Fast company logo
|
advertisement

CONNECTED WORLD

This startup aims to green broadband deserts with an old-school idea: Get customers to pay for the network up front

California-based Next Level Networks flips the broadband script and builds a fiber network only after securing a customer base.

This startup aims to green broadband deserts with an old-school idea: Get customers to pay for the network up front

[Photo: Blake Wheeler/Unsplash; Henrik5000/Getty Images]

BY Rob Pegoraro4 minute read

The worst kind of broadband provider is none at all, and that’s the problem Next Level Networks aims to solve, one neighborhood-wide deal at a time.

Whereas other broadband companies build a network before signing up enough subscribers to cover any capital costs, Next Level’s business model involves first closing one sale with a developer, homeowners association, or local co-op that wants a fiber network, and then building the infrastructure.

The Sunnyvale, California-based company then builds out the fiber, backhaul connection included, and turns it over to the customer. Next Level can stay on as the internet provider or the customer can choose to hire another firm. 

Think of it as collective ownership of the means of communication. 

“Everyone shares the cost of installing the network, everyone shares the cost of operating the network,” says Next Level Networks CEO David Barron. The concept isn’t that far afield from how we get water, he adds, but people see broadband differently: “They’re not used to thinking of a self-help model.”

Next Level found early success in a place where residents realized they had no other good option: the Silicon Valley neighborhood of Los Altos Hills. With Comcast quoting service-extension costs that started at $17,000 for a house within a block of its current network and exceeded $200,000 for another, the Los Altos Hills Community Fiber co-op set up by neighbors accepted Next Level’s offer to build and operate fiber they would own.

Next Level’s construction costs were much lower, thanks to the wireless links it uses to bridge gaps between clusters of fiber homes and allowing residents to dig their own trenches for conduit. 

Los Altos Hills co-op president Scott Vanderlip, the recipient of that $17,000 Comcast quote, says houses on his street paid Next Level $5,000 each to get connected and now enjoy at least 1 Gbps downloads and uploads for $155 a month—without Comcast’s data cap. He expects the cost to drop to about $100 once the co-op exceeds 50 or 60 members.

“The physical fiber that we’ve installed is really almost limitless,” Vanderlip says, adding that the current 10 Gbps maximum speed (which outstrips older Ethernet cables) can be upgraded to 20 Gbps fairly easily. 

At one of Next Level’s current build-outs, a golf-course community in Sonoma County far enough in the hills east of U.S. Highway 101 for phones to have minimal service, Barron says the HOA-paid cost to get fiber past 31 lots was $115,000, plus $42,000 for AT&T to extend a fiber line to the community. 

Individual homeowners then pay, on average, $2,700 for the connection from the street to their abode, with service running $174.82 monthly—a high figure that Barron defends as a consequence of the small number of homes being serviced.

“There are ways to drive this all the way down to the bottom end of the spectrum,” he says, suggesting $50 to $70 rates should be doable in a build-out that connects hundreds of homes. “This does not have to happen in the land of the rich.”

Barron says Next Level can make small expansions like this work when a company like AT&T or Comcast can’t because it focuses on broadband instead of also offering traditional TV and phone service. And because it’s a smaller shop.

advertisement

“We’re not constrained by the manual, the paperwork, the bureaucracy,” he says. “We don’t have all the corporate overhead that they do.”

In Los Altos, Sonoma County, and elsewhere, Next Level runs its fiber networks on an open-access basis. “They can have any ISP or multiple ISPs,” Barron says. But so far, none of Next Level’s communities have exercised that option.

Industry observers agree that the basic model seems sound—although they wouldn’t offer further assessments without knowing Next Level’s finances.

“As long as he’s costed it out correctly and the development is paying for the deployment cost, he can’t lose his shirt,” says Jonathan Chaplin, an analyst with New Street Research

“It makes a lot of sense to build your own network if you have enough people to support it,” says Christopher Mitchell, director of community broadband networks at the Institute for Local Self-Reliance. “The maintenance costs of a well-built fiber network are pretty minimal.” 

Next Level—founded in 2015 as a part-time project by telecom veterans—lit its first fiber in 2019 and has raised $1.7 million in three funding rounds thus far. But Barron says it’s not yet profitable, noting, “It’ll take us a while.” He chalks up early losses to the company’s own administrative costs and its incorrect estimates of some build-out expenses.

Gary Bolton, president and CEO of the Fiber Broadband Association, endorses the idea of building broadband as part of a new development, saying he’s seen providers sell a developer with this pitch: “We will light up your neighborhood for you as a great selling benefit.” 

Chaplin, Mitchell, and Bolton all caution that with more widely spaced houses, even community ownership may not pencil out. 

“I think it will be more difficult in areas of lower density because the costs will be higher per unit and at that point it may be harder to get enough buy-in from enough people to make the numbers balance,” Mitchell says. 

Chaplin suggests there’s some wiggle room based on a community’s willingness to pay: “I think the model makes sense if you can partner with developers in markets that would otherwise be uneconomic but they want the service anyway.” 

Barron, in turn, wants to see regulatory barriers lowered for broadband-only companies like his, saying permitting rules in California, its only market to date, impede Next Level for not providing either phone or TV service. 

And there’s still the initial obstacle of getting a neighborhood to vote collectively with its wallets on an industry newcomer. Says Barron: “They have to be really underserved and motivated as a community.”

Recognize your company's culture of innovation by applying to this year's Best Workplaces for Innovators Awards before the final deadline, April 5.

PluggedIn Newsletter logo
Sign up for our weekly tech digest.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Privacy Policy

ABOUT THE AUTHOR

Rob Pegoraro writes about computers, gadgets, telecom, social media, apps, and other things that beep or blink. He has met most of the founders of the Internet and once received a single-word e-mail reply from Steve Jobs. More


Explore Topics