Tuesday, May 17, 2016
How Rise Broadband Is Creating A Wireless Broadband Giant
In a world of increasing importance of Internet connectivity, there's an insatiable appetite for faster, broadband Internet access. However, that high speed access is often hard to get--particularly in more rural and suburban areas. Englewood, Colorado-based Rise Broadband (www.risebroadband.com) is capitalizing on that hunger for high speed, Internet access, via what is a fast growing, fixed wireless broadband Internet network. We caught up with Jeff Kohler, Co-Founder and Chief Development Officer of Rise, to hear about how the company has grown to serve nearly 200,000 customers across 16 states, and now has over 800 employees and more than $145M in annual revenues.
For those not familiar with Rise, tell us a bit about your business?
Jeff Kohler: We started the operation in 2006. We are largely an industry consolidator. There are a couple of thousand wireless ISPs in the United States, which are typically small companies that provide broadband services normally underserved, or unserved by other broadband providers. Those ISPs have an average size of about 1200 subscribers. Over the course of the last 10 years, we have acquired 113 of those small companies, mostly focused in the Midwest and the Western part of the United States. We have now grown to 185,000 subscribers, through a combination of these acquisitions and very aggressive marketing of our services.
That's quite a few acquisitions to digest—how did you manage that?
Jeff Kohler: For a long period of time there, we were almost acquiring a company a month. For example, in the State of Colorado, we have acquired 35 companies. The same could be said of Utah, and we acquired around 35 companies there. The reason for the M&A activity in this space, is there are mostly small companies, who are under-capitalized. We're in an industry, where people's appetite for broadband is really limitless. The problem, is these small companies are often forced to have to reinvest, and reinvest, and reinvest in their network infrastructure on their tower, to deliver a decent, competitive service. That's where lots of the companies hit a wall. They either can't make it to that next round of investments, or prefer not to make those next rounds of investments. That's really what's fed that pipeline of acquisitions.
What's your background, and how did you end up here?
Jeff Kohler: I spent 25 years in the wireless industry, with AT&T Wireless, and also was an investment banker. I used to raise money and do M&A for wireless companies. During that time, I used to get approached all of the time by these small, wireless ISPs, looking for their next round of capital to make those investments in their network. But, all of them were just too small to raise money to do those things. That's where I initially got the idea, that if you could put together enough of these ISPs in one, larger, company, you could actually have a very, profitable large business. That would make it able to reinvest into the business, over and over. That gave birth to the idea of JAB Wireless Inc, which is the legal name of our company. Last year was when we changed our brand to Rise Broadband, to operate under one name.
Why is it that when you scale up this business, you're able to make those reinvestments and make the business so much more profitable?
Jeff Kohler: The biggest thing for us, is you have to pay for the bandwidth that feeds the network, the Internet service. We're able to buy that in bulk from large providers such as Winstream or Level 3 or CenturyLink, or AT&T. That's how we access the Internet. Doing that in large scale, you can do so much more inexpensively than a small provider. On the other side, with equipment purchasing, with the radios we have to put on the towers and put at the homes we serve, we end up with a very, significant price advantage in purchasing, because our company has scaled to be so large. Those are a couple of the big ones. The others are marketing resources, things like mass mailers and so on, where we're able to leverage our brand. We've become fairly well known in suburban and rural areas.
Is satellite Internet competition to what you do?
Jeff Kohler: We actually get very little competition from satellite. Satellite ends up being the solution just for remote, unserved areas. I would classify us as more of a rural, suburban type of provider. Satellite is truly the service of last resort. The reason for that, is satellite capacity is so limited, that cannot offer what we call the gigabyte level of monthly data allowance. A satellite plan typically only provides 5 to 15 gigabytes per month, and you have to pay extra for anything over that. Our average customer uses 95 gigabytes per month, and that's just the average. Our plan will typically allow from 150 o 250 gigabytes. To get satellite service comparable to our service, it would cost you $700 to $800 in satellite usage, just to handle as much data as our average customer. That doesn't make any sense, when they can pay $50 for us and have great usage and faster speeds. And that's not even considering latency in satellite. They have a latency of well over 100 milliseconds, and that really makes it difficult to run things like gaming, home phone service and VoIP. You just can't do that via satellite, and you can't even access your workplace VPN. Satellite is inferior, and not really scalable for these other services.
What's the technology behind your network, and the recent speed upgrade?
Jeff Kohler: The technology that we are adopting, across large parts of the network, is LTE. That is Long Term Evolution. That's actually the same, global standard that virtually all mobile carriers around the globe are adopting. Typically, wireless ISPs like us have used technology from smaller companies or proprietary technology. But, just within the last six to 12 months, the LTE global standard has been adapted to work in a fixed, wireless environment, versus a mobile environment. We're seeing equipment available in that fixed environment, which means we're able to quadruple our capacity, from the same type of radio, from the same towers. We're finding we can service three to four times the companies from the same radio on that same tower, and provide twice the speed.
Where do you see the growth coming for in the wireless broadband market now?
Jeff Kohler: The growth in this market really comes from a couple of things. One, is there is always a growing dis-satisfaction from people who are still on DSL. DSL is somewhat of a dying area, and in rural areas, where there are aging copper networks with DSL available, the speeds peak out at maybe 5 to 12 Mbps. The slow death of DSL has really been contributing to our growth. The other piece, that really contributes to what we're doing, is because of the increasing usage of the Internet. People are using the Internet 40 percent more than the previous year, year over year. Part what is driving that, is people turning to the Internet for their video solution, for their telephone solution. We have an opportunity to bundle more product and services, and providing more services to the same homes we were serving the year before.