Wire 3 ditches megabit speeds amid $250M Oak Hill Capital deal

Wire 3 has decided to discontinue its megabit speed tiers and focus solely on gigabit offerings. Simultaneously, the company is undergoing a transition from its former owner, Guggenheim Investments, to Oak Hill Capital in a $250 million acquisition deal set to facilitate the expansion of Wire 3's fiber network throughout Florida.

CEO Jai Ramachandran told Fierce Telecom that the fiber-to-the-home (FTTH) provider decided to set its lowest speed tier at 1 Gbps to "differentiate" from other carriers in its markets across the state. 

He said the removal of megabit tiers shouldn’t affect Wire 3 subscribers much, since essentially, the company just shifted the price down for each of its plans. It got rid of its 300 Mbps tier, which used to cost $60 per month, and now will offer a 1-gig plan at that price. The 2.5-gig plan now costs $80 and the 10-gig plan, which was originally launched in 2022, costs $99.

Wire 3 made that announcement this month, along with a resolute declaration that megabit speeds have become “obsolete.”

Ramachandran noted that most of Wire 3’s subscribers have already moved from its megabit tier, as the provider has had “a pretty aggressive” early adopter campaign that allows subscribers to sign up for the 10-gig plan at $60 a month for two years, if they sign up within 90 days of service being launched in their neighborhood. Around 90% of its current customers are on the 10-gig plan.

Although, analytics company Opensignal has “yet to see evidence that megabit speeds are no longer viable for consumers,” VP Micah Sachs told Fierce Telecom this week.

Opensignal’s USA Fixed Broadband Experience Report showed that speeds well below 1 gigabit can “consistently” deliver a quality experience for the majority of typical use cases, she said. In one graph, the report showed the "fastest average broadband download speeds in the U.S.,” from Verizon FTTH, Google Fiber and AT&T (FTTH), still fall between 135-160 Mbps.

“In practice, gigabit is more for marketing than actual end user needs today or in the near future,” added Sachs.

Ramachandran claimed Wire 3 has seen some scenarios where customers use upward of 5 gigabits at a time, pointing to examples like an entire family downloading through many different devices at the same time, or someone uploading or downloading large files from a corporate cloud server. Still, “very few” ever use the full 10-gig capacity, he said.

“Across the board our average usage per user, even peak times, which we consider peak times typically Sunday afternoon, tend to be less significantly less than even the one gig number.”

However, Ramachandran said bandwidth usage isn’t consistent, and made the case that a gigabit future is coming. A modern household could have 100 devices that need to connect to a cloud service, and multi-gig services can ensure all of them are able to hit “their maximum bandwidth” if needed.

“I think that it's not about what people need on a day-to-day basis,” added Ramachandran. “It's what it's about what people need on a burst basis.”

Oak Hill Capital acquisition

In a separate announcement this month, Oak Hill Capital acquired Wire 3 from Guggenheim Investments and will invest up to $250 million to accelerate the expansion of its network across Florida.

Private equity companies have flooded the market with investment funds for fiber. This adds to the growing list of fiber companies Oak Hill Capital has taken under its reigns. The firm is already invested in Omni Fiber, Greenlight, MetroNet and Vexus Fiber, and most recently committed $150 million to Lit Communities.

"Oak Hill believes that reliable, high-speed access to the Internet represents a fundamental necessity for economic growth and opportunity," said Adam Hahn and Jeff Butler at the close of the Wire 3 deal. Hahn and Butler will join the Wire 3 board as Oak Hill directors, as Wire 3’s existing management team members continue leading the business as shareholders.

Wire 3 has been actively expanding its network in Florida’s Volusia, Brevard, Indian River, St. Lucie, Orange and Marion counties. The $250 million for Wire 3 will come out of Oak Hill’s sixth flagship fund. Ramachandran said that will mean expansion to “hundreds of thousands” of homes and businesses across Florida.