Wireless home Internet provider Starry is cutting 500 employees, about half of its workforce, and canceling plans to expand into new states. Starry’s board of directors yesterday approved the plan to cut 500 jobs, the Internet service provider said in a Securities and Exchange Commission filing today.
“The decision was based on cost-reduction initiatives intended to reduce operating expenses and allow the Company to focus on serving its existing core markets and customers,” the filing said.
Starry said the job cuts will be “substantially complete” by the end of December. Starry also announced a freeze on hiring and non-essential expenditures and withdrew full-year 2022 guidance that was previously given to investors.
“This is an extremely difficult economic climate and capital environment, and at present we don’t have the capital to fund our rapid growth. Because of that, we’re focusing our energies on our core business: serving multi-tenant buildings in our existing dense urban markets,” Starry CEO Chet Kanojia said in a press release.
The press release suggests the job cuts won’t be the last major changes for Starry. The company said the cost-cutting plan will “conserve capital and improve its capital runway as it explores all strategic options.”
Starry launched in 2016. In mid-2019, Starry spent $48.5 million on 24 GHz spectrum licenses covering more than 25 million households in 25 states. “Combined with Starry’s current deployment roadmap, Starry’s fixed wireless footprint will reach more than 40 million households, covering more than 25 percent of all US households,” the company said at the time.
Starry has just 91,000 users
But the expansion never reached the scale envisioned by the company. Starry provides service in Boston; Columbus, Ohio; Denver; Los Angeles; New York City; and Washington, DC. The company’s network can serve 5.96 million homes after recent expansions in those markets.
Less than 2 percent of potential users subscribe to Starry service, though the customer number has been growing. Starry said it had 91,297 customers as of September 30, up from 55,078 one year earlier. That includes bulk billing arrangements where a building owner or association is invoiced for multiple units.
Starry says its most popular broadband plan is $50 a month for speeds up to 200Mbps, with unlimited data. Average speed test results last quarter were 196Mbps for downloads, 105Mbps for uploads, and latency of 20.3 ms, Starry says.
Kanojia said Starry “needed to curtail our cash burn while we pursue strategic options,” but stressed that it wouldn’t abandon its customers. “Today is a very tough day for our Starry team, but I want to be clear: Starry remains open for business,” he said. “We, like so many others, are making the difficult calls now and taking steps that will allow us to be laser-focused on financing the business over the long-term and continue serving our markets.”
ISP defaulted on FCC funding
In December 2020, the Federal Communications Commission tentatively awarded Starry $268.85 million to serve 108,506 homes and businesses in nine states: Alabama, Arizona, Colorado, Illinois, Mississippi, Nevada, Ohio, Pennsylvania, and Virginia. Starry, also known as Connect Everyone, got final approval to obtain most of the Rural Digital Opportunity Fund (RDOF) money less than two months ago. It would have been paid out over 10 years.
But the company defaulted on the bids in a move that seemed to take the FCC by surprise. In a public notice last week, the FCC said, “Connect Everyone LLC notified us that it planned to default on all its winning bids. We had previously announced that Connect Everyone was ready to authorize in all states in which it had placed winning bids except for Mississippi.”
Withdrawing from the RDOF program was a “tough decision,” Kanojia said. “While participation in this important program fit within our strategic vision in 2020, changing capital needs, changing capital environments, and continued success in the urban multitenant market forced a decision to take a step back and focus our energies and capital on executing on our core business plan.”
Starry said it would incur one-time charges of $3 million in connection with the workforce reduction but save $48 million in operating expenses over the next 12 months. “The Company also anticipates approximately $10.4 million in non-cash savings related to share-based compensation expense that will no longer be recognized due to the cancellation of previously granted, unvested equity awards,” Starry’s SEC filing said. Ars Technica