Most office building owners and managers give the phone and cable companies (AT&T, Verizon, Time Warner, etc.) free reign to sell and install services within their buildings. Could they collect a percentage of the revenue these big carriers derive from tenants for riding on the copper and fiber in the risers? The answer is a resounding “yes”…
In the late 1990s, building owners and managers were bombarded by competitive phone companies (“CLECs”) offering an income opportunity by providing tenants shared or controlled voice and internet services. Flush with Wall Street cash, these CLECs, many of the now defunct carriers (Winstar, Teligent, ICG, etc.) filled building risers with abandoned fiber, rooftop dishes, and multiplexing equipment. After the big telcom shakeout from 2000 through 2002, owners were left with a bad taste for the telcom business. But a decade later, a new twist on an established busieness model is available to help building owners capture a share of the telecom revenue, boosting profits and building values.
Building owners can now partner with an established “Telecom Concierge” consulting firm who in turn can work with their tenants to reduce their telecommunication costs and ensure that the clients have the right services (e.g. bandwidth) to meet their needs. How much profit can owners add by offering voice and internet services? A typical office tenant will spend fifty cents per office square foot each month in voice and internet services. By offering a Concierge to help tenants navigate the myriad of voice and internet suppliers, owners can easily add an additional 12 to 24 cents profit annually with virtually no “cap ex” or liability.
So how does this relationship work? Much like the insurance industry, carriers like AT&T, Verizon and Time Warner maintain a national sales force of consulting brokers that can present multiple competing services to tenants moving in, or out of a building. Tenants benefit from 15% to 30% lower pricing than carrier offered “rack rates” as the consultants are more proactive than direct carrier reps in offering promotions based upon competitive pressure. For example, AT&T has at least six different prices for the same internet T1 circuit that vary by as much as 40%. Tenant telecom savings can be substantial, equating to $1 to $2.50 per square foot annually by simply knowing what promotions are available.
The Concierge partner will work with tenants to: 1) identify the set of voice and data services that matches their needs; 2) reduce telecommunications costs by researching and presenting offers/rates that incorporate competitive bidding/pressure. Once the tenant selects the carrier and services needed from the Concierge, the carrier takes over the standard duties of contracting, installation, billing and customer service. The Concierge continues to supervise the relationship as the tenant’s managing liaison with the carriers. Telecom consultants generally receive a residual commission from AT&T and others for arranging voice and internet services for the tenant (10% to 20% of the tenant’s ongoing monthly billing) and will share this revenue stream with owners in return for an early introduction to a new lessee, or even one vacating the building.
In summary, telecom consulting firms are an excellent vehicle for owners to earn additional revenue on every lease, while tenants benefit from added choices, promotional pricing, and coordinated installations with voice and data hardware vendors.