Over the last thirty years various firms have tried to make money off the idea that office tower tenants would prefer to rent their telecommunications services and equipment from a third party rather than handle it themselves, according to one Canadian analyst. And every time the idea was tried, it flopped.
Nonetheless, Bell Nexxia and Ottawa-based NetStone Communications have announced an agreement that will enable them to deliver communications and desktop computer services to office towers across the country. A deal with TrizecHahn Corp. was also announced for the real estate operating company to provide the services in all of its office towers in Canada.
It’s an old idea that never really seemed to take off, said Ian Angus, the president of Ajax, Ont.-based Angus Telemanagement Group. But there is the possibility that things could be different this time around.
“I suspect that this is going to come down to execution,” he said. “Are they going to deliver services that people really want at a price that people really want? Because I think the general statement, ‘People don’t want to own their own and would like to have someone else manage it,’
is pretty hard to prove.”
In the TrizecHahn deal, NetStone will be responsible for all activities with the tenants inside the buildings. Specifically, it will deal with the design and delivery of the product, the billing, and collecting the money. It will work will Bell Nexxia to actually deliver those services to the tenants, said Gerry Lalonde, president and COO of NetStone Communications.
“We put in a high speed fibre connection to the building,” explained Bill Parisi, the assistant vice-president of market development at Bell Nexxia. “In most buildings we end up putting an OC-3 connection. We put some ATM equipment and some telephony, PBX-like equipment and some switching equipment into the building itself, and connect (it) back to our high speed backbone.”
All services are offered on a monthly, per user basis, Lalonde said. “There’s no firm contract, so you can add or decrease the number of users on a month-to-month basis.”
According to Lalonde, there are three bundles that will be available to customers. The first is a telephony bundle, which will include an IP-ready telephone set, caller ID, and six-way conferencing. Long distance will be available as well, with 300 minutes worth of talk time anywhere in North America.
The other bundles are Internet service, which offers 10Mbps at the desktop, and LAN services such as secure back-up.
The buildings NetStone is dealing with are both old and new. Lalonde said, and “are in a variety of conditions when it comes to internal wiring.”
The main benefit for customers, according to Angus, is they are able get services without having to manage or arrange them themselves.
But there are negatives as well, Angus noted.
“It’s very unlikely that a single supplier can meet everybody’s needs,” Angus said. “Even if they’re perfect for one customer, they might not be good for someone else, because everyone does have different telecom and computing needs.”
As well, if there has been customer demand for these types of services for buildings, Angus said he hasn’t heard it.
But Bell Nexxia’s Parisi said the companies will be offering services to a market that needs it. Small and medium customers didn’t have the critical mass and volumes that would “justify putting in some really high speed bandwidth into their particular location, nor to pay for some of this advanced equipment that was going to be local on site,” Parisi explained.
But now, as they focus more and more on their core competencies, these sizes of enterprises will be able to take advantage of the services and the way they are being offered, he said.
NetStone will be providing in-building expertise at the locations, meaning there will be someone physically in the building at all times, Lalonde said.
The deal with TrizecHahn covers all of its properties in Canada, beginning with Calgary and Montreal in April, and by the end of May, Parisi said there will be 12 properties lit in four different cities. Remaining properties will be lit up throughout the rest of the year.
There are a few things about the announcement to consider, Angus said.
“It’s important to remember that under Canadian regulations no landlord can prevent other telecom carriers from providing services to their tenants,” he said. “A tenant can get service from whoever they want, so there are no exclusives.”
He also warned that this is a highly competitive market. If you go in on some deal where you sign a long-term agreement to somebody to provide you with telephone and computing services, you are “probably going to find that other people are buying them on the street for half the price you’re paying a year from now.”
Bell Nexxia is at www.bellnexxia.com, and NetStone is at www.netstonecommunications.com.