In this Article, You Will Learn:

  1. How the multiple-tenant unit (MTU) presents an excellent business opportunity for service providers;
  2. How to enter the market easily with new, value-added services
  3. What to look for when choosing a vendor to get started.

Profiting from the Untapped MTU Market
by Greg Ioffe, Tut Systems

Ever since the telecommunications industry was deregulated in 1996, new Internet access providers have continued to flood the market. The resulting fierce competition shows no signs of letting up. There isn’t much room for providers to rest on their laurels if they intend to be long-term players. To beat the competition, providers need to find new exploitable markets, introduce new value-added services, improve service margins and increase profits. But what are the most effective ways to achieve these goals? For many providers, the answer to this question lies in the multiple-tenant unit (MTU) property market.

MTU properties offer an excellent opportunity for providers to create new revenue streams by serving a population that has long been ignored. Most business and residential customers in the United States now have access to broadband data services. This is in part due to the wide availability of last-mile technologies that leverage existing copper, such as ISDN and xDSL. However, while today’s last-mile technologies can effectively deliver high-speed data from a telco’s central office (CO) or a cable headend to the edge of a building, they do not address the needs of MTU structures. Thus, the millions of people who live or work in MTUs – including apartment complexes, university dormitories, hospitals, shopping malls, military bases and office complexes–remain largely unsatisfied. The same is true for most hotel visitors.

MTU Properties: Uniquely Structured

Even when a provider’s last-mile infrastructure reaches the edge of a building, the data still must travel to an end-user device over the building’s local, private copper network (PCN). In MTU buildings, the predominant PCN topology for connecting individual units to the last mile is a single twisted-pair of copper wire connected to one centrally located punch-down block, often in the basement. This configuration has typically required installation of either new cabling or multiple access concentrators, or both, in order to deliver high-speed services.

Most hotels, for instance, have one or two pairs of regular voice-grade copper telephone lines running to each guest room from a central wiring closet. Currently, more and more telephone lines are being tied up by guests who leave their computers connected for hours. Hotels have had to invest in additional PBX equipment and trunk lines, or rewire the building to support data traffic with a traditional Ethernet LAN. These options are equally cost-prohibitive, not to mention disruptive for normal business.

In addition, many hotels, apartments and corporate campuses are in a "garden-style" arrangement, meaning a single property might contain several buildings. The distances between these buildings often exceed the 300-foot limitation of standard Ethernet.

For these reasons, most MTUs are not well-suited for a conventional approach using structured cabling. That is why there has been a frenzy around technologies that leverage existing wiring, such as cable- and copper-based solutions. Unfortunately, however, the existing cable infrastructure within many MTU properties cannot support two-way services and would require a significant investment to upgrade. Moreover, as a shared medium, the performance of cable diminishes proportionately with the number of users, making it problematic for high-density MTUs. The shared nature of cable also raises some concerns regarding data privacy.

And, while xDSL would seem to be an attractive option for many MTUs, it is hampered by cost concerns and technical limitations. Developed as a wide area networking (WAN) technology, xDSL was designed to cover long distances up to 25,000 feet. For it to work, a continuous twisted pair of copper wire must extend from a DSL access concentrator in the telecommunications provider’s central office to the end user. The telephone wiring infrastructure in most MTUs is not generally set up to accommodate this. Thus, for an on-premise MTU deployment, which involves much smaller distances, xDSL is overkill and far too expensive. This has left the MTU market largely untapped.

Today, however, there are new solutions that make it easy and cost-effective to deliver high-speed access to MTU properties by leveraging the existing infrastructure of the building. And almost more importantly, there are platforms that enable providers to deliver specialized services to MTU dwellers. As high-speed access itself becomes more and more of a commodity, margins are not necessarily sufficient for most service providers to make a strong profit. Service providers need to look at Internet access as just one piece of their overall service offering. Value-added services offer a way for providers to differentiate themselves and generate incremental revenue.

A Large and Attractive Market

The MTU market is enormous. According to the Building Office Management Association, there are approximately 750,000 multi-tenant commercial buildings in the United States. Approximately 75 percent of Americans work in such buildings, and those people are prime targets for high-speed deployment. The overall commercial market, including structures such as office buildings, malls and hospitals, is worth roughly $6 billion.

In addition, National Multi-Housing Council (NMHC) statistics indicate that the United States is home to 21 million apartment units. Research firm The Yankee Group and the NMHC estimate that more than one-third of Americans live in MTUs, and in California, more than 22 percent are MTU residents.

The residential MTU market, which is populated by young, technologically savvy residents with significant disposable income, is attractive for service providers. When it comes to PC ownership, one could easily assume that MTU residents match or exceed the national average of 50 percent. According to a 1999 bulletin from International Data Corp. (IDC), the number of home office households with multiple PCs will soar from 7.8 million in 1998 to 12.1 million by 2002. Property owners realize that broadband services are a valuable tool in differentiating their properties to attract new residents in the competitive MTU market.

In the hospitality industry, there is a quickly growing demand among guests for access to telecommunications services. According to an American Express Corp. survey, 65 percent of business travelers carry laptops. Many business travelers now choose a hotel based on its ability to deliver a high-speed Internet connection that is "always on" – in other words, one that requires no dial-up procedure. According to Smith Travel Research, there are nearly 4 million hotels in the United States alone.

Taking into account all types of residential and commercial MTU properties, the market could easily represent a $100 billion opportunity. This leaves little room for doubt that providers have a significant financial incentive to adopt an MTU strategy.

Innovative On-Premise Solutions

With new technologies available today, service providers are able to realize the tremendous potential of the MTU market. Armed with the right tools, there are nearly limitless opportunities to gain new customers. There are now scalable, high-density network systems that enable providers to deploy high-speed Internet access to MTU structures easily and profitably. Service providers should view this market as a business opportunity not to be missed.

Based on access concentrator technology, the new network systems are designed to reside on the MTU’s premises in the central wiring closet and work seamlessly with the existing copper wiring system. Ordinary phone service is not interrupted when an end user accesses the web or sends e-mail.

A service provider chooses a high-speed WAN connection for an MTU, such as a T-1, xDSL line, cable modem connection, fiber etc., and connects it to the network system in the wiring closet. From there, the system delivers data to individual tenant units at rates up to 1 Mbps over the existing copper telephone wiring.

With the addition of a network extension solution that utilizes either copper wire or a wireless link, an MTU can provide access to outlying buildings in a garden-style arrangement or to remote meeting rooms in a hotel. Thus, from a single point of access in the building, an entire MTU property can be provisioned for high-speed services with no re-cabling required.

In addition, new remote management systems virtually eliminate the need for an on-site visit when provisioning service to end users. By pushing the intelligence of the network as close as possible to the customer with self-installable customer-premises equipment, these solutions are cost-effective and highly adaptable to the needs of both providers and MTU property owners. The best remote management systems can be described as multi-service platforms that streamline user configuration, address management, traffic shaping and firewalling, and deliver service branding as well. They also can enable delivery of income-generating services such as broadcast-quality onsite video and voice-over-IP.

Some platforms now available for MTUs are truly plug-and-play, automatically delivering users to the Internet when they launch their web browser – with no need for configuration. This could be great for hotels, because a guest needs only to connect an in-room adapter into a laptop’s Ethernet port. Easy-to-use screens walk the guest through payment options and offer links to various services, such as online room service ordering or online hotel spa and restaurant reservations. Such features provide obvious conveniences for hotel guests, but they also simplify work load for hotel employees.

Easy set-up is particularly useful for hotels, where the end user might be different each night, but it also provides benefits where residential MTUs are concerned. Automatic configuration eliminates a service provider’s need to spend time helping each new end user get online. There is no need for a technician to visit an apartment to install software. This significantly decreases operating costs.

Web portal capabilities are also built into some systems, enabling providers to offer branded pages. With this ability, hotels can build a city-specific welcoming page that comes up when a guest launches the Internet. A hotel can generate incremental revenue from such a portal site by offering links to sites that provide local maps or theater tickets, for instance, and gaining a percentage of "click-through" sales to those sites.

Commercial and residential MTUs can also benefit from customized portals. Residential MTU owners could set up a portal for scheduling repairs or maintenance; commercial customers could develop a portal with any number of features specific to their business. Like hotels, both residential and commercial MTUs could generate revenue via click-through referral fees. A link to local restaurants for take-out food orders is an excellent example.

Further simplifying things both for the service provider and the end user are subscriber management solutions that enable customers to provision tiered services for themselves. With such a solution, a service provider can charge different rates for different service speeds, and end users can choose what they want from their computer screen. No customer visit is necessary, and if the system is linked to the service provider’s back-end billing system, no additional customer service intervention is required.

The additional cost of a remote management system is well worth it when considered from a profitability perspective.

Choosing a Vendor

MTU property owners are looking for some important features in a high-speed Internet system. A system should protect privacy by ensuring that data from one port cannot be "seen" by another port. Also, a system must support virtual private networking, which is a remote access technology that uses the public Internet to provide business travelers and telecommuters with a secure connection to their company’s private network. It should be also designed to accommodate future communication needs like voice and video services.

MTU owners do not want to construct a solution from scratch, nor do they want to make an enormous capital investment. They want solutions that integrate all the elements necessary to launch a service – the Internet "pipe" itself, equipment, installation, custom software solutions, training, service and maintenance.

The good news is that there are vendors offering comprehensive solutions for providers looking to enter the market. As the MTU market has drawn more attention, a flood of product offerings have become available, ensuring that high-speed Internet access can be deployed to almost every MTU building configuration, including small commercial buildings and garden-style apartment complexes and hotels. In fact, there are now innovative wireless-to-Ethernet solutions for multi-tenant properties that lack central wiring.

When choosing an equipment vendor, keep the following guidelines in mind:

  1. It is best to partner with a vendor that offers the full range of on-premise products to provision every type of MTU. This ensures that a provider will be able to serve the broadest range of MTU customers while enjoying the simplicity of working with only one vendor;
  2. Choose a vendor whose equipment was designed specifically for the MTU market. The equipment sold by some vendors was originally designed to reside in a telco central office, and is not optimized for the MTU environment;
  3. Choose a vendor that offers remote management software, and make sure it does not require any special client software or configuration on the end user’s side;
  4. Partner with a vendor whose equipment is compatible with industry-standard protocols and equipment; and
  5. A vendor’s solution should offer the kind of record-keeping capabilities needed to manage a large, distributed network, including easy integration with a provider’s back-office systems.

Those providers that add high-speed MTU services to their offerings today can get a jump on the competition in this emerging market. By going to the right vendor, providers can be up and running relatively quickly with everything needed to successfully serve the MTU marketplace.

About the Author

Greg Ioffe is senior director, marketing with Tut Systems.