Like many entrepreneurs, Joseph Fasone was inspired to launch Pilot, a business internet service provider, by a personal pain point: frustration as a buyer.
In 2010, when Fasone was 16 years old, he landed a job at WeWork, and soon after, decided to quit high school to make it his full time gig. Back then, the co-working company was just starting out, and Fasone’s duties involved finding and contracting internet services for the New York startup’s spreading locations.
“I finally hit the realization that no ISP was built to deal with a company growing as fast as WeWork,” says the now 24-year-old. Not only was the service costly, he says; he also couldn’t get the incumbent telecom providers to give him an order form within 48 hours. Smaller players, by contrast, didn’t provide the bandwidth capacity the offices required. “I saw an opportunity,” he says.
Today, his company supplies services, including high-speed internet and low-latency connections to cloud providers like Amazon or Salesforce, to companies along the eastern seaboard including Boston and Washington, D.C. It has 1,250 business clients and over 75,000 end users. It has also attracted $32.3 million in venture funding from the likes of Union Square Ventures and the Foundry Group.
A Key Advantage
Of course, he didn’t get there overnight. It wasn’t until April 2014–two months after he quit WeWork–that Fasone started Pilot. By that time, he had cultivated key contacts in the industry, as well as a vast knowledge of the telecom scene. He also identified a critical competitive advantage.
Fasone is able to pitch his company as a lower-cost provider thanks an existing patchwork of dormant, or “dark,” fiber-optic cables that run across New York City. Eight years ago, when Fasone was still at WeWork, a salesman trying to sign the company alerted him to its existence.
After digging around for more information, Fasone eventually learned that New York City had issued permits for a dozen or more fiber-optic network operators. The companies, he recalls, included not only cell phone operators (like Verizon) but also companies that wanted to use fiber to build educational or research networks.
“A fiber cable has hundreds of fibers in one physical cable,” says Fasone, “and it’s very unlikely, if not impossible, that an educational or research network is using all of them. Our assumption, which is true, is that a lot of this fiber is unused.”
Rather than physically lay down new cables, which is understandably cost intensive, Pilot started by piggybacking on existing infrastructure in cities, buying or leasing untapped fiber optic cables for up to 15 or 30 years, and layering its technology on top. In large cities, says Fasone, there are underground networks of three to 12 different providers that give Pilot access to a marketplace of fiber cables “at a fair and predictable pricing.”
Fast-forward four years, and Fasone’s 98-person company still uses this system. It also lays its own cabling; Pilot has a 24-person construction team for this purpose. The company simply taps whichever option is cheaper and delivers quicker access for its customers.
Dave Lerner, an early investor and director of entrepreneurship at Columbia University, describes Pilot as ground breaking. It “literally burrows down beneath the streets of American cities, explores the labyrinthine networks of unused dark fiber, and connects building after building with high-speed and reliable internet,” Lerner says.
While the company declined to share financial figures, Fasone did note that revenue had grown 20 times over since 2015. Pilot charges its clients between $500 for 100 MB and $2,500 for 10 GB of dedicated bandwidth per month for its base plans, which include one static IP address. The industry average for dedicated fiber-optic cable starts at about $1,500 a month for 1 GB (Pilot’s 1 GB plan starts at $1,000), but depending on the provider, even 100 MB could cost you north of $2,000 a month.
In addition to its use of dark fiber, Pilot’s cost advantage derives from its ability to tap into individual strands of fiber within a single cable. (Typically, telecom providers offer dedicated fiber cables, not strands.) Pilot claims its technology allows “every customer’s bandwidth [to be] dedicated and private,” meaning the download and upload speeds won’t be affected even if there are multiple clients connected to the same fiber optic cable.
Naturally, starting up an internet service provider when you have competitors like Verizon and the Washington, D.C.-based business services provider Cogent has high barriers to entry. Between shelling out for construction permits and networking equipment, it can take years before you can see any return on your investment–and that’s if you can even rise above giant competitors’ marketing muscle to attract customers.
However, if Fasone can overcome this, there’s a huge market opportunity, says Dan Littmann, principal in technology, media, and telecommunications at Deloitte Consulting. His team estimates that the U.S. needs to invest about $130 billion to $150 billion in fiber deployment in the next five to seven years to meet the needs of household users across the country. (That number does not include enterprise or small business users, which Pilot currently caters to, but you can imagine an equally big outlay, says Littmann.)
“We watch much more video; that’s the primary driver of [internet] traffic right now,” Littmann tells Inc. “AR and VR are going to drive even more traffic, and be even more bandwidth intensive, and [they] would need to be supported by fiber to the home or very dense wireless networks.”
It’s no surprise then than Pilot is laser-focused on growing its fiber network across the country. While its business internet service is currently only available in New York, Boston, Philadelphia, and Washington, D.C., the company’s network expands across 30 data centers in 18 different cities. And Fasone is eyeing to increase that to 50 data centers in 2018.
“If there’s anything about me in this industry, it’s that I’m very long on fiber,” adds Fasone.