Growth of Fiber Broadband in NYC Not Just Beneficial to Tech Sector: Analysts
Jotham Sederstrom July 16, 2013, 10 a.m.
High-speed broadband and its potential to enhance productivity are concepts typically associated with tech startups.
Many commercial landlords believe that quicker connection speeds are unnecessary for the majority of their tenants, but the utility provided by fast broadband speeds extends beyond the realm of tech companies. New York is headquarters to corporate offices that advise global empires. Also, many foreign companies maintain a presence in the city.
Both parent and subsidiary offices use point-to-point connections that allow them to store and share information on secured drives, which are accessed remotely. Companies frequently utilize cloud-based applications to allow multiple remote users to collaborate in real time on documents and presentations. The unimpeded, quick transfer of digital information between discrete locations is vital. Broadband is also useful for video conferencing and streaming video content, which are quickly becoming office staples. Slower speeds make watching videos tedious or impossible. The ability to download and upload large files quickly would eliminate many wasted work hours.
One argument that landlords invoke against upgrading to better broadband is that their buildings are 100 percent occupied and therefore do not need to be improved. Why update a building that has no vacancies? Well, leases expire. Fiber broadband can help solidify renewals and even warrant an increase in the price that current tenants pay per foot. Russ Hamm, president of Rainbow Broadband, says he has “seen firsthand that updating a building’s bandwidth leads to higher rents.” More importantly, having a fully occupied building does not necessarily maximize a building’s value.
Reuven Moskowitz, founder of MoPho, a picture printing company that was sold to Shutterfly in 2012, recently began a search for new space in New York City. As Mr. Moskowitz explained earlier this month, he and other tech tenants “will not even consider buildings without fiber broadband.” If broadband is introduced to more buildings, tech tenants will migrate to the city. If landlords upgrade their buildings, the eventual competition for space will push rents and ultimately raise the overall value of buildings.
According to a Comcast survey in 2011 that polled nearly 500 commercial property owners and managers, 90 percent of building owners say that access to advanced communications services is the fourth most important selling point, behind only price, parking and location. In a time when traditional companies are scaling back, the tech industry is thriving. According to TechAmerica, the tech industry added nearly 100,000 jobs in the first half of 2012 and employs over six million people in the United States.
A further impediment to fiber installation is the relationship between ISPs and landlords, who want to receive licensing fees from ISPs for allowing the latter into their buildings and providing space for telecom equipment. In some instances, these costs are offset by exclusivity agreements, which give the ISPs rights to service an entire building without competition from other providers. This, however, compromises the interests of tenants, who lose the option to choose among fiber providers. Unfortunately, landlord fees render the enterprise unfeasible for a provider unless he is guaranteed exclusivity to offset his space rental and setup costs.
Another problem is time-to-service. Those landlords who do agree to install fiber for the purpose of luring prospective tenants face complications from New York City. On average, it takes 90 to 120 days to install fiber in a building. Half of that time is spent waiting for city permits. The city is currently working to streamline the cumbersome permitting process with a program called Broadband Express.
Landlords, tenants and ISPs seem to have divergent goals, and each brings distinct challenges to the city’s attempts to build its infrastructure and move forward. New York City is working to streamline the process, but unless ISPs and owners can find common ground, issues will persist. Landlords must realize that fiber broadband is becoming increasingly important to tenants and is not just a passing fad.