Outfitting Remote Offices from the Bottom Up

SAN MATEO (06/12/2000) - E-Businesses with remote offices scattered across multitenant buildings soon will have more flexible options to equip workers with essentials such as bandwidth, broadband connections, and even hosted applications.

A new crop of service providers, BLECs (building local exchange carriers) or OSPs (on-site service providers), is gathering steam to go after small and midsize businesses and even enterprise customers. Their aim is to provide infrastructure and services that percolate up from a building's basement to workers in the floors above.

Fueled by new networking hardware, BLECs amount to more than just convenient, local broadband connections. Instead, they are voice and data carriers looking to lure customers away from the Baby Bells with personalized, on-site customer service and an increasing number of ready-to-go corporate applications.

"A lot of businesses are thinking, 'If I am moving into a new building and I can have electrical hookup, a phone system, and even Microsoft Office for like $25 a month, why not just sign the check and move on?' " says Tim Weis, a senior consultant at Telechoice, a market analysis firm, in Tulsa, Oklahoma.

Allied Reiser, eLink, Broadband Office (BBO), and Urban Media are just some of the BLECs trying to cut deals with building landlords and make life easier for office tenants.

"We station ourselves near a building and can do adds, moves, changes, or answer questions right away instead of requiring customers to go into a queue and have their dial tone show up maybe five weeks later," says Mark Davis, vice president of engineering at Palo Alto, California-based Urban Media.

Because BLECs take direct aim at entrenched local phone companies, they have to get aggressive to capture any significant portion of that market, says Larry Kraft, vice president of marketing at Advanced Switching Communications (ASC), a Vienna, Virginia-based network hardware company that just cut a couple of BLEC deals.

ASC in late May signed on Urban Media and BBO as users of the company's A-1240, a pizza box-size piece of equipment nestled in an office building basement to converge voice and data services.

"These companies don't have a huge universe of customers. They've got to offer a low break-even point and differentiated services," Kraft says.

Urban Media is also punching up its infrastructure with hardware enhancements from suppliers such as Nortel, which recently inked a $30 million deal with Urban Media to provide, among other things, its BayStack Ethernet and Passport multiservice switches.

BLECs are proving a lucrative new market for hardware vendors that demand high bandwidth and, increasingly, the ability to control traffic and service levels on their infrastructure, Telechoice's Weis says.

For instance, ASC's A-1240 will let the BLECs offer QoS (quality of service) levels tailored to individual tenants. "Small and medium enterprises are asking us for more bandwidth. And in order to do that, we have got to be able to turn up bandwidth at any time," says Johnson Agogbua, founder and vice president of engineering at BBO, in Falls Church, Virginia.

Increased bandwidth made possible by new-breed networking hardware is also allowing BLECs to pump up the suite of applications they can offer tenants. "We are going to be posting enterprise applications in the network for the small to medium-sized enter-prise space. We are in the midst of launching them now," Agogbua says.

Agogbua will not elaborate on the kinds of applications BBO will soon make available, because the company is still in the process of forging deals with software partners.

Urban Media, too, is adding a slew of new applications, which likely will include the most popular ERP (enterprise resource planning) and e-commerce packages, Davis says, who does not want to pre-empt the company's fresh partnership deals by naming vendors.

Once those alliances are sealed, BLECs will be able to give connectivity to building tenants for literally nothing, Davis says. "We will be offering free broadband to all customers so they can access a host of applications."

Analyst Weis predicts that the BLECs' new revenue model will likely take hold.

"It may take awhile -- two to three years or more. The BLECs know that they have got to do something so they can use their bandwidth to make money. But it will be entirely possible to do that because they will have a closed set of customers they know a lot about," Weis says.

Weis says he also expects to see office-outfitting chains such as Office Depot Inc. and Staples eager to cut deals for advertising on microsites that BLECs will build for tenants. Those revenues would also offset the BLECs' need to send those tenants a monthly bill for bandwidth.

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