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Making Sense of Connectivity at Today’s Apartments

Posted on Dec 22 2019 - 6:43pm by Lance Edwards

Changing models make bulk internet en vogue again.

 

By Joe Bousquin  (MultiFamilyExecutive.com Article

Navigating the world of connectivity at today’s apartment buildings can seem like déjà vu all over again for multifamily operators. After all, many apartment pros are still reeling from legacy “bulk” TV, internet, and phone deals, where they contracted with a single telco or cable company to service all the residents in their buildings.

High costs, slow speeds, and resident complaints about lack of choice led many operators to drop those deals in favor of inviting multiple service providers into their properties, who then contracted with residents directly. But that created its own problems, with conflicting Wi-Fi networks inside buildings and a rat’s nest of cables in the comm room.

Now, as smart home technology has become the new beachhead in the multifamily amenity wars, there’s a compelling technology argument for returning to the single-provider “bulk” model. Along with installing a high-speed fiber-optic “backbone” to distribute internet within a building, providing a single external connection has increasing advantages today. For example, if connectivity for residents and a building’s tech amenities comes from a single provider, residents can control their in-unit devices directly, without bridging over to the public internet, and increased cybersecurity risks.

“Clearly, the bulk model makes smart home tech and everything else much simpler, because you’re able to provide one connection that has high speeds and has access to everything,” says Jeff Kok, chief innovation officer at Dallas-based Mill Creek Residential, which counts 19,700 units in its portfolio. “But that model is also not as common and is less adopted in the industry,” Kok says.

Once Bitten, Twice Shy

The reason why is because of operators’ past experiences with resident complaints on legacy bulk contracts. “My advice to my owners is to not get locked into a contract with a single provider,” says Marcie Williams, president of Charlotte, N.C.-based RKW Residential, a third-party manager of more than 18,000 units. “The incentives for developers to sign those deals can be really attractive, but is that provider going to still be the right choice three, five, 10 years from now? That’s hard to know. To me, it’s better to offer as many options as you can within your building and allow the resident to choose what he or she wants.”

The legacy of not giving residents that choice is still felt at apartment communities today. Take the experiences of an engineer working at Scottsdale, Ariz.-based multifamily smart home technology integrator SmartRent. At the worker’s apartment community, he pays $100 for a basic cable TV package and internet connectivity that gives him just 3MB download speeds. Worse, the employee has to take the deal, because he doesn’t have any other options.

“There’s not a single person in that complex who is happy to pay that $100 per month,” says Lucas Haldeman, CEO and founder of SmartRent, which helps multifamily operators integrate smart home technology into their buildings and serves 65,000 units nationally. “It’s a bad legacy deal, and the complex itself knows it, but they’re stuck with it.”

Today’s Internet and “Choice” Is Different

Even though Haldeman sees the pain of those past situations for apartment operators, he still recommends his clients offer residents bulk internet today as an amenity, as long as it’s fast and robust. The reason why? Because in the interim, the kind of internet that’s available, and what residents are actually “choosing” in terms of their telecom options, has changed.

Cord cutting and video streaming have made the importance of set-top cable TV connectivity—as well as a choice of cable providers—less prominent in renters’ minds, while cellphones have eliminated the very notion of landlines altogether. Thus, while residents may have griped about being locked into a single TV or telecom provider that they were forced to take in the past, observers say reliable, high-speed internet is quickly becoming residents’ solitary focus. Paradoxically, if they can get a quality connection, they don’t really care where it comes from.

“We don’t sell internet access, so I don’t have a horse in this race,” Haldeman says. “But what we’ve seen in practice is that if residents have reliable, high-speed internet, they don’t really care about choice anymore.”

Once residents can connect to a robust internet pipe servicing their buildings, and ideally distributed internally over a fiber-optic backbone, they can make all of their video streaming choices directly, whether via Netflix, Amazon Prime, Hulu, or any of the quickly multiplying streaming offerings such as Disney+, Apple TV+, and HBOMax.

At the same time, as fiber-optic internet infrastructure has spread nationally, and gig internet connections have become ubiquitous, the quality of internet service has also improved. That’s a big difference from what apartment pros experienced in older legacy deals.

“I get it. A lot of operators got burned by bulk deals in the past, because it wasn’t good internet. They thought they were buying something that was going to be a great resident amenity, and it wasn’t,” Haldeman says. “But today, internet is faster. It’s better. And it’s the same speed as what residents could buy themselves, which makes it a commodity.”

Student Housing as a Harbinger for Tomorrow’s Apartments

Indeed, that commoditization can already be seen in student housing, which has been a reliable bellwether for what market -rate apartment residents will expect in terms of technology amenities going forward. And there, providing high-speed internet access as an amenity is already standard operating procedure.

“In student housing today, almost exclusively, you’re providing the internet connection to the resident as an amenity,” says Andrew Marshall, chief information officer at Philadelphia-based Campus Apartments, which has $1.5 billion in assets under management at more than 50 campuses nationally. “Doing so gives you the opportunity to build a single network in the building that carries multiple services.”

In fact, in a recent pilot program at a student housing property in Louisiana, Campus Apartments surveyed residents about choosing between free TV service or doubling the speed of their internet. Residents overwhelmingly asked for faster internet speeds. “Today, internet is the core amenity for everything in your building,” Marshall says.

Wiring Buildings for Both Bulk and Choice

With that change happening fast, developers are giving themselves options. For example, at 444 Social, a 302-unit luxury apartment community in Lincolnshire, Ill., Chicago-based developer ECD Co. designed and engineered the building so either a bulk or choice model would work over its fiber backbone.

In the end, president Scott Greenberg says he decided to provide his residents bulk internet, because it was a better deal than the developer would get contracting with an ISP directly. For about $40 a month, residents can access 150 mbps speeds in their units, which he estimates would cost them between $75 and $100 if they had the choice to contract with various providers. Greenberg and ECD Co. also benefit via ancillary income from the spread between what the bulk provider charges the firm and what residents pay at the building.

“It’s really important that the operator think about what the best deal is for their residents, as well as its own situation,” Greenburg says. For example, even though he chose a bulk model, he gave himself—and his residents—flexibility to go back to choice if needed, in the future. “You negotiate to allow yourself to get out of the deal if you need to, because the world is always changing.”

By wiring buildings to handle both bulk and choice models, and leaving wiggle room in contracts, operators today can give themselves and their residents options for navigating the world of internet connectivity at apartments today.