Birth of the BLEC: Service providers jump at chance to win over MTU audience

Tenants in skyscrapers, office buildings and complexes have been largely ignored when it comes to incumbents providing them with high-speed data services. RBOCs seem to expect multi-tenant unit customers to "get nothing and like it" rather than meeting their ever-growing needs for bandwidth and other e-business services.

A new breed of service provider is making its way into the competitive service provider market by exclusively serving the MTU market. These service providers, sometimes called building local exchange carriers (BLECs), make deals with property owners, wire a building with fiber and copper, and turn up voice, data and even cable TV (CATV) services. >From the Sears Tower to the Empire State Building to a strip mall in the suburban Midwest, these service providers have found a captive audience in small and medium-sized business occupants.

In addition to addressing the needs of the MTU tenants, the market also grew from the need to improve the level of service real estate companies provide their tenants, said John Todd, president and chief operating officer of Allied Riser Communications. "They were very disgruntled with the ability of local service providers and their lack of desire to come into a building and offer the tenants a new way to do business."

ARC takes a dedicated pair of fiber to each customer in a building and provides IP-based services. The provider then aggregates all traffic in the building and sends it to an interconnection point. "We believe that by taking fiber all the way to the customer, we enable a new view of broadband applications. Capacity is not an issue anymore," Todd said.

While ARC focuses more on providing capacity to the desktop, Urban Media concentrates on the applications, said Jeff Barnell, vice president of marketing for Urban Media. "Because the cost of bandwidth is declining rapidly, we decided to give away access to the Internet," he said. Though free Internet access is not new in the residential space, it is unusual for business customers. Urban Media makes money through its toolbar, an interactive interface between the end user and a variety of applications and content that customers can build their businesses around.

Urban Media plans to offer services such as transaction applications, desktop integration and management capabilities, and human resources applications. "The value is in making a company more successful, more competent and more efficient," Barnell said. "We are not just giving them a pipe for less money."

Broadband Office takes a similar route, said President Dan Chu. "We focus on what's in the cloud," he said. "It's all about enabling the building with a whole new network of capabilities." Significant IT needs are going unaddressed, he added. "Providing an end-to-end solution is what the market needs. We focused on creating a platform that's a differential, end-to-end platform with unique levels of scalability, provisioning and service creation."

Broadband Office and Urban Media emphasize services rather than capacity, whereas OnSite Access, which recently finished wiring the Empire State Building for broadband access, focuses on customer service (see sidebar on page 138). "By getting to know the building owner and tenants, we can offer great services," said Joe Basile, CEO of OnSite Access. "We focus on what it is that the small to medium-sized businesses want related [to] telephony and the Internet, but other services as well," he said. The provider plans to develop a Web portal service that can provide content-rich services to tenants and building owners, Basile said.

Business plans aside, MTU service providers have different ways of sharing revenues with building owners. Agreements range from splitting revenue 50/50 with the property owner to giving them a flat fee or handing over 5% of revenues.

Though most deals between property owners and service providers are not officially exclusive, exclusivity is implied. "If we do the wiring and charge $25 per month for Centrex services and 6 1/2 cents per minute for long-distance, no one can match that," said Chris Catranis, CEO for Skyway Partners. Skyway targets residential and business MTU markets with digital CATV, voice and data services and e-business services. "The Bells are not going to go in and build. They couldn't get any customers," he said.

Once a service provider has wired a building, it's a barrier for entry by others, said Carl Garland, principal analyst for network services for Current Analysis. It's unlikely a building owner will allow another service provider to come onto the premises, he said. "Construction is a nuisance, and it's costly. Building owners aren't service providers so the FCC cannot mandate access."

When it comes to partnering with building owners, some service providers prefer to deal with building owners that know their building and tenants well. Skyway, for example, tends to avoid dealing with major real estate companies.

Not so for Broadband Office, which has partnered with 50 major real estate owners across the country, Chu said. "We focus on those buildings, which represent 25% of all office buildings in the U.S."

Although the market is growing, there are enough buildings to go around, Garland said. The BLECs have a golden opportunity now because the MTU market isn't regulated, he said. "They have a bare toe-hold on the market, sort of like the free Internet phone services," he said. "But nothing free lasts long." Eventually, Garland said, BLECs will be subject to the same regulations as other service providers.

With 20 miles of fiber and copper cabling, provider OnSite Access wired the Empire State Building for high-speed voice and data services. Because the building's construction was completed in 1931, Onsite Access faced major obstacles, including the lack of risers and telco closets and New York City Landmarks Commission guidelines. Plus, making the fiber optic network redundant was a major concern.

"The biggest obstacle was to try to find a pathway," said Scott Ringelspaugh, construction engineer for OnSite Access. The original pathway and telco closets that Bell Atlantic installed years ago were small and already full. And citycodes forbid OnSite Access from sharing.

Instead, Ringelspaugh found a janitor's closet on the 80th floor that was at the same location on every floor down to the 55th floor. OnSite simply drilled right through the floor, inserted sleeves to protect the fiber and ran fiber from the 80th floor to the 55th floor. From the 55th to 54th floor, OnSite ran cable encased in conduit in the false ceilings to connect to another janitor's closet. From there, the company linked from the 54th floor to the second floor.

To offer redundant voice and data services, OnSite Access divided the building into three sections, with six interconnected points of presence.

"Just the engineering took one-and-a-half months. This wasn't like any other building. It was like three separate buildings," Ringelspaugh said. The project began in November 1999 and was completed in mid-February.