Author(s): Raghu Gopal
In early 2016, a start-up called Starry appeared, announcing that it was looking to disrupt the home broadband market in the US. The company said it would use millimetre-wave technology for "the last mile", beaming connectivity from building rooftops (see Starry Internet). Historically, such challenger companies have struggled to undermine existing service providers, but Starry is still showing signs of life.
Starry's initial goal is to provide Internet access to apartment buildings in downtown areas. It's pitching a fixed wireless service that offers speeds of up to 200 Mbps, for $50 per month with no caps on data usage. The company claims to have pioneered the use of millimetre waves as an alternative to fixed-line broadband. It says it uses 38 GHz spectrum, which is a far higher frequency than what's currently used by wireless providers.
From its beta launch in Boston in 2016, the company's coverage passes over 350,000 households in the area. In January 2018, Starry expanded its service to Washington DC and Los Angeles. In July, it closed a $100 million funding round from investors including Tiger Global, KKR, FirstMark Capital and others. The company plans to use the funding to bring its service to 14 additional markets over the next year, including New York, Chicago, Seattle, Cleveland, San Francisco, Portland and Indianapolis.
Last week, Starry announced that it's partnering with the Boston Housing Authority to launch a pilot programme geared toward providing free or low-cost Internet to housing authority residents. The initiative, called Starry Connect, is in trial mode, offering free Wi-Fi in communal areas of the authority's apartment buildings. The partnership is part of the city's longstanding efforts to make high-speed Internet affordable to its residents; according to the agency, 20 percent of people living in Boston don't have access to broadband Internet at home. Starry is likely to introduce additional services, including paid services, for residents of public housing later in 2018.
Starry hopes to challenge providers of residential fixed Internet services in downtown areas, but it will soon go up against major US wireless carriers that are looking to fixed wireless access as a springboard for mobile 5G. Fixed wireless services using 5G will be launched in several areas in the US later in the year.
Although Starry will be taking on well-known brands such as AT&T, Comcast's Xfinity, T-Mobile and Verizon, there's a clear need for broader competition as well as pockets of opportunity to compete. That said, Starry will need huge capital investment given the propagation limitations of millimetre-wave spectrum. The US will be a leading market for fixed wireless access using millimetre wave, but the business model remains highly uncertain and we expect fixed wireless to represent a very small proportion of 5G connections over the coming years.
Furthermore, Starry's service will face competition from wireless carriers heavily densifying urban 5G networks during the coming years. As the economics for 5G will be largely based on scale, this will be a further challenge. We commend the start-up's innovative approach, but we believe it will need to concentrate on niche markets, particularly where it can partner with local municipalities. If Starry hopes to burn brightest early on, it's likely to burn out young.