A revolution; progress, sudden radical or complete change. In the multi-dwelling unit (MDU) community world, for both property owners and service providers, a revolution is currently underway. The revolution is about progress. The changes precipitating this progress are both sudden and radical. The revolution is about creating true, broadband MDU communities. As such, it is only fitting that Private & Wireless Broadband embrace this revolution by becoming Broadband Communities.
To take advantage of this revolutionary period, Private Broadband Operators (PBOs) must first become fully capable of creating and serving broadband MDU communities. This means the old-school Private Cable Operator (PCO) must become a PBO, offering both digital video and high speed Internet services to MDU communities.
The subject of converting from a traditional PCO to a PBO was addressed for most of 1999 and 2000. Unfortunately, this lengthy discussion period lulled many operators into believing the time for this conversion has not yet come, or that when it does the trumpets will sound loudly from above. Well, the trumpets are sounding.
The soldiers of this revolution, those whose strategy is to respond to the call for playing a role in developing and serving broadband communities will survive, while others are bludgeoned to certain death. Many such failures have already planted the telecom and technology graveyard. But for MDU property owners and private operators who understand the theory of "where there is chaos there is opportunity," there is no time like the present for creating successful relationships.
Trumpets Sounding, Loudly
AT&T, the nations largest video and data service provider is collapsing like a house of cards. In many areas (i.e., Southeast, Northwest, Southwest) they have left property owners standing naked in the cold, winter wind without delivering on contractual promises to put in broadband services. BellSouth Entertainment has pulled out of the business of providing services via both wireless and fiber optic systems.
Due in large part to lobbying efforts of the SBCA (Satellite Broadcast Association) and its constituents DirecTV and EchoStar, many MDU community owners are also not in favor of system operators re-selling these companies' services. After all, this is the group (SBCA, et. al.) responsible for forcing property owners into allowing residents to install satellite dishes in all manors of ways. As such, Southwestern Bell (SBC, PacBell, Ameritech) and Verizon find it difficult to acquire service agreements with many MDU communities. And of course, companies such as Comcast and TimeWarner, while doing well with system upgrades in major metropolitan areas, are severely behind in upgrading many suburbs and most non-metropolitan areas. Of course, this is where the MDU industry has been focusing on building properties for the past five-to-seven years.
Not Full Speed Ahead
High speed Internet service has largely failed for MDU community owners and residents. In the past 12 months, several companies once promising great things have lost all hope of surviving.
CAIS Internet was the first to completely disengage from providing Internet services to MDU communities. Bricks, who once touted Pete Rose as their spokesperson had their wings clipped indirectly by AT&T before they were able to get far off the ground. Darwin Networks has filed Chapter 11 bankruptcy, although they are still floundering for a buyer. And just 24 hours after Darwin's bankruptcy announcement, BroadbandNow announced layoffs that included all but a skeleton crew, a sign that they may be next on the chopping block. Bold until the end, Reflex has also announced its filing for Chapter 7 bankruptcy. And finally, one of the companies responsible for starting much of the MDU Internet service provider frenzy amongst high profile property owners (i.e., REITs), Velocity has announced that it too will cease operating as early as May 1, 2001.
It's Hot, Now
"Do it before it is too late. Now is the time to act. You strike while the iron is hot." This is an old English idiom that still provides sage advice. Although, it typically more posited than practiced.
Timing the stock market is an impossibility that few individuals risk attempting. But timing business opportunities is about removing the risk and is something that most successful businesses attempt. It is certainly something most successful property developers and owners are attempting.
For the MDU industry, millions of dollars are spent each year by developers and owners in evaluating critical demographic growth and shift trends, market analyses, financing and regulatory issues. It is by practice, a cautious industry. While it suffers the woes of many industries, its fluctuations are not capable of causing a meltdown such as the one recently seen in the telecommunications and technology industries.
One of the analyses MDU property developers and owners are focusing on intensely is the need for operating broadband communities. Such a community provides digital video and high speed Internet access to its residents. But the same network and Internet connections serving the residents are now and will rapidly grow to be used in creating virtual private networks (VPNs) between the onsite and offsite offices of the company. The broadband community also increases the interactions between property staff and residents through local area networks (LANs). And while the list of resident services and operational applications is nearly endless for a broadband community, it all begins with meeting the need for broadband services. It is this need, hidden and growing in the midst of the recent telecom and technology chaos that can be filled with appropriate relationships between an MDU property owner and a private broadband operator.
Double Edged Sword
The Chinese at the beginning of the Bronze Age first created the double-edged sword nearly 4,000 years ago. They were used as a back up weapon if spears and arrows failed. Relationships between private operators and property owners are the ultimate business version of a double-edged sword.
While the need and therefore the opportunity to both develop and serve broadband MDU communities is one edge of the sword, the other edge is that the demands of property owners for guarantees, investment and ownership from private operators are extremely high. These should not be expected to decrease any time in the near future.
While many property owners are succumbing to the reality of needing to financially participate in some aspect of turning their properties into broadband communities, most still see no need for such an investment. This is a practical decision and dependent upon the magnitude one defines a "broadband community."
In many cases, owners see the promise of broadband being filled with digital video service from the local franchise cable operator. They see the promise of high speed Internet access being filled by either the local telephone company with digital subscriber line (DSL) service, or cable modem service from the local cable operator. For some property owners, this is enough. However, for many other owners, those who wish to expand this simplified version of a "broadband community," they will most likely not have their needs met by the local cable and telephone companies. These owners seek to access numerous software and hardware technologies being offered to the MDU industry for operational efficiencies (i.e., real-time accounting, lease management, procurement, etc.). This requires working with providers capable of operating outside of the traditional cable television and Internet box. The box local cable and telephone companies will always be required to operate in, despite how forward thinking and revolutionary they believe themselves to be. Their mindset, products and services are geared to the sector of the consumer market that generates the most amount of revenue; single family housing. As such, they will always experience tremendous difficulty in meeting the demands and dreams of broadband MDU communities.
Ye Take Heed
The revolution of opportunity is indeed at hand. But a system operator or property owner's failure at being successful in creating true, broadband MDU communities is dependent on non-revolutionary ideas. These are to clearly understand the objectives and abilities of each. It is for the lack of this understanding that has led to most every failure of voice, video and data services in the MDU marketplace; the failure of providers to meet the demands of property owners, and the failure of property owners to provide the services demanded by residents.
Both industries must understand each other's financial dynamics. Private system operators suffer from the same crises as most companies. They must smartly allocate capital to those projects that yield the highest return on investment, since there is rarely an endless supply of capital. As such, property owners must be realistic in their expectations in the amount of investment to be made by operators. They must be realistic about the length of contract required, as well as the terms contained therein. They must also remain cognizant that if they are building out a broadband community to include VPNs, LANs and other broadband network applications, they will need to participate in the investment of such a network.
Conversely, private system operators must not take lightly the single most important fact driving a property owner's decision making process; rental revenues. As such, operators must realize that property owners are forced to require a level of guarantees from private operators that at times will seem unprecedented. But owners would be remiss in not doing so, particularly given the plethora of experiences with such operators over the past 24 months.
Operators should not over estimate an owners desire to financially participate. Property owners will need to see hard evidence regarding a return on the investment before entering into such an agreement. For most owners involved with developing broadband communities, the decisions to make a capital investment in infrastructure will take place outside of deciding upon a particular provider. This frees them to permit access to multiple providers of these services. As such, they will need to be convinced that the partnership meets their needs for both capital expenditures and service guarantees. This will be a tall order to fill, indeed.
Both private broadband operators and MDU property owners have a tremendous task before them. Both must bring the long-term dreams of broadband MDU communities to reality. Consumer demographics and business economics are forcing this trend. To ignore this would be an error in judgement for both operators and owners. To meet this new objective head on with realistic goals and strategies will prevent either from saying "I sure wish I would have. . ."