[Updated, 10:10am. See below] When it comes to buying home broadband service, there hasn’t been an abundance of choices. If you have at least two decent options—say, Comcast and Verizon—you’re in the lucky half of the population. One-quarter of U.S. households have no choice at all.
But that’s all starting to change, and the cable giants aren’t the only companies battling to provide more options to consumers. One Boston startup, Starry Internet, is gambling that it can win big by bypassing the existing wired infrastructure and charging less for wireless Internet access—making the business so unprofitable that the larger players walk away. And the startup is doing that by deploying an array of advanced wireless technologies.
It’s a startling vision, given that the big Internet service providers like Verizon, Comcast, and AT&T have long charged consumers $70 per month or more—much more, sometimes—for fast Internet, often in combination with TV and phone service. Those big carriers “have gobs and gobs of money,” says Starry’s CEO, Chet Kanojia. “But their business model requirements are such that they’re not interested in deflating the market from a price perspective. And that’s our stated charter: to make broadband as ubiquitous and as low-cost as possible.”
Starry has built a team of 110 employees in Boston and 25 in New York to pursue that vision. And investors such as FirstMark Capital, KKR, Tiger Global, Fidelity, IAC, Quantum Strategic Funds, and HLVP have put lots of cash behind it: $63 million to date, with another $55 million in Series C funding about to arrive.
Kanojia has a history of raising big sums to take aim at entrenched powers—with mixed results. At New York-based Aereo, he built a service that let users watch over-the-air TV programs on Internet-connected devices. Aereo raised $97 million and signed up tens of thousands of users. But it had to shut down after broadcast networks won a copyright infringement suit in the U.S. Supreme Court in 2014.
Starry Internet’s service—which is available only in Boston so far (more on that below)—costs $50 per month for 200 megabits per second, with no caps on data consumption. For comparison, Netblazr offers a minimum of 100 to 500 megabits per second, depending on the quality of a building’s wiring, for $60 per month. Comcast’s Xfinity brand offers a variety of Internet-only packages, starting at $40 per month for 25 megabits per second and $60 per month for 75 megabits per second, all the way up to $225 per month for 2 gigabits per second. (Most people get their Internet service in bundled form, making it difficult to price the Internet portion alone.) [Comcast sentence updated with high-end plan—Eds.]
The story of how Starry plans to outflank competing ISPs is all about the choices embodied in the company’s technology infrastructure. And it’s one that hasn’t been told fully in the mainstream press. I met with Kanojia last month at the company’s downtown Boston headquarters, and he explained why Starry went with a complex and finicky method of wireless communication over simpler alternatives; why the service comes with its own proprietary home Wi-Fi router, the “Starry Station” (pictured above); and other intricacies that don’t make it into the company’s usual press pitch.
It’s a story that hinges on geeky terms like “active phased array,” MU-MIMO, and OFDM. But it’s worth unpacking, because it shows how risky technical choices can be worthwhile if they’re driven by economic logic. In the end, Kanojia says, “It’s all about getting your cost down.”
First, a bit of history. For most Americans, getting a home broadband connection was long an all-or-nothing proposition. You could get online as part of an expensive voice-TV-Internet bundle from whichever cable or phone company had a monopoly in your neighborhood, or you could basically go without. The alternatives—dialup, DSL, satellite, microwave line-of-sight—were either slow or expensive, or both.
Around 2005, things started to change, at least for the lucky residents of a few chosen cities. Verizon, AT&T, Google, and others began building fiber optic connections to individual residences. More widely, they and other providers like Comcast, under pressure from consumers, began to unbundle Internet service from video subscriptions. [This sentence updated to reflect consumer pressure—Eds.]
That allowed a generation of users to become “cord cutters” or “cord nevers” who eschewed cable subscriptions in favor of Netflix and other forms of Internet-delivered TV. But most cord cutters were still getting their Internet-only service from one of the big telecom or cable companies.
Then came something even newer: wireless Internet service providers or “WISPs” who let consumers sidestep the telecom giants entirely and get very fast service—100 megabits per second or more—via point-to-point radio connections. Service from WISPs such as Webpass and Netblazr came first to residents of large buildings in big, wealthy cities like San Francisco and Boston. (Full disclosure: I’ve been a happy customer of both Webpass and Netblazr. Webpass is now part of Google Fiber.)
Starry is something different still. … Next Page »
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