First there was construction of fiber networks under the streets, which gave buildings in downtown areas access to alternative telecom providers and competitive services. But at the time, building owners were hesitant to allow then-unknown providers access to the basement phone closets and riser space.
Since those early days, attitudes have changed. The provision of reliable, voice and high-speed data services for tenants has become more of a necessity than a luxury for commercial property owners, the hospitality industry and even many upscale apartment and condominium complexes.
Thus, there has been a natural extension of the CLEC industry from the basement phone closets to the end-users' desktops. This evolution has created a new breed of CLEC--a group that is now more commonly known as "building-centric" service providers.
These providers--which focus solely on rebuilding the infrastructure inside the building by using new copper and fiber, or by implementing new technologies to get the most out of the existing wiring--have taken the shared tenant services business one giant step further. In fact, they're competing for their share in a building-services market that is pegged to be worth about $12 billion, according to industry estimates.
"We believe it's a natural progression that Intermedia understood years ago, and what prompted Intermedia to purchase Shared Technologies Fairchild," says Mike Dimperio, vice president and general manager of the new Advanced Building Networks (ABN) division at Intermedia Communications Inc. (www.intermedia.com).
In March, Intermedia launched its ABN group in an effort to keep its edge in the increasingly competitive building-centric services market. "Through the acquisition, it was kind of buried within Intermedia," says Dimperio. However, these services are important to Intermedia's bottom line. Building-centric offerings accounted for about 10 percent of Intermedia's total business, Dimperio notes.
In addition to the rebranding, Intermedia says it will use the most current technologies to deliver high-speed, high-capacity data and voice services, backed by QoS agreements. And, Intermedia won't focus solely on Class A commercial property. Instead, it will work with current real estate partners to bring services to smaller buildings and those outside the central business district. Currently Intermedia offers services in 660 buildings, but the company has contracts to serve 13,500 buildings nationwide.
Voice service offerings is a big differentiator for Intermedia. "While everyone else is focused on data, 80 percent of the customers' needs are for voice," says Dimperio. "In order to satisfy customers, we have to be able to do voice today." Currently, Intermedia is testing technologies that it hopes will eventually allow it to offer VoIP using a building's existing copper infrastructure for distribution.
Another advantage for Intermedia is its metropolitan area fiber networks. "We have a number of buildings on our fiber already. It lowers the cost structure," says Dimperio.
While Intermedia may be one of the granddaddies of the building-centric service world, it is seeing competition from many newcomers that have origins in both the real estate and telecommunications industry.
One of the longstanding building-centric providers is Cypress Communications Inc. (www.cypresscom.net), which has been offering services since 1996. Cypress bundles 19 voice, video and Internet services for tenants in Class A and Class B properties. Among the services is Digital Business TV, in which Cypress takes feeds from broadcast stations and cable stations from DirecTV, then runs the programming from a mini-headend in the basement through a building's coax infrastructure.
At the end of last year, Cypress was providing service to 116 buildings, with contracts to eventually serve 730 buildings.
"It's very much a speed game," says Barry Boniface, CFO of Cypress. "We can basically do everything we need to do today. And we have licenses to go into many more buildings."
Among others racing to market with voice and data solutions are B2B Connect Inc. (www.b2bconnect.com) and OnSite Access Inc. (www.onsiteaccess.com).
B2B, which touts itself as an "e-solutions company" for Class A space, is seeking to fill the need for IT management among small and medium-sized companies, says Kirk Millet, the company's vice president of marketing.
In addition to the typical voice and data connectivity services, B2B provides turnkey web and IT support. "IT is the real differentiation," says Millet. "Our approach is to be the onsite solution and have accountability. Many other companies offer a thin value proposition. They're faceless, and customers don't see them onsite."
B2B is serving only four buildings in Northern California currently, but plans to expand its portfolio nationwide, Millet says.
OnSite also is seeking to be highly visible among its small and medium-sized business customers. The company uses "Building Communications Managers" (BCMs) to act as a single point of contact between OnSite, the building manager and tenants. Each BCM is assigned to handle the needs of about 2 million square feet of property, and is paid a residual based on his or her service to end users, says Sharon Kelly, OnSite's executive vice president and chief marketing officer.
OnSite is a full-service provider, offering local, long distance and enhanced voice services, as well as high-speed Internet access, web hosting and security products. The company, which was incorporated in 1997, provides services to 183 buildings in 10 cities. Like other building-centric providers, OnSite is seeking--and getting--about 30 percent to 40 percent penetration rate per building. However, in some of the New York City buildings it has served since its inception, OnSite boasts take rates of 70 percent to 90 percent, Kelly adds.
Besides its full host of services, OnSite believes its big advantage is that its founder's background is in real estate. "It's a great entrée in the industry," Kelly says, adding that OnSite is able to make contacts that allow it to sign contracts with major property owners.
Like OnSite, other building-centric providers have their roots in the real estate industry. SiteLine (www.accessready.com), which provides services under the AccessReady brand, was founded by Lawrence E. Tanenbaum, whose family was one of the largest shopping mall owners in the nation.
SiteLine recently purchased another building-centric provider, inBuilding Systems Corp. With the acquisition, SiteLine is installing networks in 300 buildings in 22 markets nationwide. In the last four months alone, the company has turned up service in 140 buildings.
Unlike previously mentioned providers, SiteLine is offering only data-related services. "Our view is that the whole world is coming down to one pipe, and that will be a data pipe," says Randy Mueller, SiteLine's vice president of marketing. "Our focus is on data; it's the highest growth and affords us the greatest opportunity." However, Mueller says the company is exploring a few voice strategies, including voice over DSL and IP.
Darwin Networks Inc. (www.darwin.net) shares this philosophy. "We've elected to bypass voice and focus on the new field," which is data, says Glenn Meyer, president of Darwin's multifamily division. "Even though there is a rush to bundle, most companies are looking for services on a best-of-breed basis." Like Site-Line, though, Darwin is exploring the use of VoIP.
Darwin was created last August by the merger of four companies, most of which had been in operation since 1997. In addition to commercial buildings, Darwin provides data services to multifamily properties and hotels, as well as offering public Internet access kiosks.
While Darwin does use a building's existing infrastructure, it also relies heavily on fixed wireless services. Currently, the company serves 300 office buildings and has in-building networks passing 30,000 residential units, Meyer says.
Everest Broadband Networks (www.everestbroadband.com) also is serving the multitenant market, including office complexes, residential properties and hotels, using an IP on Ethernet strategy. Using Ethernet, "we'll layer services over that, [such as] e-mail hosting, IMAP [Internet message application protocol], IP fax and IP messaging," says Joseph Varello, Everest's vice president of corporate development. Eventually, Everest will add tiered web hosting and other fee-based services to the mix.
Everest does reuse a building's existing copper to deliver 6mbps services, but in most cases, Varello says, the company is putting in new fiber to offer 100mbps connections.
Allied Riser Communications Corp. (www.alliedriser.com) also is installing new fiber in the buildings in which it has contracts. In each building's risers, ARC runs a 4-inch steel conduit through which 48 to 96 pairs of fiber pass. "This allows us to dedicate discrete pairs of fiber to each tenant," says John Todd, ARC's president and COO.
ARC was founded by CEO David H. Crawford, a former real estate executive who experienced difficulties getting telecom companies to bring services to his tenants, Todd says.
In addition to high-speed connectivity, ARC brings customers bandwidth-enabled services such as web hosting, e-mail, OpticTV business television and portals.
ARC also offers managed services, something that small and medium-sized businesses are demanding, Todd notes. Among the managed services are developing LANs and doing LAN/WAN interface.
Eventually, Todd says, ARC will offer remote LAN management and help desk services to customers.
At the end of 1999, ARC had completed build-outs and had begun offering services in 120 buildings. The company has 1,300 buildings in 50 cities under contract.
