For over a decade, the fiber industry has been focused on the metro and middle mile as the path to success. But having solved that business model, some in the industry are now turning their attention toward what has been a harder nut to crack -- fiber to the home. GoNetSpeed is a recent entry in that arena, launching its services in the Pittsburgh metro area and in suburban Connecticut. With us today to talk about the opportunity they see and how they are taking advantage of it are two familiar faces: the company’s president, Larry Coleman, and its COO, Tom Perrone, veterans of Sunesys and Fibertech/Lightower, respectively.
TR: How did GoNetspeed get started?
LC: After the Crown Castle/Sunesys and Lightower/Fibertech deals closed in August 2015, Frank Chiaino reached out to me about another venture doing fiber to the home stuff. And I'll be honest with you, I wasn’t sure about it, because I knew how to do fiber but I wasn’t a consumer-oriented guy. But after thinking about it, and meeting with Frank and Tom, we decided to give it a go. That was in May or June of 2016. I think we had the entity up and running by the fall and started on the applications for CLEC status and other regulatory issues. In early '17 we had our act together and we applied for permits in Pittsburgh. Now we're in Connecticut, and we're rolling forward.
TR: Fiber to the home and the consumer space are a world apart from the wholesale and enterprise metro fiber you did at Sunesys and Fibertech. What drew you to them?
LC: It's really about fiber densification, with fiber to the home being the primary customer. Neither Sunesys or Fibertech or now Crown Castle now, build down every street, although if they're going after the small cell and 5G, they're getting denser. But, we will literally be down every block in every community that we build.
TP: We have some of the same mentality that both Fibertech and Sunesys were successful with by building fiber to the underserved areas. This is kind of an extension to the last mile, going down every side street. If you think about where the industry is headed with streaming video, home automation, the Internet of Things, and how the home is embracing all of that technology, you need that to have fiber.
LC: In both of our models previously, we initially built for an “anchor tenant" whether it was the schools or the hospitals. That's how your network got out and you expanded it from there. At GoNetSpeed, our anchor tenant is fiber to the home.
TR: How different is it do build out an FTTH network versus the metro and regional networks you have built in the past?
TP: There are some differences in how you market it and how you support more of a volume-based subscriber. But building the fiber out there is not much different. The nuts and bolts of how you apply, construct, and continue to build are all very similar. I think that every one of us has a little bit of a consumer in them. We can each speak to who our incumbent provider is and how we like or, usually, dislike them. We see a need and a big opportunity out there to build this infrastructure, and the landscape has changed such that there is a business plan to do it. It is kind of the next frontier.
LC: The bricks, the basic foundations, the lit services management, network performance, the good customer support -- it’s all exactly the same as what we each did with Fibertech and Sunesys. The customer has changed a little bit but your customer is really yourself. Everyone has the same story -- they're tired of the cable or phone company, tired of their tricks, tired of the bundling, tired of downtime, tired of getting told that they're going to get 100 meg and really most of the time only get 20 meg, and all of those things. It’s refreshing for us to build it the way we've always built it and build it right and provide the customers with a service that people appreciate.
TR: How did you choose the Pittsburgh metro area and Connecticut as your first markets?
TP: We do both have experience in these communities and can leverage existing relationships, but we took a number of elements such as density and competition into account as well. We could have picked from a lot more, because one intriguing about the whole business plan is that this could go on for a long, long time. It’s not just a few underserved cities based on large businesses and schools, we're talking about densities of residents scattered throughout the United States.
LC: One primary reason we're in those markets is that we needed fiber to get us to the internet, and In PIttsburgh and Connecticut we already understood the infrastructure that was in place. We weren't going to build 30-mile connections back to the internet PoP. We knew where a lot of existing fiber was, and we got agreements with the incumbent providers to do transport for us over dark fiber.
TR: What does your network infrastructure look like today? What parts do you build versus lease?
TP: We're building from the living room back to our PoPs. Each area is a little bit different but consider Ambridge, Pennsylvania, about 15 miles outside Pittsburgh. We're building out the entire community of Ambridge, and we will either take down some existing fiber back to Pittsburgh or well build it ourselves if the residential and small business play supports it. But even when we do it's really not about that backhaul fiber, it’s the fact that we're building fiber densification down every street. Aerial fiber is our first preference. We're coming off of the backbone or the main pole line, we drop to the house, pull it directly into the house, and demarc it in the room that they're looking for service in.
LC: And, because of our experience, we are pretty confident we're building as or more efficiently and economically than anybody that's out there. We can build it for fewer dollars and on a quicker schedule.
TR: What sort of regulatory hoops do you have to jump through?
TP: We follow the normal process for rights of way while communicating with public officials on what we're trying to do for their community. They are embracing that because they've been trying for years through RFPs and public funding, trying to find ways to get fiber built in their town. We’re a private company with private funding, and so we're being welcomed with open arms; we’re being asked how they can help.
TR: How do you choose what neighborhoods to start off with?
TP: We picked a few spots to start the builds and marketing-based density, competition, and demographics. Then, where we go next is based on interest. We're looking for the folks that live in and around these areas to go on our website and check their address to see if there's service available. If there isn’t and they continue to give contact information, we can see where the biggest interest is to build next.
LC: If you looked at all the communities that we are currently live in, they're not identical, cookie cutter communities. They are across the whole tapestry of demographics. One reason for that is we want to prove the concept that this is not just a one-trick pony for well-to-do communities. Another is that we're not pricing it out of reach of anyone. I think the truth is that the incumbents aren't serving the need.
TR: How do you approach competing with the big cable guys and ILECs?
LC: We're in Comcast territory, and we’re in Verizon territory. Some of that territory may have their latest, and they may have a fiber going through the town. And they would advertise that they would offer these services on their website. But the reality is there's not many of those high-end services being taken in those communities. With that being said, if you go back 10 years or more when Fios was built, they specifically targeted communities. We're not building exactly like that, so we're not targeting those exact communities. But some of the fringes could extend into the communities that we're at. But right now there's a demand and it is not being met. We serve cord-cutters who want to be able to get what they want over the internet with unrestricted bandwidth
TR: How do you price your services?
LC: We're not competing so much on price, we're not trying to undercut anyone. It's that's what our model says will work and what it says that the consumer will pay.
TP: We're not trying to be the cheapest game in town. We feel that we're the best value, and that enables us to compete at any level regardless of what's there. We promise existing customers that we won't raise their rate for as long as they're customers with us, even if they were to move to another area that was served by GoNetspeed.
TR: What new markets might be next on the drawing board for GoNetSpeed?
LC: Obviously, we'll obviously we'll be expanding organically in those markets that we're already in. It’s not a final target yet, but we do have third and fourth markets are tentatively targeted for late 2019 and into 2020. They are still being formulated, but primarily we are looking at the East Coast. We haven't limited ourselves, but Florida could be on it as well as other places in Pennsylvania and New York.
TP: I think it's important that there's a lot of opportunities in the neighborhoods that we have started in. The three Connecticut markets, as well as Pittsburgh, have a lot of residents and we're making a commitment to these communities that if they continue to show interest then we will continue to invest.
TR: How close are your current markets to the threshold justifying your investment?
LC: Our model has a take rate that puts us where we hope to be, and that's exactly what we're proving out right now. That's why we're in the different communities, not all the same community. We are on track to hit the take rates and we expect to get there within the next 12 months. We think the timelines all fit the model.
TR: What’s the biggest challenge ahead of you right now?
TP: I think it's inventing the name and raising the awareness. In the very beginning, when we didn't have anything, we would have to say, "Have you ever heard of Google Fiber? We're kind of like a private Google Fiber." Now we can say, you know, "We're serving 14 communities in two different states” and point to GoNetspeed’s reviews. But to reach every home and get a household name, like Kleenex or something, that's the biggest challenge.
LC: Of all of our experience, that's where we have the least depth. We know how to market to business and wholesale from our experiences at Sunesys and Fibertech, but we have to prove that we can market to consumers.
TR: Will you be adding consumer services beyond bandwidth?
LC: When we sold Enterprise services under our different respective companies, two of the major selling points were price stability and control over their bandwidth. It is the same driver for the consumer. A gig is a lot of bandwidth for a home. We are empowering consumers to make choices. We serve cord-cutters who want to be able to get what they want over the internet with unrestricted bandwidth. Some people are primed for that. For others who just want to get the Steelers or the Eagles, we provide some helps on our website to direct them to Hulu, YouTube TV, Dish, or whatever.
TP: The future is the Internet of Things and everything will be streaming. For us to put money into building those products and delivering them under our name and our name only would be, to me, a silly move. You would be building legacy into your own company from the greenfield. Basically, we want to be a neutral internet service provider (broadband highway into the home) and let the consumers decide what streaming services they want to buy directly from the providers that supply it.
TR: Thank you for talking with Telecom Ramblings!