Too many telecom choices?

Too many telecom choices?

Kelly, Abigail

Building local exchange carriers, building– centric companies, independent telecom service providers: Whatever they are called, there’s no doubt that the new breed of telecommunications provider has become a major player in the real estate arena. Offering voice or Internet packages that often include financial incentives for building owners, dozens of these new providers have made inroads in the nation’s real estate market seemingly overnight, bringing with them a mindnumbing smorgasbord of telecom options.

Building owners have arrived at a critical juncture: They have to sift through all the telecom confusion to forge the path the organization will follow for years to come and to determine what options tenants will have where increasingly fundamental telecommunications services are concerned. Though many key telecom decisions will ultimately fall to the tenants themselves, building owners have the power to decide which providers even make it through a facility’s front door.

This is a daunting task, and it’s made even more so by the fact that no two building local exchange carriers (BLECs) are exactly alike. Some specialize in the delivery of high-speed Internet service; others offer packages that include local or long-distance dial tone. The methods of service provision vary greatly as well, with some offering DSL services, and others focusing on fiber or wireless networks.

It’s no wonder that many savvy building owners have put telecom information-gathering at the top of their priority lists. Many have begun that process by bringing on telecom gurus – either as permanent staff members or as consultants. Others have created special initiatives to learn as much as possible about telecommunications technology and provider options.

“We feel that our employees, property managers and tenants need to have one central place to come with all their questions about this,” says Ilene Allen, manager of special projects with Hines’ Central Operations and Engineering Services. “We’re trying to provide that.”

Efforts like these are particularly important because most tenants, for now at least, don’t know quite what they want in the way of telecom services – only that they want them. That situation is likely to change fast as providers continue to market their services aggressively to tenants; already, some property managers report that more tenants have a clear idea of what services, or even which providers, they want.

“Choosing telecom providers is one of the biggest challenges tenants are facing right now,” says Gerry Lederer, vice president for government and industry affairs for the Building Owners and Managers Association (BOMA) International. “What they really want is someone to help them with some guidance.”

“The more you can take their headaches away, or at least allow them to choose which headaches they want to deal with,” adds Jeffery S. Deckman, CEO, Synet, “the more attractive your building is going to be.”

Assessing the Options

Given the regularity with which BLEC representatives are now appearing on building owners’ doorsteps, it’s hard to believe that these companies have been around only for a year or two. BLECs, born in the newly competitive telecom market that resulted from the Telecommunications Act of 1996, arrived on the scene just as tenants were growing desperate for Internet service and landlords were desperate for ways to deliver it. Their business model was appealing: In exchange for the right to market and sell their telecommunications services to tenants, the BLECs would upgrade facilities’ infrastructures to equip them with advanced telecom capabilities at no charge to the landlords.

The idea of any one facility hosting numerous telecom providers that would then compete for tenants’ loyalty is a fairly new one, and it stands in stark contrast to the old days, when tenants’ telecom options ended with one local and one long-distance carrier. But this new model offers a way to upgrade facilities, provide tenants with advanced telecom capabilities and even get a share in the profits. For many building owners, it’s a clear winner.

“We’ve done a lot of homework, and we believe in the benefits of having BLECs deliver what our tenants need,” says Mark Rose, chief innovation officer, Jones Lang LaSalle. “Telecom service delivery is not our core competency.”

Not everyone is convinced. Some building owners believe that the traditional telephone companies now offer telecom packages that are just as attractive as those the BLECs deliver without the companies actually becoming a presence in a facility.

“I really put them through the wringer about what they’re going to bring to the table and what I’m going to get in exchange, and I have yet to be lured in by any of them,” says Roland Garcia, communications expert with Harwood Management Services’ Harwood Technologies group.

If studies like the Emerging Trends in Real Estate 2001 report issued by Lend Lease Real Estate Investments and PricewaterhouseCoopers are any indication, however, the trend is taking hold. “Without features [like high-speed voice and data connections], buildings are out of business,” warns the report. Most facility owners, it adds, are covering their telecom bases by “forming alliances with the broadband service companies wiring up their buildings.”

Of course, that’s easier said than done. Deciding which companies, if any, to let into a facility can be a long and complicated process. For building owners who are new to the business of telecom wheeling and dealing, it’s difficult even to know where to begin. But given that today’s BLECs tend to differ more in terms of technology, service provision, network reliability, financial stability and response time than in price, examining those criteria for every prospective provider is one good place to begin.

For many building owners, the technologies themselves have become an important piece of the puzzle. These days, copper technologies like DSL are popular options for many facilities because they are relatively inexpensive and easy to access. Fiber, while much more expensive, can be an excellent option for very large organizations or those that require the very best in telecom capabilities. And wireless services can be quite affordable and may hold particular appeal for organizations wary of service interruptions due to construction or problems with buried cable lines.

“If you’re looking for the perfect telecom solution, forget it. The different technologies all have their pros and cons,” says Harwood’s Garcia. The best approach, then, is to avoid becoming fixated on one technology or another, and instead to focus on selecting reliable providers whose offerings match tenants’ needs.

In addition to the technologies they employ, the providers vary significantly in how they provide service. While some BLECs actually own the networks they use to deliver their services, many others sell service that is delivered over lines and networks owned by local phone companies. Others use a combination of the two methods. Again, what matters most to landlords and tenants is not how service gets from the provider to the desktop, but simply that it will get there reliably and without interruption.

How do you ensure that? With all that’s going on in the telecom industry these days, it’s not easy. But one starting place is making sure you have a solid service guarantee from a provider with a demonstrated track record of reliability. And one that puts its money where its mouth is.

“Who’s the management team? Are they experienced or are they entrepreneurs who have come out of the woodwork?” asks BOMA’s Lederer. “And do they have staying power? It’s vitally important that you make sure they have the financial wherewithal to deliver what they’ve agreed to deliver.” These are all essential questions, but the probing shouldn’t end there. It’s also crucial to understand who will be interacting with tenants and when, what sort of support the provider will make available, and just what the provider guarantees in terms of the service the building will receive.

“If everybody in my building gets on the Internet at once, is there going to be enough to go around, or is the system going to collapse?” asks Harwood’s Garcia. “These are the sorts of things I want to know before I start making deals with anybody.”

One opinion that is shared by nearly all building owners with experience in the telecom arena is that no one should be blinded by the revenue stream percentages or equity many BLECs hold out as incentives. “The warrants have not proven to be the motivators many companies were hoping for,” says Jerry Marmelstein, president, Riser Management Systems. “A lot of them are not worth a whole lot right now. Those sorts of things should not be driving decision making.”

Experts recommend selecting finalists from a pool of prospective providers based on criteria like service and reliability. Once a building owner has a number of good options, it’s all right to let finances be the final differentiator.

“If you do a good job in picking those top contenders and then just let capitalism take control, they’ll compete very aggressively to get that business, and you’ll win with the revenue stream,” says Synet’s Deckman.

Another decision to be made concerns how many providers will have access to a facility and its tenants.

“The approach I advocate is to select maybe two to three providers to do business with,” says Deckman. “That way you’re creating a competitive environment that will benefit your tenants and give them a choice Df providers, but you’re working only with providers you’ve selected, and you’re avoiding the free-for-all.”

Demystifying Telecom

The rigorous selection process is over, and one or more BLECs have been chosen. The hard part is over; now the building owner can sit back and wait for the revenue and tenant compliments to start streaming in, right? Wrong. In fact, it is at this stage — once telecom providers have already been selected – that many conscientious building owners wander off course. Although many property owners prefer to adopt a hands-off approach, allowing tenants and providers to hash out the details of service provision on their own, the building owner plays an essential role in establishing ground rules. Perhaps the most useful guideline is remembering that there’s nothing magical about telecommunications; these companies need to be managed just like any other vendor or service provider.

“All the performance requirements that building owners have today for nontelecom vendors should also apply here,” says BOMA’s Lederer. “Why would you require any less in the way of back-up and documentation from your telecom provider than you do from a janitorial or security company?”

A sound contract, for instance, should outline where the telecom provider will be in a facility, and when. “Things like rooftop access and 24/7 activity in the building become important because they affect more than just the little bit of space you may think your telecom provider should be using,” says Harwood’s Garcia. “These all need to be crystal clear.”

Additionally, any agreement should clearly spell out very strong rights for the building owner in the event of the merger, acquisition, bankruptcy, or sale of the BLEC – a very important provision at a time when experts expect to see many BLECs succumb to financial instability and market saturation. Safety issues should also be covered; who is responsible if a BLEC’s employee gets injured in your facility?

Another issue of increasing importance is the marketing of telecom services to tenants. While most recognize that the BLECs need to be able to spread the word about their offerings if anyone is to benefit, few relish the notion of a telecom provider plopping a promotional booth in the lobby of their Class A office building or stuffing flyers under tenants’ doors. A contract with a BLEC should therefore stipulate that any solicitation be consistent with the landlord’s guidelines.

“There are creative ways to make everyone happy,” says Hines’ Allen. “Some of our property managers have decided to host a telecom fair periodically or allow providers to market over lunch hours. These can be reasonable solutions.”

Taking Charge

A building owner’s ability to build sustainable relationships with BLECs depends, in part, on the owner’s willingness to take control of the facility’s telecommunications capabilities just as he or she would any other building system. In order to maximize the benefits BLECs can offer, however, it’s important to remain mindful of the ways in which they differ from other service providers. Specifically, that means paying close attention to the unique opportunities BLECs present and serving as an effective gobetween for tenants and providers.

The key to doing all of this successfully? Becoming educated about telecommunications in general, and especially about the individual providers who come knocking.

“The confusion that remains can only be addressed by our putting aside our hesitations and moving forward with the process of learning what our options for the future are,” says Jones Lang LaSalle’s Rose.

Above all, remember that you hold the keys to both your tenants’ satisfaction and the BLECs’ success – a thoughtful, pragmatic approach to planning and decision making will stand you in good stead.

“There’s an enormous opportunity here for landlords,” says BOMA’s Lederer. “That’s not to say it’s going to be easy, but there’s no doubt that the opportunities are there.”

Abigail Kelly is a writer who specializes in facility management issues. She is the former editor of EducationFM magazine.

E-mail comments and questions to edward.sullivan@tradepress.com.

Copyright Trade Press Publishing Company Dec 2000

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