Here's why this Sunnyvale startup sees a big opportunity in building broadband networks where Comcast and AT&T aren't

In the wealthy enclaves of Los Altos Hills and Woodside, residents aren't wanting for much. But one thing they may be lacking is high-speed broadband internet.

The big providers of wired broadband service such as AT&T Inc. and Comcast Corp. have tended to avoid more rural areas such as those communities, focusing instead on denser urban and suburban areas where they can reach more customers with a given strand of cable.

The people behind Next Level Networks Inc. have positioned their Sunnyvale startup to fill the gaps those companies have left behind. Next Level designs, builds and helps maintain high-speed fiber-based networks, targeting communities ranging from groups of neighboring homeowners to entire towns and cities. In a form of municipal broadband, the customers of the networks pay for and own them.

"We are enabling people to create a self-help type of model, essentially a community utility," Next Level CEO David Barron told the Business Journal. "Rather than wait for some large company to come in who had the money to go build the network to help you, we enable a community to build its own broadband system."

The company built its first pilot network in Los Altos Hills in 2019, serving a few homes on a single street. It plans to expand service in that area; meanwhile, it's already building out networks in the rural parts of Woodside and Los Gatos. It expects to turn on service for those communities in the next four to five months.

One of the major benefits of the company's networks is speed. Next Level builds fiber optic networks directly to customers' dwellings that offer them 10 gigabits a second for both uploading and downloading. That's five to 10 times faster than the speeds AT&T and Comcast's residential customers can get in the areas where those companies actually offer fiber-based broadband. And it's hundreds of times speedier than the throughput offered over the older DSL lines that are often the fastest wired connections available in rural areas.

What's more, Next Level's systems are upgradable. Customers will be able to increase their speed in the future by swapping out equipment on the front and back ends of their networks.

"When we're asking people to invest in community infrastructure, we want them to know that they're future-proof, that their investment is going to be good five, 10, 15 years from now," Barron said.

The company offers networks for different kinds of communities

Next Level offers networks for organized groups of people such as homeowners associations or dwellings with multiple households like apartment complexes. It will also work with commercial property managers, real estate developers, cities and individual homeowners that have banded together to form groups called mutual benefit corporations.

The company designs the networks, oversees the installation of the fiber-optic cable and other equipment, and connects networks to data centers. The cost for building out the networks starts at about $1,200 per unit for multi-unit buildings. Townhomes and homes on small lots cost between $3,000 and $6,000 per home. Homes on larger properties and in more rural settings cost between $8,000 and $10,000 each to connect.

Property owners or municipalities pay Next Level to build the networks. In the case of a homeowners association or a mutual benefit corporation, the members of the group share the overall costs. In such cases, the original investors in the network can get back some of their expenses as new residents pay to join the network.

Next Level also helps customers get financing for the networks when needed.

In addition to building out the networks, the company also manages systems when they're up and running. Customers can contract with Next Level for five to seven years to oversee their systems or hire another company to do so. When multiple households own the network, they share the operating cost.

"We're kind of a combination of the developer who built the building and the management company that the HOA hires," Barron said. "We build the network, design it, and then we manage it for them under contract."

Barron sees a big opportunity

In addition to choosing whom to administer their networks, customers also decide which companies will offer telecommunications services such as internet and television over their networks. While they can choose to go with a traditional broadband provider, they can also pick Next Level, which bundles its own broadband service with telephone service from Ooma Inc. and a television offering from AT&T. One benefit of choosing Next Level is the company promises not to track users' online activities for the purpose of selling that data to marketers.

"We are not trying to make money on collecting data, selling data, monitoring what is going on," Barron said. "We only collect data that is necessary to run the network ... we do not provide it to anybody."

Next Level's business model means that unlike traditional telecommunications companies, which have spent billions of dollars building out their own broadband networks, it doesn't require a lot of capital. Instead of shareholders or investors providing the cash to build its networks, its customers supply the funds.

To date, the company has raised slightly more than $1 million, with Plug and Play Ventures as its institutional investor, according to Barron.

While Next Level started its initial rollout in some of the Bay Area's toniest suburbs, it's not planning on staying put in just those places. It's partnered with regional economic nonprofit Joint Venture Silicon Valley to help identify other communities that could benefit from its services. The market opportunity to build and operate networks is likely worth $200 billion a year, Barron said.

"A very large percentage of the population right now does not have access to gigabit-speed networks," he said. "Even if we only got 5 or 10 percent of the entire market opportunity," he continued, "that is a lot of money."