SDC Capital Partners, a digital infrastructure private equity firm, announced that it has acquired a majority interest in Smartaira (Consolidated Smart Systems, LLC), an internet service provider (ISP) to the multifamily market. Furthermore, SDC Capital has committed up to an additional $100m for Smartaira’s footprint expansion through organic growth and acquisitions in the multifamily internet and entertainment industry.
Initially, Smartaira will use proceeds from SDC Capital’s growth equity investment to close several opportunities with multifamily property owners/managers and acquire assets, accounts, and technologies from local service providers.
Beyond SDC Capital Partners, Smartaira’s corporate entity, Consolidated Smart Systems, is owned by Dan Terheggen (Chief Executive Officer) and Robert Benton (Chief Marketing Officer), who have been with the company since 1983 and 1997, respectively. Notably, Terheggen is also President of the Multifamily Broadband Council, a trade association focusing on broadband solutions for multifamily communities.
Smartaira – Overview
Smartaira is a Los Angeles, California-headquartered internet, video, and VoIP provider to multifamily and commercial property owners and managers. The company provides service to over 75k multifamily units in California and the Greater Phoenix area of Arizona. Specifically, Smartaira provides both bulk (see below) and retail broadband solutions.
Importantly, Smartaira can predict, with a high degree of certainty, what its subscriber penetration will be in any particular property based on two contractual components, namely exclusive marketing and bulk billing agreements:
Exclusive Marketing Agreements
Exclusive marketing agreements are set out between Smartaira and owners of multi-dwelling Units (MDUs), which provide the company with the exclusive right to market its services to the MDU’s residents. In turn, smaller operators like Smartaira can better compete with large telcos and cable companies, which have significantly greater advertising budgets.
Bulk Billing Agreements
Smartaira uses bulk billing agreements, under which a property owner purchases service and provides it as an amenity for all residents at a steep discount to regular retail pricing. Bulk billing agreements allow Smartaira to offer reduced prices to customers by spreading fixed costs among many subscribers using common facilities.
Smartaira has a number of bulk billing agreements, with its bulk properties falling into two distinct categories: luxury buildings and low-income buildings. Firstly, luxury buildings use bulk billing as an amenity to the building, positioned as a convenience for their residents. Secondly, low-income buildings use bulk billing to receive internet and video service at a substantial discount, and, in turn, pass this discount on to their low-income residents.
In particular, bulk billing is frequently used in shared-living environments like retirement & nursing homes, student housing, and lower- or fixed-income residences.
By partnering with property owners and management companies, Smartaira offers a managed Wi-Fi service, known as Smartaira 360. This managed Wi-Fi service provides residents and guests with community-wide internet connectivity, offering symmetrical, gigabit speeds, enterprise security, and unlimited data.
In the vast majority of the communities that Smartaira services, it is competing directly with one of the major telcos (e.g., AT&T) or cable companies (e.g., Charter Communications / Spectrum). Smartaira primarily competes by offering the fastest speed and lowest price in all of its markets. Additionally, Smartaira offers residents ‘instant on’ for internet, meaning the modem is pre-installed and ‘hot’ before a resident moves in. As such, all the resident needs to do is launch their browser and get online.
Acquisitions – Smartaira and SDC Capital Partners
Smartaira recently closed two acquisitions with the financial support of SDC Capital Partners:
Just In Time Technology Solutions
Smartaira acquired the multifamily account portfolio from Just In Time Technology Solutions in Rancho Cucamonga, California.
Blue Rim Networks
Smartaira acquired the technology, assets, customer accounts, and employees of Blue Rim Networks in Logan, Utah. Notably, Blue Rim’s network operations center (NOC) merged with the Smartaira Smart Desk, increasing the size and capability of the company’s internal support team.
SDC Capital Partners – Digital Infrastructure
SDC Capital Partners invests in all of the digital infrastructure sub-sectors of towers, data centers, fiber, and small cells. For example, the firm’s current investments include the following companies:
- Allo Communications: fiber-to-the-premises (FTTP) network services in the Midwest region of the United States
- Arcadia Towers: developer, owner, and manager of communications tower infrastructure and rooftop sites
- Bandwidth Infrastructure Group (Bandwidth IG): metro dark fiber provider for data centers, hyperscalers, and enterprises throughout Northern California and Greater Atlanta
- Fatbeam: fiber infrastructure provider to enterprise, education, healthcare, government, and carrier customers in the western United States
- IQ Fiber: newly formed residential fiber-optic internet provider which plans to pass 60k+ homes in the Jacksonville, Florida area with fiber
- Summit Infrastructure Group (SummitIG): dark fiber infrastructure provider in Northern Virginia