George Pollock: From this industry and from a growth perspective, we just think there’s a great opportunity at this intersection of technology, connectivity, and real estate. These multifamily owners, they’re increasingly adopting smart building technologies. They need always-on, reliable, property-wide connectivity that works. We’re positioned to provide that. We really think about ourselves as a digital infrastructure partner for connected living, which is what we all live in this environment today.
Jeff Johnston: That was George Pollock, chief financial officer of Gigstreem, about some of the key attributes of the multifamily broadband market and why he is so bullish on this opportunity.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast, where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the digital infrastructure market. This podcast is brought to you by CoBank’s Knowledge Exchange group.
The single-family broadband to the home market gets a lot of press given all the government funding, the growth and new disruptive technologies entering the market. But what doesn’t seem to get as much press is the multifamily market, where broadband operators work with building owners and managers to provide a robust, enterprise-grade network. It’s a great business model that has a lot of growth given the lack of housing stock and the affordability challenges facing many single-family home buyers.
George has extensive digital infrastructure executive experience, and as the CFO for one of the fastest-growing operators in this market, he has keen insight into this attractive opportunity.
Johnston: George, welcome to the podcast. It’s great to see you. How have you been?
Pollock: I’m great. Thank you for inviting me. I certainly look forward to our conversation and you providing us the platform to tell everyone more about Gigstreem and what we do, and how we compete in this industry.
Johnston: Excited to chat with you. I think you guys are doing some unique stuff, unique go-to-market strategy. I really think that listeners are going to walk away with a lot more knowledge after listening to you. Hey, maybe you can provide a high-level overview of who Gigstreem is, your business model, how you think about the market. Then from there, we can get into some more detailed questions.
Pollock: Sure, I can provide a quick overview. Gigstreem is a full-service internet provider, purposely built for multifamily communities. Mostly apartment complexes, senior living, college housing. We focus on multifamily apartments. At a high level, we design, build. We can finance, and then we operate property-wide networks that deliver a seamless, always-on connectivity for the residents and the property owners.
Business was founded in 2017, really with a clear mission: “connection without compromise.” Since then, we’ve scaled to almost 90,000 units across the country. We’re in 26 states, and we’re one of the fastest-growing providers in our industry.
We think about our model differentiated in a few key ways. We operate as a one-stop shop, so we handle everything. We design the network. We construct it. We provide the on ramps for customers and tenants to sign up, and then we manage the network going forward with care, a knock, 24/7 support. The service is, it’s not just internet, we’re much different. We deliver managed Wi-Fi as an amenity.
What that means is the entire property is wired. You can walk out of your apartment. You can walk to the pool, you can walk through your parking garage, and you’re always connected. It’s always safe. It’s always secure. That managed Wi-Fi is provided in partnership with our customers, the big property owners, so they benefit from incremental, not operating income, from our service. They’re driving more profit and more enterprise value for their business.
We also have some flexibility where we can fund the CapEx up front. We’ll pay for all the infrastructure, allows flexibility for a property owner. Some want to fund it on their own and get a different ROI. Some want us to fund all of it. The two different models, if you fund it on your own, we charge you a little bit less on the monthly recurring fee. If we build it all, obviously, we’re looking to get a return, and we charge you a little bit more. The property owner underneath that gets an immediate return without any capital outlay.It just provides flexibility for our customers.
From this industry and from a growth perspective, we just think there’s a great opportunity at this intersection of technology, connectivity, and real estate. These multifamily owners, they’re increasingly adopting smart building technologies. They need always-on, reliable, property-wide connectivity that works. We’re positioned to provide that. We really think about ourselves as a digital infrastructure partner for connected living, which is what we all live in this environment today.
Johnston: That’s super helpful. Let me just ask a clarifying question for myself. Your customers, who you bill, your billing, or your direct relationship is with the property owner or the property manager. It’s not so much the individual tenants. Is that a correct assumption?
Pollock: Mostly. Our strategic focus is on property owners, and we sell a bulk managed Wi-Fi service. If a property has 300 units, we build out a managed Wi-Fi solution for the entire property. As I said, ubiquitous across the entire environment. The property owner then pays us a monthly fee for all 300 units. They will typically then charge a higher fee to the tenant, either as an internet service, a technology fee, or some other methodology. Sometimes there’s a revenue share with the property owner. For the most part, we sell a wholesale take-or-pay service to a property owner. Part of that reason is because it’s ubiquitous across the entire property. That’s quite a bit of CapEx and infrastructure. It’s a meshed service.
There’s access points in everyone’s apartment as well as access points all over the property. It’s not just a cable modem in some building or in your room.
Johnston: That’s super helpful. Then, maybe just talk through a little bit around some of the strategic thinking behind this particular business model, which I find really interesting for a variety of reasons. Were you really focusing on multi-dwelling units versus, I’ll call it a more traditional fiber-to-the-home broadband operator. Obviously, providing the same service, but going to market in a very different way. Maybe you can just help me understand the puts and takes between those two strategies.
Pollock: Absolutely. As you know, fiber-to-the-home is a big and growing business across this country. There’s plenty of really successful providers. We compete with them. Sometimes, most of them aren’t really focused on multifamily, or maybe not do it as well as they would like to. It’s just that it’s a different product. A lot of those fiber companies around the country are vendors.
We’re bringing in redundant fiber into our buildings. We want to be the best-in-class provider on the property. Getting to the property, however we can get there, sometimes it’s dedicated internet. Sometimes we end up going through a data center.
We’re trying to pick the best provider. The market’s moving to more redundancy. It really wasn’t like that a few years ago. I think we’re trying to drive it in the market from a quality perspective.
In this space, it’s getting more enterprise-class, but there’s lots of outages for some reasons you can’t even make up. Someone unplugs your router in the office, you’re out, right? Fibers get cut in this country, it seems to be, on a daily basis. It’s hard to react and fix that because they have to sense through the network and where it happened and then go fix it. We’re really a proponent of redundancy on the fiber coming in, and then we want to be the best-in-class on the property.
What does that mean? From the design, we start with the first walk-through on the property. We need to understand what the layout is and what the topology is. A garden style with multiple buildings is a lot different than a high-rise. The costs are a lot different. You’re running thousands of feet more fiber. You have more distribution boxes. You may have more access points. We start with the design. We model that.
Once we design and build, then it’s engineered. We walk around with technologies that heat-map the entire property called Hamina. We know where there’s dead spots. We know how to fix them. As I said before, the access points we use have intelligence in them. They’re always pinging and polling. You can turn up those devices or turbocharge them or not. Sometimes you don’t always want to turbocharge because they mesh and they conflict.
We’re using a few different vendors, but RUCKUS right now is a principal vendor on their R-One product, which brings in this AI intelligence. AI gets thrown around a lot. In these devices, it’s real. We had a property with RUCKUS AI units all over. We were having degradation because we had a conflict from an outside signal. We were near an airport. A human being can never figure that out in a timely manner.
In a couple of days, we drove down 80 conflicts to two and fixed it. It’s not a one-and-done. It’s continually working the network and continuing to get better. It has to work, and it has to work all the time. That’s been our maniacal focus on improving design, improving the construction, improving the engineering, and then post that, supporting the service for our property owners and our residents.
Johnston: Look, with that kind of intense focus on network design, redundancy, support, I would think that your market share numbers on any one particular building is probably pretty good. You’re working with the building manager. You’re providing, I’m sure, better service than anybody else could, right?
Pollock: Yes, that’s actually a good question. I didn’t mention this upfront. With these property owners on our bulk service, it’s an exclusive service. We’re essentially the only one there. There are certain regulations where you have to allow a carrier access, and they can determine whether they’re going to overbuild. There are certain states where you can opt in or opt out. There’s a couple of other states where we can do, and we’re doing a couple of these on Greenfield-built. They’re brand-new buildings where bulk isn’t really enabled through regulation, but we can be the exclusive provider and work exclusive marketing agreement. They have to allow a competitor to come in. But if we’re there, Greenfield-exclusive, we build it day one with exclusive marketing, typically, it’s not going to get overbuilt by somebody.
Therefore, in that model, then we really have to work with the property manager and their local managers on site because we’ve got to drive penetration. The property owners and property managers are certainly incented because we’re providing a great internet service. There’s real value creation for what we do besides just offering good internet services. There’s a real cash flow element of this that benefits them.
Johnston: Yes, I appreciate you clarifying that. The other thing I liked about this business model, tell me if I’m thinking about this right compared to a more traditional model, is, look, you’re probably dealing with very large, sophisticated institutions, property owners, and managers that have strong balance sheets. Your risk of bad debt and certainly churn are a lot lower than, say, a traditional fiber-to-the-home operator. Is that a fair characterization?
Pollock: Yes. Again, for the most part, and most of our business are large property owners, large public REITs. As I said before, there’s different financing options with our product. They tend to fund it on their own or finance it on their own. We charge them a lower fee, as I said, and then they charge a higher fee to their tenant for that service in some form or fashion.
Having said that, there’s a very big market for smaller players. When I say small, they still may own 5, 10, 15, 50 properties, right? They may not want to use their balance sheet for internet because they’ve got to refresh rooms. They’ve got to refresh pools. They want to put a weight room in. Now, the big thing is pickleball courts everywhere. They may not have the capital for internet. That’s where we come in.
Last summer, we raised $100 million through an ABS structure. Houlihan helped us. It’s two of the largest insurance companies in the world. Your audience knows ABS very well. We were the first provider in the industry to leverage an ABS. There’s been a second one now since then, but we were the very first in the industry to tap that market. How did we do that? Backed off the property owners. Their balance sheets, their cash flows were long-term contracts. They’re stable. It’s fixed recurring revenue, relatively fixed cost.
Johnston: Hey, George, talk to me a little bit about your decision criteria for new markets.
Pollock: Tampa’s our biggest market by city. Texas is our biggest market by number of properties, and then Florida is second. We’re in, like I said, 26 states. Quite a bit of presence in the northeast in Boston, New York, with some fixed radio wireless businesses that we purchased a few years ago. Southern California, we have a fixed radio as well. We like the Sun Belt. We like the Southwest. We like the Midwest, partly because of regulatory reasons. It’s just easier to do business.
It’s not agnostic. It’s agnostic towards bulk. We are allowed to provide the service. Property owners like it. Historically, we’ve followed a lot of our property owners as they’ve built or bought. These guys are super acquisitive, and they buy and sell quite a bit. If they’re buying, one of the things they like to do is upgrade internet. We’ll come in and redo it for them. A lot of it’s tied to legacy contracts, but it gives us a nice pipeline over a couple of years as we work with our partners, the big guys, to do that. We follow them quite a bit.
We do like density in markets. Whether it’s Dallas or Tampa or Orlando or Denver or Austin, we like to go deeper in our market. There’s a lot of synergies around that. We can hire construction teams in market. We can hire technical folks in market. You’re not paying a third party, a lot less travel. That helps. We’ll expand geographically from that, either with property owners as they go into new, or as we think about extensions around those markets to stay somewhat dense.
If you think about it, it’s typically larger cities where there’s lots of apartments, lots of growth. Those are sweet spots for us. They really work. We already have business there. We have network there. It’s just easy for us versus going to really top brand-new markets. We tend to do less of that, unless it’s with a partner.
Johnston: That’s super helpful. I’m curious to get any advice you would provide. a fiber-to-the-home, fiber-to-the-premise operator. If they were looking at this market as a growth opportunity, what two or three things would you say that they should consider, because it does feel that’s quite a bit different operationally and strategically than what they’re presumably doing today? It sounds like one would be you got to be in big cities. That seems to be Tier 1, Tier 2 cities, I’m guessing. Any other advice you would give folks that are listening to this that are thinking, “Hey, maybe this is a market I should look at entering”?
Pollock: Yes, I think this certainly can fit in rural markets as well. Our sweet spots, we like properties that have at least 200 units. 300 to 800 is better for us economically. I don’t want to say that it’s only bigger markets. The rural markets work as well if there’s a need. It’s a completely different business than fiber-to-the-home. It’s a network business. When we go in and deploy an apartment, we’re wiring the entire property.
When a new tenant comes in, they go on their app, and they sign up. We’re not rolling any more trucks. Access point is there. We can sign everybody up. They log in, and they’re done.The user experience is it’s instant on. When you’re there, it’s instant on. It’s seamless across the property. We have a super high-touch response. If something doesn’t work, you call us, and it’s fixed.
Product’s different. The install and the design’s different. The install’s different. As I said before, we heat-map the entire property with technology to make sure we’re overlapped, and it works. That’s important. Again, I mentioned property-wide. Also, our service, we’re partnered with the property owner. We work with them. They’re getting profit. We’re getting profit. It’s a partnership. As I mentioned before, we have complete flexibility on financing.
Property owner may want to pay for it. If we need to finance it, we’ll finance it. It’s literally zero cutbacks to a property owner. They pay higher on recurring revenue. They still make a profit. Day one, they have brand-new internet. It’s a great selling service for their customer. It’s a different business. It’s a different network deployment. It’s a different level of service, and then it’s a different economic model.
Johnston: Lots to like, though, I’ll tell you.
Pollock: Lots to like. One last stat here. If you look at the property owners, just look at their investor decks, and they speak about their business, which has been a little bit under stress the last couple of years, a little bit overbuilt. Rents have come down a little bit, but macro, we’re still short in this country on housing. If you look at their reports and their analysis, 5 to 10 million apartments need to be built in the next 5 to 7 years. Very big numbers. They’ve got a really good macro trend. The machinations with price and occupancy obviously work themselves out. Clearly, having great internet is only going to get more important for them.
Johnston: Outstanding. Great stuff. I really appreciate you walking through all that. Thanks again, George, for making time today. This was wonderful, so I appreciate it.
Pollock: Thank you. Appreciate it.
Johnston: A special thanks goes out to George for being on the podcast today. I have a couple takeaways after chatting with George. First off, I think this is a great business and if managed correctly it can generate a reliable and predictable cash flow stream, which I think is evident by the securitizations deals George has done. And secondly, its pretty clear to me that it’s a specialized part of the market that requires capabilities, relationships and go-to-market strategies that are different than a typical fiber to the home operator would use.
Hey thanks for joining me today and a special thanks to my CoBank associates Christina Pope and Tyler Herron because without them there wouldn’t be an All Day Digital podcast. Watch out for our next episode.
