It’s an unfortunate irony, in this period of “peak FWA” that Starry, a pioneer in the space, is struggling for survival. The company has lost 97% of its value since going public with a SPAC in March, and recently laid off 50% of its employees. Starry was the initial poster child for the new wave of FWA, enabled by high speed, high capacity mmWave-based networks. Since its founding in 2014 and first launch in 2016, Starry received extensive media coverage and was a constant presence on industry FWA panels. Their maverick CEO, Chet Kanojia, had previously founded Aereo, which enabled consumers to view live TV from any internet connected device, via a cloud-based OTA antenna. Aereo was shut down when the Supreme Court sided with the TV broadcasters, who argued that Aereo’s use of their content without permission was copyright infringement.

So what happened to Starry?

Starry did a lot of things right. In the early days of mmWave, Starry received permission from the FCC to use spectrum in the 37 GHz band on an experimental basis. The company developed proprietary beam forming technology on the MIMO antenna, and made its Starry Beam network node and Starry Station access point in-house. It targeted the historically underserved MDU market, a segment now populated by cord-cutting millennials. And, over the past year, Starry seemed poised to enter a faster growth phase, raising $176 million via a SPAC and then being approved for up to $270 million in RDOF funds to provide internet service in parts of eight states.

What went wrong? Three big things, in my view: a historic inability to scale; an altered spectrum and competitive environment; and being a victim of the overly exuberant SPAC market. Let’s briefly pick each of these apart.

Probably the biggest thing that sunk Starry was that it missed its window to scale. The company launched its first private beta service in the fall of 2016. Six years later, Starry’s service is available in small parts of only nine markets. As of the end of June 2022, Starry reported 81,000 subscribers and only $15 million in revenues for the first half of the year. To put things in perspective, T-Mobile added 578,000 FWA subscribers in Q3 2022 alone. Starry continued to miss buildout projections. It was not successful in converting a sufficient percentage of its TAM in areas/buildings it actively served. As an analyst, I was impressed with Starry’s technology and management team and believed there was potential to tap the MDU segment. But I did call out the anaemic pace of its buildout — particularly in light of nearly $200 million the company raised, pre the SPAC deal.

Second, during and post the pandemic, Starry’s competitive landscape changed. T-Mobile, and more recently Verizon, significantly expanded their FWA coverage, based largely on their mid-band spectrum buildout and newfound capacity, offering a similar service to Starry, at a similar price. In the year since Starry announced the SPAC, T-Mobile and Verizon expanded their FWA footprint to each cover approximately 40 million homes. As of 3Q 2022, they count 3.1 million FWA customers combined.

Starry’s cost per home passed is less than that of the MNOs, who’ve spent tens of billions of dollars buying the spectrum and building it out. But for the MNOs, FWA is really just one use case of the overall network utilization.

There was also the infusion of broadband buildout subsidy dollars from multiple corners, which has helped fund competitive FWA buildouts… and some fiber overbuilds. Starry wasn’t really able to accelerate its buildout or subscriber take-up during this time.

Finally, in the most recent chapter, Starry was impacted by the foundering of the SPAC market. Yes, Starry raised $176 million in March 2022 when it completed its merger with FirstMark Horizon Acquisition. But that was already a third less than what was anticipated when the SPAC deal was originally announced in October 2021. And we all know what has happened with SPACs over the past year or so. Starry’s stock price has fallen by more than 90% since March.

One can certainly attribute Starry’s most recent troubles to the near collapse of the SPAC market, as well as the general stock market/tech company downturn. But one must also question where the diligence was. How was Starry’s ability to scale any different in October 2021 than it was before that, when it had already raised nearly $200 million?

In October 2021, Starry was in six markets and counted 48,000 customers – five years after launch. Revenue was $13 million in 2020. When Starry announced plans to go public, it projected 1.4 million customers and $1.1 billion in revenues in 2026. In addition to a quite ambitious expansion plan given the company’s track record, that math also projected significantly higher ARPU in the out years. Not quite sure how that was going to happen.

It’s difficult to see a way out for Starry, whose stock is trading at $0.20 per share as of the time of this writing. The company has hired PJT Partners to help it explore strategic options. It’s an unfortunate outcome for a pioneering company. And ironic timing given the rather recent and rapid growth of cellular-based FWA subscribers…after years of debate about the viability of FWA – especially in already competitive broadband markets. But this will also go down as one of the wireless industry’s cautionary tales of the relatively easy money of the last few years, and the rapid rise and fall of SPACs.

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