The Power and the Promise of 5G with Chaitanya Kanojia (Starry) | Disrupt SF (Day 3)
7:46PM Sep 10, 2018
We are going to kick the day off with a conversation with Chet kanojia from starry internet. So who here is familiar with starry? Okay, you guys are in for a treat. It's a very cool broadband service, they shoot it over the air into your homes. He's going to talk all about that with Ron Miller, the TechCrunch enterprise reporter, so thanks for joining us. This is gonna be really cool one stick around. It's gonna be awesome. Thank you.
Morning, everyone. Thanks for coming out. So early.
Chet kanojia, he's a guy who hasn't been afraid to take on established industries. Famously, he took on the broadcast industry in around 2012 with his startup Mario Aereo, sorry, battle the ultimately lost when the Supreme Court struck down his company's idea. But today he's the CEO starry a company that wants to take on big internet providers with an idea to deliver five g internet to the masses at a reasonable cost, which is an idea, I think we can all get behind,
we're gonna talk to chat about his latest attempt to take on a ginormous industry. And we're going to start by talking about just five g in general. And then we're gonna jump into story as a company. So chat, we've been hearing a lot of hype around 5g going back years, what do you believe 5g will ultimately bring to the table? And how do you separate hype from reality in this area,
you know, it's just sort of the fundamentally I think it's going to be an evolutionary step from LTE. And, you know, the, there's a lot of sort of hype, people think of autonomous cars,
just struggling and I start floating in air and 5g is going to solve, you know, all problems and world peace and hunger and everything else. And the fundamental reality,
more bandwidth and all this other stuff. But, but basically, what's really going to happen is you're going to get a little bit more speed, but that's not really five G's, essentially, 4g sort of next step, which is a technology called carrier aggregation and massive MIMO, which are sort of the two fundamental things, but five G's I mean, I look at that as forget the height part. But it's an indicator of where the world's going ahead. And really what that indicators finally have so much computational capability and power
that sort of the Moore's law is being applied to communications and wireless communications. So this is just a starting point, I think, where things are going to go.
But it's, it's, it's going to be a multi decade process where you will see a lot of revolutionary things, I do want to caution because I think a lot of people in the startup community sort of, you know, hear that as a starting that and say, Oh, my God, you know, Verizon, this, this, or, you know, let me go invent the next thing that's going to take advantage of 5g, whatever the reality is, you know, all that is sort of who we I mean, you know, a lot of these companies have no idea what they want to do or not do. And nobody actually makes any real money working with these guys. So, so, as a startup founder, you know, the first time around when I was looking at these things, like, as soon as there was announced that I'm going, Oh, my God, you know, I'm so behind that have to do this. And the reality is no, you know,
right. things move much more slowly than we think.
Exactly. Yeah, I mean, these are capital cycles that take 15 years to play out, right? I mean, you know, you're talking about 100 ish, billion dollars going in and buy just one particular company, and, you know, even got a startup company like Starry is gonna plunk, in about two, two and a half billion dollars. And that's just doesn't happen overnight.
how does your company take advantage of 5g and how has your approach is different from the traditional providers that we used to, you know, buy this kind of access from.
So let's divide 5g into two categories and mobility and fixed, right. So what we're doing is fixed, which basically means the person we're serving is stationary, they're not moving around, because they're going to house and we're certainly the house or apartment or whatever that happens to be
five g mobility is a very different beast, and largely going to be focused on sub six gigahertz bandwidth is a sub six gigahertz frequencies. So what we do is do in order to a fixed installation, we operate more like a satellite company versus a terrestrial company. So think about this right now, the best thing is, if you're in ground, so that's fiber, that's just the most expensive thing. So as you rise above, in air, the complexity increases, cost goes down, there's just kind of the weight of so you just want to find that happy medium. So what we do is we bolt our satellites, which essentially our base stations, very powerful little devices on high rooftops, whether it's towers, buildings, things like that, and flood the urban area with a ton of power, RF power. And that allows us to put receivers in people's either windows rooftops, building tops, etc, to take the power out, essentially connect with with the network. And so it's a very different way of thinking about a network versus what you would see the traditional incumbents talk about is basically converting every municipal furniture piece, meaning light poles, traffic lights into 5g base stations. So that's wonderful. That actually is probably the most robust way to build a network. It's also more expensive than you know, you could probably afford, you're probably looking at 100 plus billion dollars to the right and 10 years.
So I mean, I think it would be helpful to let people know like, what this what this means in terms of like, if they wanted to order internet from you, how would it be different from ordering from Comcast or another cable company that we do now. So we, Austin,
we started the company in all of us, the other founders are very, you know, social mission driven as well. So mainly because I think we love mission oriented things, it's easier to get motivated, it's easier to hire, it's easier to attract capital, all those things. And they tend to be big things. And so we said, as a mission, we think that connecting people creates economic value and social value. So we said, okay, let's start there. So the purpose of our company is to connect people not to squeeze every dime out of them. Right. So that's the the fundamental starting
Lee and worthy goal, my perspective and, and that worked
for guys like us, because our every inch of share that we're taking us just sheer profit for us, right, we have nothing to lose everything to gain. That's kind of the classic view. So when our subscribers order from us, they get treated incredibly well. They get a world class, excellent product. So for a millisecond latency, the starter plan we have is 200 megabits symmetrical just for 50 bucks a month, down, up and down. That means for $50 a month, no data caps, which you can't get from the cable guys, because it's
cemetery and, and frankly, our customers love us. Because even when our tech comes to their house, they have little booties that they put on their on dirty or carpets, of floors, things like that. And, you know, we send you socks and cookies and all kinds. And this is not, you know, it basically drives our NPS score so dramatically high, the cable industry's NPS tends to if you have zero, you're the leader of the pack. That's really how bad the industries and I
don't have to tell you that like, and customer service metric.
Net Promoter Score. Yeah, right. Basically, you take the people that, you know, like, you are the people who are detractors and do the math and figured out kind of what right zero basically means you're in the terrible, right?
I think Apple is somewhere in the high 70s, low 80s somewhere in that range. So we're low 70s, that's pretty that's because you care about your customer. So that's the big difference our customers, the second is other companies focus is to fit into our customers life. So it's not all about getting the dime out of them. But really, so every appliance that we give to our customers for our service fits into their life to solve a problem.
So that's social goal. I wanted to ask you about that because, well, that's commendable. Want to bring cheaper broadband to the community at large, you have investors who have invested a lot of money over 160 million dollars in the company so far. So how do you satisfy both goals, your goal to make money for your investors, and yet satisfy that social goal of wanting to bring broadband people who maybe previously couldn't have an idea.
So this is where wireless technologies and five gene in particular comes in really, really handy. So historically, what happens is, what used to happen is you have to lay down either co x or fiber, and the cost of construction is pretty high. So it's a legitimate question. And if I'm going to get to customers versus 10,000 customers, when am I gonna go 10,000 cash, if you're doing this wirelessly, the cost of passing as we call it, meaning the dollar you spend to pass a premise goes down to the floor. So we spend under $5, a home pass today with a gigabit quality signal coverage. So and my backstage get to a passing meaning the signal is passing in front of their house. Now, it costs us more money to install the device and terminals and all that stuff. But But really, versus 2000 bucks in a wired construction. So that allows us to have sort of this mixed view of saying, we can make money even on low end, because broadband, believe it or not, is in 95% margin business group. The wholesale internet doesn't cost anything, it's all in the distribution costs, right? So that's so it actually does allow us to make money on both ends of the equation. And sort of full for social mission says, I don't want me to make like social missions, like some crazy nonprofit thing, you know, we want to
make Apple TV but
but, you know, it really is wonderful for our company, team staff, everybody to sort of feel like we are contributing to the world. And I, you know, especially in this day and age where you got app acts, and app wise, stealing people's data, and privacy and this and that, all that stuff, it leaves such a bit bad taste in people's mouths. And it helps us attract people who are kind of like
us. That's, that's great. I mean, one thing you've alluded to, and that answer is the equipment that goes on the roof and women that goes in the house, or the or the apartment
you made in that's been say that you're expanding into New York City, and you know, you to take a different approach with how you place your equipment in city centers, and you made an agreement with a company to do that, I was wondering if you could talk about how that works. And then if explain, in fact, good work outside of city centers to in areas that are underserved outside of cities.
So what we're doing, and this is sort of
a big picture comment,
what we're going to see. And this is really sort of not a prediction, but I think you're going to see this play out physical plant meaning infrastructure of cities, what, or whatever else globally, whether it's light poles, electric, utility poles, building rooftops, building facades, they're all going to become part of the network, that's just how it's going to play out. And so working with real estate, and in urban real estate is really interesting way to think about kind of what your plant looks like in the future. You know, folks at rising have talked about, you know, like bowls and things around, those are very similar. So we started with one which is our partner and actually invest in the company related companies that are large scale development. Actually, Hudson Yards is a massive development that they're doing in New York City, but their premier company that also is one of the largest holders of
real estate for affordable housing. So as you can start seeing that it's a similar sort of concept that starts coming together to go outside of urban areas and buy urban we define it as 1000 homes a square mile and greater go outside of that we certainly can, but what you need is different frequency bands. So there are new frequencies that the FCC is making available distinct in particular called CVR s, which is citizens broadband radio service. So there's going to be a bunch of spectrum in the 3.5 gigahertz band that's going to come in that will assist people, whether it's us or others to enter the market in the more sort of deep suburbia and rural cases. And then obviously, their Satellite Broadband with low orbit satellites. That's always you know, makes a cycle every 15 years comes by and goes right
by, by placing your equipment on the buildings, though, and partnering with a real estate company in this fashion. How does that help you kind of expand further into the city? Do you need other placement or well, that partnership be enough to help you like the expand beyond the kind of, you know, maybe the neighborhoods of those those smells
of these managed real estate tends to be higher. So you want high altitude as I described, sir. So we will do more partners along the same line. But I'm just to give you an example that how powerful the technologies with with about we've deployed in Boston, just about 14 ish based at macro base station sites. And with that we have coverage in about 400,000 or so households with almost 80% service ability now. So that's a that's how dramatic impact
is and we were talking about this backstage. Can you can you let these folks know how much you've cut into the established market in Boston? I think it's Comcast has Boston? Yeah,
I don't think we've described those numbers publicly. Okay. We don't worry, there's too many people.
And I won't, I won't, I won't.
Yeah. But suffice to say, our customer, you know, we're shocked at how I should we, I guess we shouldn't be right. But we are when we were doing a business model, we thought, you know, as we started, if we got two or 3% penetration in the market, that'd be a really great start. And I think we're,
I mean, we're north of that. Yeah,
I mean, one of the things that we talked about it and our prep call was the fact that you're, you're targeting consumers, particularly cord cutters. And I think this particular solution would really appeal to the cord cutters who are looking for that alternative, that last thing that they can get rid of is, is the is the internet access. And I speak from experience when I say that, but you know, when you when you chose to go that way directly to the consumers, you're not partnering with the big networks. And I'm wondering, why didn't they give you more lift to achieve your social investment goals? If you said, Okay, we're going to partner with the big no God
number I was talking to, and I won't use the name of the major Asian equipment provider. Yeah, one of the senior executives there was like, why, you know, why don't you go sell your technology to at&t, or Verizon or whatever. And, you know, Frank, reality is, you just can't get there. From here. You can't make any money doing this. And, and I'll give you an example, the two most largest equipment suppliers, outside of while way in this sector, Ericsson Nokia are taking on debt to finance r&d in five G. That's how silly The situation is. You can't make a dime doing this stuff, right? So in fact, we can raise in today, if you went out to the venture community and said, Hey, I wanted to get venture capital because I'm going to sell equipment or technology to cable companies, or wireless companies that would don't give you $1. And if you go out and say, I think I can build a while a carrier from scratch the all kinds of money. So that's the nature of the beast. Yeah.
So you have a history of going after markets being an irritant of doing things that the big companies don't even want you to try. I mean, area was a big, big example of that. And they they were successful and stopping you in that case, in this case, I think it would be harder for them to put up legal barriers for you. But how would you advise startups or taking on big established players in the industry is like you've done in the past, you know, with deep pockets? And how, what, what should they be doing to do some of the things that you've been able to achieve? It's, it's startups
are all about asymmetrical warfare, right? That's really what it comes down. So you have to have something that the other guy I mean, fundamentally, as a small nimble company, have a huge set of advantages, right? You can you're not wedded to an idea, you just can move fast, and you can break things and get on with it.
So get a symmetrical get an advantage, that just gives you a huge amount of asymmetry. So area you mentioned was the regulatory asymmetry, though we were exploiting, taking advantage of here its technological asymmetry, right. So that's really what it I mean, that's kind of what I focus on is, do you have 100 x advantage 10 x 20 x 50 x advantage over the incumbent structure in some way, shape, or form and beyond that, don't don't have too much of a strategy. That's we never have any strategy, you know, for us, it's like, it's a massive structure sector, it generally makes sense, the cost structure is generally there for us, okay, great. Let's really get good at doing it. Don't overthink it, just get really good at execution. And then rest will take care of
itself. I mean, when you when you did area, and I don't want to bang on area too much. But, you know, there was, it was a pretty clever idea, really, and, and almost simple in a way. And the best ideas, I think often I buy, it must have been terribly frustrating for you to have these these big companies go after you and that way
No, no, no, that was the whole point of view. Yeah, gonna sort of light that fuse. And then you're seeing right, I mean, today, you I mean, we started this whole thing, and I was actually texting with one of the senior executives in the media industry. And, and he said, You were right. And I was like, I don't know if I was right, right. But we, we at least lit the fuse, right? And then, you know, today, you can get pretty much any piece of content online and just pay for it simply. And it's, it's, you know, whether it's HBO or right Google TV, YouTube, TV, whatever. Yeah, there's
a lot of services out there. They're being suddenly
scared the daylights out of people. Yeah. And everybody started, you know, like, Okay, this day where everything thing is over the top is going to happen, and it's happening. So people
that are usually when something like that happens when an idea like yours, you know, begins to take fruit, you're just like the first piece of it, right? Absolutely. This is going to be others behind you, who are going to figure out a way to do this, it doesn't get in the way of the of the company's stopping you so
based on that experience, though,
what did you learn from that when you got shut down the enemy and you started salary pretty much right after area gotcha down. It was this is right around the same time
putting What did you bring from that experience to story that you've been able to take advantage of.
I mean, in all candor, I think, you know, I was successful entrepreneur prior to that, right. I told my company, and, but yeah, and actually, my father said, you know, my parents live in India. So
you're like, son, your fame needs to catch up, catch up to your fortune now, because nobody knows what the hell you are. Right? So it was a great. And after the last company here, he said, Now, you're fortunate needs to care,
because everybody knows, we already have nowhere close to the money that you're supposed to have at that sort of level of thing. So what I learned was that doing big things is the same amount of effort and challenges, doing small things just worth applying yourself to really big things.
I think we built an incredible team at area that transition into story. And one of the biggest reasons we started started right after is because I just loved working with my partners. And so we started is actually a weird company in the sense it was started by 26 people, or 25 people they want and the entire principles sort of engineering founding team was coming out of here. And then what most people don't understand about area also was that the idea was simple, but it was incredibly difficult technical problems. And so when we just to give an example, when we started the company to transport meaning going from impact it to impact for at three different rate profiles use $2,000 channel, when we shut the company down, we had the largest transcoding fabric in the world. And we were doing it at $25 channel and through different rate profiles. And so that's how great this engineering team is. So people say, Well, you know, that was like, immediate thing. I'm like, No, you don't understand that was a a hardcore RF plus cloud company and so's story different frequencies, but similar
you will. So we're gonna have to end it right there. Because we're out of time. Please give a hand for for chatting with us. Great. Thank you.