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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by. Welcome to Starry Group Holdings First quarter 2022 Earnings Call. As a reminder, this conference is being recorded.
I would like to turn the conference over to our host Ben Barrett, Vice President, Investor Relations. Ben, please go ahead.
Thank you and good morning everyone and welcome to our first quarter call. I'm Ben Barrett, Head of Investor Relations for Starry. Joining me on the call today are Chet Kanojia, our CEO; Komal Misra, our CFO; and Alex Moullé-Berteaux, our COO. By now, you should have received a copy of Starry's earnings release and investor supplements for the first quarter of 2022 results. If you have not, copies are available on our Investor Relations website.
Before we begin, I would note that some of our comments today may be forward-looking statements. As such they're subject to risks and uncertainties described in Starry's earnings press release and SEC filings and results may differ materially. Additionally, during our call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of non-GAAP financial measures were appropriate to the corresponding GAAP measures can be found in the company's earnings and other filings with the SEC.
With that, I'll turn the call over to Chet.
Thank you, Ben. Good morning everyone and great to be starting our first ever earnings call here. I think I've met a lot of folks over the last – over my career here and – but just for those who don't know me a quick two second bio, one of the co-founders and CEO of Starry. I'm an engineer by training and I've had the [indiscernible] career of starting multiple technology companies starting in early 2000. And this entity Starry was really started right after my last company, which was Aereo, which shut down. And as the team and I were sort of thinking about what we really wanted to do next and I – this is just a fantastic team and everybody had a desire to continue to work together. We thought building a broadband company made a lot of sense for a variety of different reasons that I'll touch upon as well.
I believe the opportunity in broadband is to be able to disrupt the sector with extremely low cost technologies and to be able to achieve scale with relatively less investment compared to the traditional approaches that have been used in the past. And so, what motivated us to found Starry? We believe broadband is essential for everyone, just as food and shelter, but the experience is universally bad. It's expensive and the customer experience is just poorer. And I think we can all relate to that from our personal experiences.
When we found Starry, we wanted to focus on our customers first and foremost. While our peers looked to mind more dollars through price increases, speeds and bundling, we obsess about adding value, speed and performance to the customers' experience. We knew at the beginning that we needed to be a combination of technologies in particular, in this case fiber along with last-mile high capacity wireless in order to have the right destructive cost structure, but the technology didn't exist, so we did the difficult thing of creating the technology stack ourselves. And that was a process that took us about four years of the first part of the company's life. The result is a totally unique tech stack based on global standards that includes all the radio frequency hardware plus our own software suite that runs our network and provides scale.
And you will hear a lot of noise about cloud-based telecom in telecom. We are cloud native and we run our network effectively from a smartphone. The result of this intense R&D is the new broadband network cost structure, an inversion of the classic model. Instead of deploying billions to build out fiber, we can cover an entire city with a few million dollars in CapEx as the price of entry and then the rest of our CapEx and cost structure is success-based as customers sign up. This new broadband economic model is what allows us to run a successful business at very low penetration rates in most markets.
I firmly believe today we are at one or third stage of our development process, meaning that the technology and the concept has been proven out and we obviously continue – need capital to continue to grow the company. That is why we decided to access the markets and become a public company. To that end we went public on March 19th, raising a total of net proceeds about $155 million through de-SPAC transaction and concurrency out of shares. Market conditions obviously are very volatile, but it's a company that has proven economic model. This is not a concept company and we've successfully found investors willing to finance our approach.
We welcome them to the extended Starry family and we'll strive to prove their thesis right. However, the business ultimately will require more capital. It is approximately half of what we originally expected to raise in the offering and look – we're looking to be raising additional capital in the future. We have timed in multiple pathways to source the future funding on exploring options that combine debt, equity and other vehicles with strategic partners as well as we continue to prove out our ability to scale at our refractive unit economics, we believe we will find the support. I firmly believe that good companies find support in nearly any market condition.
Why are we so bullish? Why will Starry succeed? First, the technology is delivering – proving – providing a comparable or superior product experience to most broadband consumers. I would say that company's technology is comparable to fiber and superior to most other things out there. We have a full stack tech solution for gigabit last-mile broadband today using licensed millimeter wave spectrum and a technology roadmap that allows us to have multiple gigabit solutions in the future. Our innovation in using global standards based on 802.11 baseband adapted for licensed frequencies in millimeter wave spectrum. It enables us to have fiber like performance at a fraction of the cost. We're proven out the efficacy of our technology at every level of the chain over the past few years. We've continued to invest in R&D in several dimensions to drive down cost and improve spectrum efficiency.
Our subscribers are heavy users of broadband. Last quarter, the average user consumed 574 gigabytes of downstream and a very substantial amount of upstream, which I think is a long-term trend that's in our favor. Second, we're continuously improving our unit economics. This is a key element for success as investors can realize in this sector. Costs matter. In order to succeed as a competitive provider, we need to be able to match speeds and capacity except at much lower cost and which is our focus. Today, our [indiscernible] market is ballpark $10 million to $30 million depending on the size of the market, which is the – which is orders of magnitude better than fiber. This is the cost we make the market serviceable think of this as price of entry in a particular market then all the remaining network CapEx is success based.
Today, our cost to attach typical customers in the mid hundreds of dollars, it has fallen over years as we continue to improve our unit economics and we expect we will continue to decline the cost curve as we achieve more scale and operational efficiency, plus continue to invest in new R&D for the next generation of technologies. For example, our base stations first were about $.25 million then they cost several thousand dollars today. We expect to see similar trends layout across most of our major equipment categories. In addition, we saw our cost of goods sold for vertical assets, which is essentially the equivalent of a tower and manage rooftop dropped by a full 18% in 2021 compared to 2020 and then 36% compared to 2019.
Vertical integration study is unique in this sense, but we have an absolute control of our technology as well. This vertical integration helps us to drive our unit economics as well as better prepared to resolve any supply chain issues that arise. And we're extremely proud of our team to have managed these difficult times in the last year from a supply chain perspective that I am missing the beat [ph]. Third, we are performing incredibly well on our deployed network. Alex, our Chief Operating Officer, after this will dig into the network and customer performance, but I want to highlight some – a few trends. We continue to see penetration in the buildings that we deploy and provide service, reached 25% in the first year or more, 28% in the second year and 30 plus percent in the third year of operations, which is all the data we have today. That just shows us the demand is real for our product, but because we're investing growth along with so many vectors, the multitude and magnitude of our investment is relative to the size, while base can distort the underlying financial picture.
The underlying economic model remains extremely healthy and unchanged. The path forward for us continues to grow our serviceable homes while also increasing our penetration within that set. We continue to see a potential for breakeven profitability at approximately 4% take rate of the passings. And we have also discussed our adjusted EBITDA margins approaching cable levels at double-digit penetration in market. This gives us a lot of confidence in the underlying economic model works that's intended and reinforces our desire to expand as quickly as possible.
Finally, I want to spend a couple minutes talking about the market segmentation and competition. With our license spectrum portfolio covering 49 households, we have focused mostly on the urban and denser parts of the suburban cohort. I want to highlight this point. There is a lot of attention being paid now to mobile providers offering fixed services and to new fiber deployments. These are both interesting segments for sure, but they're focused on different geographic aspects of the market than starting days. Mobile operators offering fixed wireless that are focused on where they have access network capacity, which generally is not in dense parts of this country. New fiber deployments are focused on existing SDSLs or DSL areas, which again, by very definition, tend to be away from dense parts of the country.
In addition, we have developed a very meaningful competitor most against potential new entrants. Our network allows us to deliver speed and capacity, while others can offer one or the other, but rarely both. And this is an important point that I want to highlight on. Our spectrum position is nearly impossible for a new entrant to replicate today because the FCC has nearly auctioned off most the millimeter wave spectrum that was teed up and there isn't a meaningful secondary market opportunity to acquire. We've spent four plus years, $200 million to develop our technology, which is extremely difficult engineering, time consuming and has left us with a great deal of intellectual property and knowhow in the market.
We've also had the valuable experience of having built multiple networks in multiple cities. We've worked out the kinks in the system and learned how to most effectively sell the product and serve our consumers. In some ways we've created something really unique. This is frankly from my perspective the only real growth story in the broadband, perhaps even in decades. We've solved really difficult technical challenges and now we're getting the word out and getting our products in the hands more and more consumers every day.
I will now turn over to Alex, our Chief Operating Officer, to walk you through operating results of this quarter.
Thanks, Chet. Hi, everyone. I'm Alex Moullé-Berteaux, Co-Founder and COO at Starry. I'm responsible for overseeing the business performance and operations here, including network deployment and maintenance, customer delivery and care as well as sales and marketing. A bit about my background for those who don't know me. Previously, I worked with Chet and the team at area. And before that, I spent over a decade in product management and marketing across consumer technology businesses. The underlying thread throughout my career has been to work with high disruption teams and products. At Starry that disruption is innovating on how internet access is delivered, expanding high speeds and affordable broadband coverage to millions of Americans.
Now let's jump into operating results. Addressable homes, we define this as residential household units within the total market boundary, think of this as TAM in our live markets. We're currently at 9.7 million household units in six live markets. Flat year-over-year as no new markets were opened you'll see this number increase as we rollout new markets. In live markets, we continue to focus on driving serviceable homes by expanding our network.
This metric is the household units that we covered and technologically service with our built network. We increased serviceable households by 20% year-over-year to 5.5 million homes. Our customer relationships increased by over 8,000 in the quarter and had over 71,000 customers, up 72% year-over-year. This is the second quarter in a row that Starry has added more than 8,000 net adds in a single quarter.
We already saw growth in customer relationships in each of our six markets during the quarter with continued strength in the net new category. Our penetration of serviceable homes was up 39 basis points year-over-year, as the company continues to focus on not only new network expansion, but also deploying and delivering service under existing Starry network coverage.
This quarter we also made great progress with Starry Connect, a digital equity program that now reaches more than 63,000 apartment units of public and private affordable housing. We’re proud to say that Starry was named to the TIME100 Most Influential Companies list in recognition to our digital equity work in Starry Connect. We also continued to lead our industry in net promoter score. Our lifetime NPS score is 61. This is on par with some of the most beloved household brand.
So all of these are foundational building blocks that we believe will continue to support our next phase of expansion. We plan to build out new networks in a cost efficient manner and expect at least one new markets to go live in 2022 in more new markets in 2023 and beyond.
From the beginning, we looked to align our growth with our equipment costs with strong and consistent focus on unit economics. We originally started by deploying it to only large MDUs of a 100 apartment units and above, and we steadily reduce the size of buildings we deployed – that we deployed to and cost reductions that each generation of equipment were realized. In MDUs as of the quarter end, we had approximately 375,000 apartment units connected.
As Chet mentioned, we continue to see healthy penetration trends across all MDUs connected in all our market. This healthy penetration dynamic is really driven by a lack of alternative service options [indiscernible] and strong customer satisfaction dynamics in the areas that we’re serving. We believe this will all support ongoing and robust demand for our service.
For single family units, we’ve rolled out servicing in select market areas in mostly suburban community. This is a new market opportunity for us that has been opened up in existing and new coverage areas. And this is made possible by our declining equipment costs.
In other opportunities, the Rural Digital Opportunity Fund or RDOF, as you all know it and the affordable connectivity program or ACP of both government supported programs we’re participating in. We expect to continue to grow our participation in ACP as our overall footprint and the Starry Connect program expands.
Over time we also plan to introduce small and medium business services and more over the coming quarters.
In conclusion, our operational focus is on continuing to improve and expand the network, scaling our teams and capabilities to continue to offer superior service to our customers. We believe we are seeing strong consumer demands, we have the technology and supply to support our customers and our priority now is to continue to execute.
With that, let me now hand things over to Komal.
Thank you, Alex, and good morning, everyone. Let me introduce myself to those of you who I haven’t met. I’m Komal Misra, the CFO of Starry. I’m an engineer by training and I’ve worked as a software engineer at AT&T Bell Lab early in my career before transitioning to a 15-year career in asset management, where I was a tech investor and portfolio manager at Lloyd Punj team. Prior to taking on this role at Starry, I also spent time at Cognizant and IPsoft in finance and corporate roles. And I’m very excited to be here, a company that is disrupting the status quo in broadband services.
Now let share the details of our financials with you and also provide guidance for fiscal year 2022. Let me start by saying how pleased I am that we were able to produce these results. They clearly show that Starry’s value proposition to consumers is working, helping us to drive our penetration of home services to new levels and I’m convinced we are on the right path to take share and grow the business.
Now on to the financial. Revenue of $7.4 million, increased 63% year-over-year due to the increase in net customer relationship and was partially offset by a decline in ARPU. ARPU of $36.4, was down 7.9% year-over-year and reflects our significant customer growth couples with our revenue recognition methodologies, where we don’t recognize revenue for the promotional period that we offer to our customers.
Our ARPU after the promotional period expires returns to rack rate and we think this is the right thing to do for consumers and our customers. Given the early stage of our business and the high growth in net new customer relationship over our existing base of customers, we expect our realized ARPU to continue to show the impact of these promotional periods.
In markets where the number of our new customers is smaller than the existing base of customers in that market we see a substantially higher ARPU today. We expect ARPU to flattened out and increase as we see growth in the midst of our high tide service offerings like SMB and also other higher speed plans.
Cost of revenues were $18.2 million up 45% year-over-year due to higher depreciation related to our network expansion, as well as increase in head count and network service costs as we expanded our network this quarter. We continue to see positive signs of leverage in this expense as our business scale.
SG&A expenses increased by 77% year-over-year due to higher head count deal related expenses and our marketing expenses. Excluding deal-related costs of approximately $3.3 million in the first quarter of this year, SG&A expenses actually increased by 53%. This year – year-over-year growth was also higher due to an increase in public company related expenses that we incurred in first quarter of this year for the first time.
R&D expenses increased by 38% year-over-year due to increased headcount costs to support the product development of our network. We anticipate that R&D expenses will grow at a reduced rate in future quarters as we are well staffed for the current product roadmap that Starry held in place.
Net loss was $53.6 million compared to a net loss of $41 million in the first quarter of 2021. Our net margin improved by more than 150 percentage points on a year-over-year basis.
The adjusted EBITDA loss increased to $27.8 million as we invested in our network systems and the staff to support growth in current and also future quarters. We adjusted EBITDA margin improved by over 100 percentage points on a year-over-year basis.
Our CapEx was $16.8 million, up 67% year-over-year, as we invested in our network and customer expansion. Most of this CapEx was related to driving growth of our network in both the existing markets and also initiating network built out in one new market that is expected to be launched later this year.
Now, let me give you color on guidance. We are executing our capital allocation strategy based on the results of the de-SPAC process and the capital rates from it. Our focus is on maximizing customer growth, while also lowering unit economics and our guidance reflects on these goals. We continue to pursue higher penetration in our existing network, while also expanding the network in both our existing markets and the new market that I mentioned previously.
We will launch one additional market later this year, and we’ll give you additional color on that market as we come closer to realizing subscribers within that market. We expect our customer relationships to be greater than a 100,000 by the end of fiscal year 2022, reflecting the growth of at least 58% year-over-year.
On revenue, we expect fiscal year 2022 revenue to be at least $50 million, reflects our growth of at least 125% year-on-year. This guidance assumes we will receive more than $15 million in federal regulatory revenue through the FCC’s Rural Digital Opportunity Fund this year.
Our adjusted EBITDA will be a loss of $125 million, which represents an improvement of 200 percentage points on a year-over-year basis. And we will continue to deliver on operating leverage in the future as we grow our customers relationship and scale our business.
In conclusion, as you can see, we reported very strong results this quarter, highlighted by industry leading revenue growth, rapid customer growth driving record penetration of home serviceable and strong operating leverage as we continue to build scale in our business. We are confident that we can maintain our current business momentum, and we look forward to sharing the results of our continued success with you every quarter.
With that, Chet, Alex and I are ready to take your questions.
Operator, we’re ready for Q&A.
[Operator Instructions] Our first question comes from Brett Feldman from Goldman Sachs. Brett, your line is open.
Great. Couple questions if you don't mind. First did you actually get any subsidy revenues during the quarter? I think there had been some delays in distributions out of RDOF. And I have some follow-ups. So I'll start with that one.
Sure. Hi, Brett. This is Chet. No our subsidy has not started. We expect it to shift very soon thereafter. We were obviously waiting for our transaction to close, so that we could be prepared for that next step. So we were timing it just post transaction.
Okay. One of the things I was looking at was going back to the presentations you had given during the de-SPAC process and you'd given some forecast. And I think you had initially expected about $26 million of subsidy revenues here. It seems like you've written that down by about $11 million based on a delay in the program. And I think that would probably explain the large majority of the variance between your current revenue outlook and what you had put in that deck. Is that a fair assessment?
That's correct. Yes, the organic revenue ballpark is going to be the same what we had originally shared. And if you recall, the original view was the transaction was supposed to close in the fourth quarter, like October-November timeframe and due market conditions that ended up being end of Q1. So that's effectively we pushed the subsidy part out to essentially face with that.
Okay. The next question is also kind of thinking about how your current outlook compares to what you had anticipated previously. It does look like you are expecting a greater EBITDA loss than maybe your prior estimates on a reasonably similar customer revenue forecast. And even if we adjust for RDOF, it looks like it's still going to be a much greater loss. I was hoping you could give us some insight as to maybe where you pulled forward some spending in business?
So I can give you some color on that, Brett. I think what you are referring to is some of the numbers that we had put out when we were solely focused on launching some partner markets for the rest of this year. I think what the new guidance reflects is that we will launch a market as a Starry market. And of course, we are continuing to see partnerships for the market, but for now the guidance assumes that the entire expenses related with that, and also the growth in our current existing network will come will – be borne by Starry. So some of the expenses related to that is what you've seen in the Starry number.
Okay. And then just one more, if you don't mind, and I know Chet you sort of talked a bit about the competitive backdrop. But I'm curious for what insight you've gained in terms of how consumers are starting to think about fixed wireless, meaning you now have T-Mobile and Verizon advertising to services much more significantly. Are you finding that that is making it harder because it's more competitive or are you actually finding that consumers are starting to see fixed wireless as less as an oddity and more of a core service in some ways that might actually be helping to go-to-market?
Yes, we actually find it to be easier but is probably the best way to sort of describe it largely, because I think, there is a more of an educational component in the consumers’ mind that there are alternatives emerging. And as I mentioned geographically, we don't see an overlap of that. We haven't over the last year and we don't expect to, given the technological differences. We're obviously, as you can imagine, right we don't zero rate, we don't do any of those things. And our customers are consuming, 500 gigabytes, 700 gigabytes a month and substantial up length.
So that's pretty difficult to replicate with mobility-based solution, which is why we think that, our position geographically, where we're focus is actually interesting in the sense that historically people have always talked about hey, why don't you do rural, why don't you do this, that whatever. My view is always, look, I want be where the customers are.
And secondly, on the rural side, there is going to be a lot of competition given government subsidies, potential of the 5G-based solutions utilities, electric coops.
And on the urban side, we're pretty unique that we're kind of the only name of the game from an overbuilding perspective. That's attempting any meaningful scale. So we don't see overlap on the competitor side, but I think, generally speaking the awareness in the consumers’ mind that that there are alternatives emerging is very helpful and positive.
Thanks for the color.
Thanks, Brett. Next question, please operator.
Our next question comes from Michael Rollins from Citi. Michael, your line is open.
Thanks and good morning. Couple questions if I could, first, can you talk more about the pivot to targeting single-family housing units? And how you're looking at in terms of ramping the growth there, the acquisition costs for those customer opportunities?
And then secondly, as you're thinking about just the opportunities from addressable market perspective what's the pros and cons of accelerating the geographic footprint expansion relative to the current outlook that you have? Thanks.
Hi Mike. So not a pivot, I think, it's a continuation of our cost per base sort of how we sort of think about it, right? And today our sense is there is about 15-ish million households in multifamily of varying different sizes in the licensed areas that we have. So in all standard, if the company did nothing else and just focused on that we have a pretty bright future ahead of us. But being who we are, obviously beginning to expand to single family is important because a couple years from now, it's going to be an important element where we're going to be investing more heavily along those lines.
So, I think it's much more of early stage. And the data is early, so I don't want to set any expectations on that, but I think we have guided towards about 2% take rate on an annual basis. And we feel really good about that performance and that number on a single-family side. So it's more think about it as setting our foundation for the next five years, if you will, and making sure all the technical solutions that are necessary, processes, training people, labor, component, three, all of that stuff, so we can get our foundation done.
I think you will see us continue to have sort of this balance of making sure that we continue to execute at the pace we are on the apartment side. And I think our current run rate is somewhere in the 10,000 to 12,000 apartment activations on a monthly basis, ballpark which if you take a step back that the implement of 30,000 to 40,000 new drops that somebody would be doing, which is pretty heavy clip, if you will, right. Even in current providers today that are obviously a hundred times bigger than start in terms of balance sheet and things like that.
So you will see us balance the part where we are going to continue to basically add as much customer relations as we can within the current footprint and strategically pick off next cities that are going to be providing the growth for the next calendar year the calendar year after that. So it's going to be really sort of that staging that we're going to be doing throughout this process.
Thanks. So can you give an update…
The reality is the cheapest customer we are ever going to get is the customer that is already in an existing building. The next cheapest customer we're going to get is in a residence that is currently under coverage and the third cheapest, customer is going to be in a completely new city, but obviously, we'll continue to drive take rate in our current cities and add new cities as we can layer them in to continue to get to our front ultimate objectives there.
And can you just give us an update on the funding outlook for the business in terms of where the cash balance is, the EBITDA burn for the year and how you think about funding the business as you're looking at on the multiyear business plan?
Yes, so we were working with the advisors Mike to help us sort through that and don't have a specific update on that particular topic. But I would expect us to resolve those things in a short and medium term. And again, we're a combination of debt to equity and other vehicles that we're exploring. So we would hopefully make meaningful progress in a short order here. But top of mind for us.
Thank you.
Operator next question, please.
Our next question comes from Greg Williams from Cowen. Greg your line is open.
Great. Thanks for taking my questions. First one is on the subscriber guidance. You noted greater than a 100,000 customers in your S-4. You called for about 115,000. So maybe I’m mincing the numbers a little too much. But is the language changing here a little bit more conservative or is it just leaving room for again, being conservative on that guide? Second question is on ARPU. You noted that you guided that ARPU would flatten. Can you just help us with the mechanics there and the nature of your promos? You said you’re not offering teasers. Can you just tell us what the take rates are on your plans and how the mechanics of the ARPU flattening will occur? Thanks.
Yes. So the ARPU, I mean, this is sort of a – it’s very, artifact, if you will, in some ways, right? Because the way we realize ARPU is being calculated is basically taking all the revenue coming in and dividing by number of customers. And what’s happened – what happens in our case is we don’t do tease the rates as Komal mentioned. Just as a brand, we kind of stayed fixed focused on this one price, flat price. And in order to – so the standard promotion that we typically offer to consumers is 30 day free or six weeks free, or two weeks free, depending on kind of what the particular situation happens to be.
But basically it’s a free period. If you think about – if we’re adding, 8,000, 9,000 in a quarter, and 4,000 of those may have not paid you for the first month because it’s the free promotion that brings on a relative basis pulls the number down. But as you think about the number of new customer relationships as a ratio of the base are decreasing, just because your base is increasing, that total pull down tends to be less impact.
And just adding to that our ARPU rate is typically the $50, $65, $80, we also have ACP plan where the ARPU is $30. So the minute the promotional period expires that is in ACP that we recognize from the new customer. So a large part of what you’re seeing on the ARPU is just the mix of new to existing, which where the new is the larger piece of the total existing base. And like I mentioned, we have a couple of markets where we are seeing better ARPU, because out there the base is large enough where the mix is not as much of a drag on the total ARPU for that market.
And on your prior question, yes, we’re trying to be conservative here and leaving some room. And obviously, we raise less capital, but as we solved in the short to midterm additional capital, we wanted to leave ourselves in room on the customer relationship part.
Got it. Thank you.
Next question, please operator.
Our last question comes from Walter Piecyk from LightShed Partners. Walter, your lines open.
Thanks. Just in terms of – I guess let’s start with pricing. There’s been some chatter in the mobile wireless world about increasing pricing, but in the kind of the home broadband world they’ve got competition coming from fiber and wireless broadband, you guys among other things. How do you see kind of what has been historically an ability maybe to increase price in the industry and maybe your specific ability to increase price over time within this industry? Just kind of 10,000 foot thoughts on that, please Chet.
Sure. Walt, so I’ll start off with an apology. I know how much you’ve doubt prepared remarks. This was our first go down, so we were a little long, but we will faster this strive to be on your short list of – shorter prepared remarks. Look, my view Walt in this is I think we are – I am committed to not raising prices on a per base basis, if you will. And I frankly expect those to go down as consumptions continues to grow up.
So my view is, and I think that you see in other providers results as well, where, sorry, being despite being a much smaller company from the size perspective on a net ad basis and the total number of drops we’re doing is incredibly high on a relative basis, largely because we think we’re going to drive prices to be flat to down on a per base basis on an ongoing cases.
We do think ultimately there is opportunity to serve the customer extra and get more revenue on it per customer basis based on product features, performance, speed and other things that you might be able to add in, security and who knows what else. But ultimately I think the razor rate mindset needs to go away because I don't think customers going to be responsive to, hey, a 5% rate increases on an annualized basis. That's just not going to be the case. And maybe there's opportunities for people to do accessible amounts of bundling or whatever else, but I think reasonably sophisticated customers going to see through that and be that sorry in that sense.
Got it. And I flicked as a comment, I appreciate having revenue that's closely align with cash. We don't always see that. But I think, when I look across the industry, promotions typically are amortized over the life of the customer. Is it kind of revenue? I know that's what's happening in the wireless industry with handset, but I do appreciate. I mean, so you're obviously showing lower revenue than a like company would report, this will obviously kind of play itself out over time, but my preference is stick with what you got, just because it's associated with cash.
Just one of the question on the penetration rates, I think in year three, you mentioned getting to – gets 30%. So again, with the changing dynamics of the industry, I know earlier you mentioned that you're not seeing a mobile wireless customer, but it look, if there's a small cell next to a building it's feasible that someone could potentially sign up for a Verizon or T-Mobile, what are the puts and takes that year three or year four, year five penetration can't hit 30% and conversely, like what limits you from taking 30% in these buildings up to 40% or 50% like we've seen with some fiber overbuilds?
So Walter, those penetration numbers obviously take into account were in competitive areas, all of those kinds of things. So I'll start with the – where could this go as a first question. And today there is a natural ceiling on Starry’s customer take rate within a building, mainly because we don't offer a video product that's for a certain percentage of the population, they're still used to kind of old quicker model, right? So we've strategically decided that's not for us, it's an impact on margin that I don't believe in. And it's not a product that I think long term is going to be sustained itself.
So in – obviously in buildings where we see allowing new move traffic, we tend to exceed that take rate. And this is average across all of our markets. So obviously in areas where we are just against coax in a similar area, the numbers will be higher, but this is blended across even in Boston, for example, obviously, there's an overbuild [indiscernible] revenue. So this takes all of that into the account.
On the mobile 5G side, I think the – well, the question is, yes, we will certainly be able to build the tower close by, you might have the opportunity to attach to that either. The thematic question in our mind tends to be, is that really economically rational for anybody, right? Because if you think about, we are seeing, and I think over the last year, ballpark, our capacity utilization went up like almost 170 to 200 gigabytes and non zero rated. So any customer that's sucking off of mobile network, that's basically – you're basically saying I'm going to drive you for better price, 30% lower on an annual basis and continue to while the customer's consuming 40, 50 times more band within a mobile customer.
So I think ultimately it's become an uneconomical issue at mid band frequencies. Anytime we have a lot of density or not a collection of people, see certainly in our case where even in [indiscernible] certainly have people have the ability to do that. But my view is, look, we are ultimately competing with upgraded coax or fiber, and you need the ability to deliver, a terabyte plus without flinching in front of the consumer over the course of a month. And probably 200 to 300 gigabytes a month public as well, just part of that,
Okay. With that, operator if there are no more questions, we'd like to turning the call. And I just wanted to say, we will be at a couple conferences in the last few weeks. We'll be at Moffett, Credit Suisse, Cowen, and UBS. So hope to see you then.
Thank you, everyone.
Thank you.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for being with us today. Have a lovely day ahead. You may disconnect your lines now.