Wave Broadband CEO Steve Weed isn’t waiting for the commercial services revolution in the cable business. For his Kirkland, Wash.-based company, it’s already here.
Wave just closed on a second round of financing to continue building out its commercial fiber network throughout Washington State, Oregon and California. It also recently purchased two fiber businesses, Newport, Ore.-based CoastCom and Vancouver, Wash.-based SawNet, to help expand Wave G, the operator’s 1-Gigabit-per-second broadband service, to commercial customers throughout the Northwest.
Wave first started building a commercial fiber network last year with a $130 million bond offering. The latest stage — which will include building out about 100 route miles of fiber per month, added to its existing fiber network of 5,500 route miles — will cost another $125 million and is being funded through an add-on to an existing term loan.
For Wave, which has been concentrating on the commercial broadband business for the past several years, it is money well spent.
Commercial services are Wave’s fastest-growing business line. In places like the San Francisco Bay Area and Seattle, two areas the company has targeted with Wave G, it is becoming increasingly popular.
Wave won’t break out sales figures or customer numbers, but Weed said the Wave G service, which retails at $80 per month, is attracting attention from larger and larger companies.
“We’re in a high-tech area; Amazon’s headquartered in downtown Seattle,” Weed said. “So a 1-Gig Internet service is pretty popular.”
Wave’s price adds to its appeal. Comcast, which offers commercial and residential service in Seattle, can offer business services speeds up to 10 Gbps, although the pricing varies by customer and service configuration.
“It’s a Google-like price point,” Weed said of Wave G, referring to Google’s low-priced Google Fiber competitive broadband product in other markets. In the Seattle market, he said, most of Wave’s competition is from independent local phone companies.
Commercial revenue has been important for cable operators, rising in double-digit percentages annually for the past five years. In 2015, according to Zach’s Research, commercial services revenue increased 20% in the cable sector to $12 billion, dominated by larger operators like Comcast ($4.7 billion) and Time Warner Cable ($3.3 billion).
Offering competitive pricing can go a long way for a small operator, Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said.
“If you invest in sales people and are offering companies a faster product at a cheaper price, I think there is definitely a large potential market opportunity, especially as you move to larger customers,” Wlodarczak said. He pointed to his own company: He was inundated with offers for dedicated data lines for $1,000 per month from several carriers and decided to go with a cable provider that offered the same service for about $100 per month.
“That is a powerful driver,” Wlodarczak said.
Weed predicts that commercial services, currently accounting for about 25% of sales, will reach 50% in the future. As Wave continues to focus on more of a broadband-first strategy, a tack also taken by Cable One and other small operators, that could happen sooner rather than later.
That means offering traditional video service — Wave offers full basic at the same price it pays for content — but also aggressively promoting over-the-top video providers too.
“We really are agnostic as to whether or not customers buy cable TV content from us or buy Sling TV or Sony Vue or just want to get Netflix or Amazon Prime,” Weed said. “We want to help customers get the video content they want over our broadband network. We don’t really care whether they take legacy cable or not.”
Putting Broadband First
While offering video, Wave Broadband has focused more on high-speed data service in its markets
Headquarters: Kirkland, Wash.
Service territory: Washington; Oregon; Sacramento and the San Francisco Bay Area in California.
Customers: 455,000 business and residential
SOURCE : Company reports