While many building owners complain their current vendors serve them poorly, the industry argues that this issue will begin to fade as the last of the failing companies with poor business models die off. Property manager Michael J. Wolfe, president of Midboro Management Inc., however, tells GlobeSt.com that there still are a "tremendous amount of options before them."

He says, "a building can't be sure that the provider they contract will be there for them in the future. Like the dot-coms, broadband service providers are constantly rising and falling. Even relatively established service providers are not bulletproof.

"Take the NorthPoint fiasco as an example," Wolfe says. "NorthPoint filed for Chapter 11 bankruptcy protection in January and last week agreed to sell most of its assets to AT&T Corp. Those assets don't include its network or more than 100,000 customers. NorthPoint is virtually out of cash and a shutdown of its network is imminent unless a coalition of the firm's Internet-service providers can come up with funds soon.

"NorthPoint claims that they may have to shut down within the next few days without additional funding," he continues. "Talks are continuing with 13 Internet service providers, but no agreement had been reached. The company is also seeking to sell its customer base."

Joe Gillette, CEO of EurekaGGN, and Michael Granieri, a spokesperson for Everest Broadband Networks, both tell GlobeSt.com one of the biggest problems was the initial "land grab." Companies sought to sign on as many buildings as possible without necessarily being able to service them all.

Gillette notes, "In the past there was a big push from Wall Street to get building access agreements, so owners were being offered equity participation and the buildings were wired free of cost with 5% to 7% of the revenue going to the owners." Granieri says, "The companies didn't always do a thorough analysis of the cost versus revenue. Some of these companies were gold plating buildings." He says they were also "much too aggressive in rolling out geographically," spreading themselves too thin.

They disagree on one major issue. Gillette says the FCC's regulations to prohibit exclusivity have been a disadvantage, creating chaos within buildings. He says his company's general counsel has lobbied against these regulations. Granieri says Everest has never pursued exclusive agreements and the FCC is right to preserve the spirit of free trade.

Both say the market will see more consolidations. Eureka/GGN is itself the result of a merger between Eureka and Gillette Global Network. It also bought Tenant Connect in LA in January and Nex-I of Princeton, NJ in February. Everest plans to scale back somewhat, but sees itself and the industry succeeding in the long haul. Gillette says, "We're still bullish on the business model."

Wolfe concludes, "Going with a provider of lesser caliber than the top of the heap is inviting trouble. As property managers we have to advise our buildings about the pitfalls of contracting with providers offering seemingly attractive deals and really instill in our boards the idea that the quality of a provider is infinitely more important than saving a few dollars on the service."

Instant Insights /

Managers, Vendors: Shakeout Reducing Broadband Woes

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