I saw several articles that described the collapse of Maverix Broadband in Colorado. It’s been reported that the company has received over $9 million in the past from Capital Project Fund grants, along with three awards from the State High Cost Support program. The company was poised to receive $103 million in BEAD grants. The state was alerted about financial irregularities by a whistleblower, but by the time the state could react, the company filed for bankruptcy. I know absolutely nothing about Maverix, and the article isn’t about their failure, other than an observation that the company seems to have been deep in a hole well before the collapse. We’ll eventually find out if their problems were operational or something more nefarious.
The blog today talks about why ISPs fail or get into early trouble and struggle. I’ve seen a number of ISPs that have underperformed in their early years, or even failed like Maverix. This blog talks about some of the common mistakes I’ve seen that have led to big problems for ISPs.
Biting Off More than Can be Chewed. One of the biggest causes of problems is ISPs that try to grow too big too fast. It’s difficult to launch one or two markets for a new ISP and do it well. It starts becoming impossible for a new ISP to tackle a dozen markets at the same time. This is an issue that can even plague hundred-year-old telcos. While they are good at their business, what they are not good at is the nimbleness needed to grow fast.
Takes Longer to Get to Market than Expected. I don’t think I’ve ever reviewed a business plan for a new ISP that wasn’t too optimistic about the time it takes to launch a new market. I’ve seen ISPs who plan to have their first customers within six months of the start of construction. That’s achievable if you’re adding a neighborhood to an existing ISP but is usually unrealistic in an entirely new market. There are always issues that take longer than expected, and it’s not always the same issues. In some markets it might be permitting. It might be pole attachment or getting fiber located. It could be supply chain issues. It might be waiting for software vendors to have a time slot to configure the OSS/BSS. A common problem is not being able to hire the needed people and getting them up to speed.
Miss Important Steps. This is related to the previous problem. I’ve helped many ISPs launch or open new markets in my career, and one of the best tools for getting through a launch is a Gantt chart, which is a detailed interactive list of all of the tasks that have to be completed to launch. The typical Gantt chart for launching a new fiber market might have 1,500 to 2,000 tasks. What a Gantt chart demonstrates is that failing to do some of the smallest tasks on time can slip the date for everything that is dependent on that task. Some of the big time slippages I’ve seen come from missing what sound like small routine tasks. I recall a project that had a big delay when nobody took the action item to find a contractor to build the concrete pads for huts. By the time this was realized, they couldn’t find a contractor, and the entire project was set back two months from this one oversight. My point is that even small details can get you.
Everything Costs More than Anticipated. I would guess that at least half of new market launches end up costing more than anticipated, sometimes a lot more. This could be a factor of lousy estimating, or of not anticipating the impact of delays. But when projects start running short on cash, they start making other mistakes by taking shortcuts.
Sales Slower Than Anticipated. I have seen numerous market projections for new ISPs that assume they will reach full market penetration in two years, with half of those new customers coming in the first year. Unless the ISP has fully pre-sold the market, the rate of customer acquisition is usually considerably longer than they hoped, adding more pressure on finances.
Early Outages. I’ve seen several ISPs struggle because they had major network outages soon after they launched. This is often due to not taking the time to thoroughly test the new network to make sure everything is working right. I know a few ISPs that got a quick reputation for being unreliable in a market and struggled for years. Today’s world of social media can be brutal.
Keep the Public on Your Side. The industry is full of stories of ISPs that antagonized the public through shoddy construction processes, and particularly for not doing remediation to fix public problems as soon as they arise. A community can turn quickly on an ISP that doesn’t make quality an important issue.