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“Broadband Benefit: Planning for Technology in Affordable Housing”
Multifamily Executive August 2002
By James Sison, Eureka-Waitt Fellow
EMAIL: jsison@one-economy.com

Executives that aren’t including technology equipment into the original budgets for their properties may be leaving money on the table. Consumers looking for low-cost, “plug and play” solutions may soon be turning to their landlords for high speed access, instead of the local phone or cable company. Why? With a high speed connection and a building local area network (LAN), owners can cost-effectively deliver broadband to their common areas, leasing office and individual residences. Owners that maximize their investment in technology can measurably increase revenues, contain costs and enhance tenant services.

When Congress passed the 1996 Telecommunications Act to ensure competitive and advanced telecommunications services, it was assumed that competition would lower prices and increase service to consumers. Most of the competition would come from start-up companies, which either went bankrupt or fell victim to the telecom industry meltdown. Local phone and cable companies acquired customers who suddenly found themselves without service. With fewer competitors in the market, the duopoly could charge as much as $50 per month for broadband service, the opposite effect of what the Telecommunications Act had intended. Today, broadband service is available for $40/month, but not in all areas. Nationwide, the overall percentage of households that have broadband access remains at 6%. (“Broadband and Main” Business Week October 8, 2001)

Broadband as Utility
Multifamily owners are steadily increasing the number of households that have broadband access. By folding the cost of technology into their original construction budgets, owners are making broadband access more widely available and at a lower cost per unit. This opens the door for other types of services—from online banking to video on demand—to reach consumers, increasing the demand for broadband. “Just as cable television access has become a standard amenity for most properties, so has broadband access,” says Reginald Sibley, President of M9 Technologies, a company that installs and manages building LANs. “Building owners can make a real difference in the market if they understand the opportunities.”

In a typical multifamily complex, a telecommunications provider usually owns the inside wires and access rights to deliver any particular service. Effective May 2001, owners can request that the local provider move the demarcation point to the property line so that the owner can gain control of the inside wires. By doing so, owners can deliver broadband over regular phone wires into each unit by simply installing a device that converts voice calls into one high speed data transmission, and vice versa. Instead of a modem, tenants would need a network interface card (NIC) that would allow them to plug their computer into the building local area network. Owners that understand the value of their telecommunications assets can negotiate better building wiring agreements, exact a higher price for access rights or demand a percentage of residual income from local providers.

Closing the Digital Divide
While the telecommunications industry targets its services to more affluent households, an entire market of consumers without high speed access remains untapped. The result is a digital divide between those who have access to information resources and those who do not, a condition that mirrors other socio-economic inequalities. “Just because people in affordable housing may not be willing to pay $40 per month for broadband doesn’t mean they don’t value it,” says Ben Hecht, President/COO of One Economy Corporation, a national nonprofit dedicated to using technology as a tool to help low-income people. “Builders that plan for technology in their affordable housing developments are seeing the tremendous economic and social impacts that broadband access can have on a community.” By aggregating demand, owners can provide broadband access at low or no cost to their tenants via on-site computer centers or in the home.

Bringing IT Home
Inquilinos Boricuas en Accion (IBA) in Boston, MA used its low income housing tax credits (LIHTC) to provide high speed Internet access in a low-income neighborhood. “This is the best investment I could have made for our neighborhood,” says David Cortiella, executive director of IBA, a nonprofit organization that is spearheading local revitalization efforts. IBA shares its T3 line with the 3,000 residents in the three square block area of Villa Victoria and is the internet service provider (ISP) for the cultural community center, two IBA offices, day care facility and each of the 884 individual residences. “Owners can help close the digital divide by choosing to make their units Internet ready,” says Cortiella. If legislation introduced in May 2002 by Senators John Kerry (D-MA) and Orrin Hatch (R-UT) passes, owners may have the incentive to do just that. Senate Bill 305 would amend Section 42 of the Internal Revenue Code of 1986 to make high speed Internet technology one of the criteria that state housing agencies consider when awarding tax credits.

What’s the bottom line?
Although builders may not have as broad a vision for technology as Mr. Cortiella, owners can install a building LAN on their property for roughly $50-$450 per unit. The cost varies and depends on several factors: building type (new construction or retrofit), number of units, and amount of bandwidth for each connection. No matter where you are in the development of new construction or retrofit properties, owners can maximize their investment if they follow these simple steps:

  • Joint Trench Dry Utilities
    Good utility consultants can guide project managers through the delicate process of installing gas, electricity and telecommunications infrastructure for your buildings. Builders should consider using Category 6 cable for all new construction projects to anticipate future data traffic.
  • Adopt Division 17 Standard
    Most new projects utilize six different technology consultants: audio/visual equipment, voice equipment, data equipment, security equipment, building automation equipment, and cable infrastructure. Each excels at their respective trades but rarely work as a single unit. The Division 17 service model combines these six sets into a single set of construction documents.
  • Hire network engineers during construction
    Delays from the local phone or cable company can cost you lots of money during construction. Systems installed by uncertified technicians can be downright disastrous. Hiring a network engineer that uses Division 17 minimizes problems during construction and minimizes hidden costs associated with poor design and delivery.

Aggregating Demand
Multifamily owners can take advantage of economies of scale to deliver a variety of telecommunications services. This is a very powerful value proposition that building owners can no longer ignore. According to recent estimates (R.W. Baird April 2002), data traffic has surpassed voice traffic in terms of relative volume on the network and is expected to double every year for the next 3-5 years. Increased data traffic means increased demand for bandwidth to break through bottlenecks in the network. Through strategic investments in telecommunications infrastructure, building owners will be in a better position to meet this demand and develop future revenue streams for their property.