As economic development pros and others develop strategies for using broadband to boost their local economies, here’s one strategy you should consider that can achieve this goal PLUS increase the financial strength of the network. Are you selling owners of commercial multi-dwelling units (MDUs) on being anchor tenants of the network?
Analyze Santa Monica, CA’s execution of this strategy so you can repeat their success. The City of Santa Monica’s IT Department built its initial fiber network infrastructure in 2004 primarily to replace the city government’s aging data and voice communication networks, saving $750,000 in the first year. Then they discovered offering services to local businesses attracted new companies and jobs.
In 2007, necessity led them to discover the benefit of corralling MDU property owners into the mix. The city was experiencing high office building vacancy rates even though the network was drawing in tech and Hollywood industry companies. Rental costs were high, the genera; telecommunication infrastructure wasn’t very robust and the only telco in the area, Verizon, wasn’t offering any solutions to help alleviate the problem.
“In 2008, we started approaching property owners and tried to encourage them to install fiber cabling into their buildings as a way to entice people to move into these spaces,” states City CIO Wolf. “They were not receptive to us initially. It was an added expense at a bad time, plus we couldn’t show them proof that having fiber would make a difference to potential tenants.”
Santa Monica’s city manager felt they had limited options to offer property owners since lowering owners’ taxes would offset in revenue reduction whatever the city would earn from owners increasing their tenants. Lowering other fees that property owners are charged would have a similar effect. Yet, believing that the demand for broadband was much greater than property owners realized, the city manager put an offer on the table.
“We offered to heavily discount the cost of installing, operating and maintaining 10-gigabit fiber infrastructure into buildings if the owners would pass that savings directly to potential tenants and aggressively market the offer,” continues Wolf. Even this was met with a cold shoulder until one or two property took the bait. Everyone changed their tune when the first owners filled their vacant units within two-to-three months after fiber was lit in a building. Tax revenue increased and building values currently remain high due to continual near-100% occupancy rates.
So folks, if you’re in the early stages of your broadband planning, take an inventory of your MDUs. Understand what their vacancy rates are, whether or not broadband infrastructure is in place and develop a strategy for how you’re going to win some of those folks over as high-end subscribers (partners preferably) for your network. Don’t worry about the rest of your property owners. If they don’t have or don’t want broadband infrastructure now, they sure as heck will once several of their competitors start ramping up.
UPDATE: See Part 2 post to get details on a secondary MDU strategy Santa Monica used to tackle the problem of completely vacant properties that they owned at the time.
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