Delivering Fiber to Apartments

Bellevue_Apartment_BuildingOne of the biggest issues that’s not talked about much with fiber deployment is getting fiber to older apartment buildings. According to the US Census there are around 19 million housing units in buildings with 5 or more rental units. Statistics from several apartment industry sources estimate that over half of those units were built before 1980 and over 80% were built before 2000. This means that a large percentage of apartment buildings are not pre-wired for broadband. There are both network and business issues associated with serving apartments that makes this part of the fiber business a real challenge.

The network issues are of two types. First is the issue of access to buildings. Building owners have the right to allow or not allow access to service providers. Many business owners will already have some sort of contractual or financial arrangement with the incumbent cable company. A few years ago the FCC outlawed a lot of specific kinds of onerous contracts between the two parties. The cable companies had used deceptive tactics to lock cable owners to only allowing them into buildings. But there are still numerous ways for an apartment owner and cable company to agree to keep other providers out of apartments.

But even should an apartment owner allow a fiber builder in, the cost of wiring older apartment buildings can be prohibitive. When a fiber builder comes to a single family home they generally are free to use the existing coaxial and telephone wiring in the home if they want access to it. But unless an apartment owner is going to grant exclusive access to a fiber builder the existing wires are still going to be used by the incumbent cable and telephone company.

And that means a total rewiring of the building. That can be a nightmare for older buildings. It might mean dealing with asbestos in ceilings and walls. It often means trying to somehow snake fiber through concrete floors and walls or else having to somehow run wiring through open hallways. And it often means disturbing tenants, and coordinating gaining entrance to multiple apartments or condos can be a challenge.

There are also business issues to deal with in apartments. Probably the number one issue is dealing with tenant churn. Almost by definition apartments have a much higher percentage of turnover than single family homes and it can be a real challenge to get and keep a decent penetration rate in apartments. Companies have tried different ideas, such as getting referrals from apartment owners, but the turnover generally is seen as a problem by most overbuilders.

One way to deal with the churn is to make a financial arrangement with the building owner rather than with each tenant. That generally involves paying some sort of commission. That is not a big problem with selling broadband, but the commissions expected on cable TV could easily push under the cost of providing the service. There was a time when seeking wholesale cable arrangements was a good business plan, but the rising cost of programming has made it far less attractive.

There are companies that are concentrating on serving apartment units in metropolitan areas. They bring a fiber to a complex and then serve data and cable to every tenant, often built into the rent. One would have to think that most of these deals are being done with newer apartments that have been built with telecom expansion in mind – lots of empty conduit throughout the building or even fiber already in the walls.

But for the normal fiber overbuilder who mostly serves single family homes and small businesses, apartments are mostly seen as an obstacle more than an opportunity. I have numerous clients who have built whole towns except for the apartments and they have yet to find an affordable and profitable business case for doing so. There are some new and interesting ways to more easily wire older buildings, such as running fiber along the ceilings in hallways – but a lot of my clients are not yet convinced there is a long-term profitable option for serving apartments.

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