Wave Broadband is rapidly becoming a force in high-speed internet

The adage stay low and move fast holds special meaning for Kirkland-based WaveDivision Holdings, which does business as Wave Broadband.

During the past decade, Wave has quietly acquired 15 telecom companies on the West Coast, slowly setting itself up as a future competitor to Comcast and CenturyLink. The company owns about 200.000 miles of fiber-optic cable between San Francisco and Canada, with an estimated value of about $2 billion, and offers cable television, phone and internet services. Its annual revenues are more than $300 million.

Weve consciously stayed under the radar, says founder and CEO Steve Weed. A lot of people around here have never heard of us. But if you own fiber assets and youre not one of the big guys, were the company thats buying those assets and tying them together.

Wave has grown bit by bit through strategic acquisitions finding companies that have spent millions building networks, then acquiring those firms when their fortunes falter. The company avoids a raider reputation by retaining the employees of the firms it buys, leaving many businesses with their original names intact and their operations with a measure of independence. Wave has a staff of about 400 in the Puget Sound region and more than 1,000 nationally.

Staying low has served Wave well, but moving fast is gaining it new attention this year. Utilizing the $1 billion in financing it secured in late 2012 from Oak Hill Capital and others, Wave is now entering the Seattle internet market by building up one of the fastest networks in the country, just as a similar attempt by the city falls apart.

Gigabit seattle, a high-profile initiative of former Mayor Mike McGinn, aimed to deliver cheap, lightning-quick internet access across the city. Gigabit internet can deliver speeds up to 100 times faster than broadband and is available only in a limited number of American cities.

To accomplish this, Seattle partnered with Washington, D.C.-based Gigabit Squared in December 2012 to lease unused portions of the citys fiber-optic network as a foundation for a citywide network. By plugging gigabit internet into more buildings, the hope wasnt for just faster web surfing at home. The revamped network would also attract high-caliber companies and startups to the city, particularly tech companies trafficking in massive amounts of data.

To remain competitive as a city, the argument could be made that we need internet at more reliable, faster speeds than what we have now in Seattle, says Erin Devoto, the city of Seattles chief technology officer. Frankly, the entire U.S. is trying to be competitive when it comes to this. You have these 21st-century infrastructures built from scratch in Korea or Australia, with fiber, not old telecom structures. Were playing catch-up.

Seattles broadband download speeds rank fourth in the United States, which itself ranks 31st in the world. For a region whose future is so closely tied to tech, fourth place in a low-ranked country doesnt seem impressive. Or appropriate.
Seattles gigabit project would have improved that standing, but as the new year began, it collapsed. Gigabit Squared failed to come up with the necessary funding to proceed and eventually started ducking bills from the city.

New Mayor Ed Murray says Seattle is at a crossroads where creating a fiber-to-home network is concerned. A statement from his office offers no details on next steps, such as finding another private partner, but reaffirms his commitment to improving the connectivity of Seattle residents.

This leaves only one gigabit fiber project in the city: CondoInternet, which WaveDivision Holdings recently acquired and is bankrolling for an aggressive expansion in Seattle.

Condointernet has been building out an ultra-fast fiber network since 2008, servicing high-density residential areas and buildings in South Lake Union, Queen Anne, Capitol Hill and elsewhere in Seattle. However, founder John van Oppen felt the company was approaching a plateau. Connecting fiber to individual buildings is extremely costly, he says, and demand had risen beyond the point he could meet it. Van Oppen described situations in which network speeds are a factor in condo-buying decisions and landlords citywide are requesting the service.

I realized that to continue doing this, wed have to raise a ton of money or merge with someone, says van Oppen. To do what were doing to scale, we needed a lot more capital.

Wave will provide that capital, Weed says, and has already helped CondoInternet expand into Ballard. Wave’s backing will enable CondoInternet to expand further into the Puget Sound market.

Weve decided were going to be a gigabyte internet company from now on, Weed asserts. Commercially, gigabyte services are clearly whats needed. And residential customers cant get enough speed. Its where the future is.

While this may be so, Weed and van Oppen say Seattles efforts to connect fiber citywide will take a lot of work. Some people think fiber would be everywhere if the city opened it up [for wider use], says Weed. Its actually pretty minuscule compared to what we have [at Wave].

Van Oppen notes that the city cant build a network from what it has in place. You can augment a network with what they have, he says, but most of it was networked to schools, fire stations and other such properties. Getting it to homes and businesses will take a massive amount of construction and money.

The growing need for faster internet among businesses is well documented; on a network full of plugged-in workers, any lags in loading speeds can result in lost productivity. But whether speed is truly a competitive edge among residential customers remains a matter of debate.

While connections of 105 megabits per second (Mbps) pale in comparison
to gigabit speeds, Comcast, the largest cable and internet provider in the state, says its more than enough for most people. Len Rozek, senior vice president at Comcast Washington, says the company has offered 105 Mbps service for years and only about 5 percent of its customers opt for it. Most customers, he says, purchase services offering half that speed or less.

A megabit is 1 million units (bits) of the basic information in digital communication. A gigabit is 1 billion bits, or 1,000 megabits. For the vast majority of our residential customers, Rozek notes, the speeds we currently offer meet their needs.

Weed doesnt completely disagree, comparing gigabit internet to having a whole highway to yourself. Youre not always going to drive 120 miles per hour, but its nice to be able to. However, current trends paint a clear picture of future demand, he says. Whats fast now wont be for long.

Our residential base, their bandwidth usage rate increased 70 percent last year, Weed notes. Its gone up about 70 percent every year for a while now. And streaming movies is whats driving that.

Video streaming already accounts for half of internet traffic, Weed adds. As streaming movies become more high-definition and are expected to play on multiple devices at once, download speed will become more and more important for consumers.

Nonetheless, Devoto, in the citys technology office, says demand in Seattle often focuses on other issues. A growing population in Seattle doesnt even have internet at home, she says. They rely solely on their mobile devices. People think the levels of speed from providers are adequate. Some believe they just dont have enough choice depending on where they live, and that the level of service and price isnt acceptable.

Weed says Wave already competes with Comcast in San Francisco, where it consistently wins on matters of both speed and cost. Currently, CondoInternet offers gigabit internet at $120 a month and 105 Mbps at $60. In the areas of Seattle where Wave already offers service, its 100 Mbps service is $49.95 per month. By comparison, CenturyLink offers 100 Mbps service, also for $49.9,5 and Comcast sells 105 Mbps at $114.95 per month. (CenturyLink also has a limited gigabit plan $59.95.)

As for service, Weed points to the in-house call center in Kirkland and says the company is redefining customer responsiveness in the cable industry.

Its in this area, not speed, where he believes Wave has the biggest competitive advantage. But if it can push the majors to upgrade their networks, all the better.

Right now, were building up something before anyone else, Weed says. For someone to enter the high-speed market fresh, theres years of lead time and hundreds of millions in infrastructure youre talking about. The way I see it, were getting a serious head start.