In the first weeks of September, Missouri-based Gateway Fiber is stretching its legs outside of the state to break ground on fresh fiber-to-the-home (FTTH) projects in Minnesota.
From its 2019 inception, Gateway has had a growth mindset. It noted that many suburban and rural communities across Missouri have surprisingly little internet choice with only DSL or an incumbent cable provider as their options. In 2020, Gateway formed a partnership with the investment firm Crosstimbers Capital Group to fuel expansion efforts. Gateway is targeting 12 cities in Missouri, or 20 distinct markets, with its FTTH or fiber-to-the-business expansion plans.
John Meyer, chief marketing officer at Gateway Fiber, told Fierce the company builds in areas where there are a lot of customer complaints. "That was a value proposition for us," said Meyer. He added that the company has also deployed a lot of fiber in more densely populated new development areas in the Western suburbs of St. Louis.
Gateway Fiber functions as the owner and operator of its fiber networks, so customers interface with the Gateway team once service is up and running.
Another reason why these dozen cities really appealed to the Gateway team came down to the fact that they were densely populated enough to allow for a logical economic investment, but also in close proximity to rural broadband deserts that could be the next areas for extension with support from statewide and federal grant dollars. Over the past 18 months, the Gateway team has been awarded $37 million in federal grants to build out specific areas in Lincoln, Warren, and St. Charles County in the greater St. Louis area.
Even though building in proximity to rural markets where subsidies exist is a part of the larger business strategy, it’s not the most important factor.
“We’re not allowing the grant funding to drive where we build,” noted Meyer.
Acquisition and expansion
In February 2023, Gateway Fiber was acquired by CBRE Investment Management in part to help finance FTTH build-outs as the team prepares for national expansion.
“This particular division of CBRE is an open-ended infrastructure fund…Fiber is a long-term asset, and CBRE is in the long-term asset game,” said Meyer. “This is a capital intensive business, so they’re our private equity partner fueling our growth.”
As for why Minnesota is the next state to see new fiber instead of a state bordering Missouri, Meyer remarked that after due diligence, the team found that the larger state, specifically markets around Minneapolis, fit into its internal formula. Even though the National Telecommunications and Information Administration (NTIA) recently announced funding awards for every state as a part of the Broadband, Equity, Access and Deployment (BEAD) program, Meyer said that the decision to enter Minnesota next was unrelated to the state’s federal grant monies. Right now, the new projects getting ready to launch in early September are in Blaine and Coon Rapids, two northern suburbs of Minneapolis.
“Our intent is that Minnesota will be one of many states that we enter,” he said.
One concern of government grant administrators is that they don't want to spend BEAD money overbuilding existing broadband.
“We’ve always been the first fiber optic internet option in the areas we’ve built,” said Meyers. “[But] we’re experiencing another fiber provider building on top of us…The need to overbuild is an irrational economic strategy.”
While Myers can’t share where the Gateway Fiber team is planning to apply for BEAD funding, he did state that the type of projects “will likely fall into similar categories we’ve applied for today in Missouri.”
The determination for choosing such locations or projects comes down to data sets like speed tests from Ookla, FCC data, and density via census maps. From there, a larger picture of the opportunity is revealed.
Looking ahead
When compared to the growing FTTH market across the United States, Gateway says its secret sauce is the effort that goes into its customer service.
“One of the ways we measure that is through our Net Promoter score. [Ours] is about 71, which is the likelihood someone would refer Gateway Fiber to a friend,” said Meyer. “The industry average is about 10. That is a testament to everything we do.”
Specifically, the reliability of its networks, swiftness of onboarding, and communication with installation teams are customer experiences that the team actively tracks, reflects on and improves.