of the markets they entered, regardless of demand. Doing without that requirement allows the company to avoid spending money laying cables that might never be used.

Lori Lee, senior executive vice president of AT&T Home Solutions, said the company is still talking with local regulators, but it is confident that its plans will proceed on time.

The arrangement will bring much faster service to subscribers than otherwise would have been possible. But there is concern that poorer people and rural areas will get left behind.

Broadband Internet access already has a strong economic component. According to the Pew Research Center, about 54% of households with less than $30,000 in annual income have broadband access at home, compared with 88% of households making at least $75,000. Even where broadband is available, some 100 million U.S. residents don't subscribe.

Advocacy groups say the experiments need to be watched carefully.

"Our concern is that we lose this notion of a public network and public infrastructure when service is determined only by where a company's bottom line takes it," said Matt Wood, policy director at Free Press. "These experiments are local, but they are probably the blueprint going forward for nationwide policy."

–Ryan Knutson contributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com