Multifamily developers and portfolio owners are responding to resident demands by designing and building data networks that cover their entire properties, and allow for a host of new services and features that depend on always-on internet connections.
This shift includes switching from “retail” arrangements, in which the resident pays for their own internet service; to “bulk” internet, in which the property pays for internet service to the entire property, and may have influence or ownership of the technical specifications and the capabilities of the network.
“Paradigm Shift: Can Bulk Internet Finance Smart Buildings?” a webinar produced as part of the AIM Conference webinar series, sponsored by Yardi and Rent Café, discussed strategy with Jeff Kok, Chief Innovation Officer and Chief Information Officer at Mill Creek Residential Trust; Ian Davis, Telecommunications and Technology Attorney at Davis Craig, PLLC; and moderator Stephanie Fuhrman, Catalyst Innovation Lab.
The installation of entire-building networks is gaining momentum, particularly in new development, the panelists said.
Providers are giving owners a bulk rate, and an owner-operator can split that out to the resident on an individual basis, and reinvest the profit to other aspects of the system, such as thermostats and leak detection or any other features. When modeling the pricing, owners have to consider all that could be involved. If they are going to add smart-home features to the equation, that changes the metrics totally.
Owners are making a very high percentage of their income through rents. What they can earn through bulk Internet is minimal, but if they can make some profit, that’s great, the panelists said. The panelists agreed that it’s more important to get the network right then to worry about what amount of revenue they might bring in.
Expert Ian Davis cautions owners about any service providers whose focus during an initial meeting is on how much money the owner can earn through its bulk-services network.
“If that’s the case, I wouldn’t walk away from the meeting, I’d run,” Davis said.
Rethinking onsite networks is also gaining traction in older and repositioned properties. In these cases, the panelists say, there are alternative strategies to community-wide networks that can work better to fit the property type. Leveraging existing copper wires could be more appropriate than a complete tear-down. And a cellular system could be preferred for garden-style because there is less interference with those structures.
“Developers spend a lot of time considering the physical look of a building, but not as much time as they should considering what type of digital foundation or network they will need and how it could be installed,” Davis said. “You need to start thinking about this the day you own the dirt.”
“We’re not doing any new construction without one,” Kok said.
“This is increasingly becoming a necessity,” added Davis. “This is a hot space right now. You need to bring on people who are experienced in the apartment industry while you are working out contract negotiations so that you have what is needed and not have to guess.”
Beyond Entertainment: Enabling Business Uses
Kok looks at networks as “enablers.”
He recommends thinking about how the networks will improve the resident experience as well as how the system will deliver the connectivity the property staff needs based on how it conducts its day-to-day business.
“For example, consider what happens to a resident or visitor to the property who is on a phone call and who enters your building by way of an underground parking lot,” Kok said. “You can use a Wi-Fi calling solution that blankets the property so that the person can continue the conversation after they park, while they move through the stairwells or elevator shafts, and into their apartment unit.
“What about prospects who are taking virtual tours or who are self-touring? Will they be able to maintain a connection? Where will your staff be while working within the community? Just in the leasing office? In the hallways? Will they enter the apartment homes? Will they enter and walk all the way into the back of the units? Will they all be carrying iPads? Using apps on their smartphones?”
He says geo-fencing is another consideration.
“You may give visitors or residents a badge to get into the property,” Kok said. “If a resident is connected and walks into the gym – you can determine that they are in fact in the gym – and you want to have a message pop-up on their phones, such as more directions or something related about the gym, is your network wired to do this?
“The system needs to be set up for all of this. It can’t be some jerry-rigged operation. Residents expect to be connected. It’s one of the first things they notice or ask about when they step onto your property.”
Retrofits: Connecting the Old with the New
Today, the average apartment building is 20 years old. If there’s a contract renewal coming up and the owner wants to transition to include smart-building features, or even just install smart locks and thermostats, they must do a deep dive into due diligence, the panelists said. For acquisitions, a smart-building audit and a telecom audit must be conducted.
The panelists suggest looking into: What does the existing contract say? What type of property is it? What is there now? If it’s a garden-style with Cat 3 cable, for example, we know that Cat 3 only has a certain throughput, so it’s not going to work. What pathways are available? Are you looking at a total build-over process?
The panelists also discussed the importance of thinking ahead on things such as Wi-Fi 6, 5G mmWave technology and CBRS or a private LTE. How will your network be modified to enable this? Will you need dongles? Or a secondary overlay network? Should you have one network or two networks? Who should be given access to it? Who has access to the wiring or switch closet? Will you consider employing air-gaping in the network?
Some are thinking that 5G is going to help them save money later. However, realistically, it’s in its infant stages and is probably a couple of years away from becoming widely available. You do hear a lot of marketing about it. The panelists said they believe it will first be available outdoors. Also pay attention to if it’s run on 5G mmWave, which, unlike, Wi-Fi, can’t penetrate glass, walls, etc. A wired signal is always more reliable. And bulk delivers better quality, and is fast and more reliable.
Bulk Internet in Seniors Housing?
Senior housing is developing into one of the fastest submarkets for Internet usage and property-wide networking.
These communities are featuring resident tracking systems and life-alert programs. For seniors, some communities are installing Alexa devices in residents’ rooms and the common areas and are having college students help seniors learn how to reconnect through this technology with old friends. This is a big retention driver for the communities and a great value for their residents and their families. Market-rate apartments also are doing this, especially to assist prospective residents who are taking virtual tours.
Will They Even Use It?
Bulk video is another potentially tricky service, investment-wise. “You have to think ‘How much will the residents really use it?’ ” Davis said. “Some college kids don’t even know how to watch video by logging into the Internet. In one survey, only about 10 percent of them even logged-in to the video option because their video is coming from another source.
Evaluating these bulk services ultimately comes back to the business modeling, another aspect that contains many variables.
Nonetheless, cost aside, the panelists tipped their hats to apartment owners, saying, so many in the public are quick to call out greedy landlords; but do they realize what these owners have to invest to have a good, working system? And if it’s there, when you think of these investments, and combine the discounts that residents receive from bulk Internet and energy savings, residents can save $300 to $400 a year on their living expenses.
Risk Management, Data Privacy and Bad Contracts
Risk management, too -- of course -- is a big part of these efforts. “Make sure you didn’t sign a bad contract,” said Davis, adding that firms such as his can only offer advice, not make decisions.
“In the end, the owner decides how much risk they want to take on,” he said.
Internet contracts and smart-home contracts both play into the thought process. Internet contracts are basically pretty straightforward, and simple, Davis said, “while smart contracts can keep me up at night.”
Owners must read and understand the language. For example, in regard to resident data-sharing, Davis said one attorney he was working with commented, “we don’t sell data, we share it with a third party.” Huh?
Other things to be aware of are SaaS implications, data, privacy, insurance and indemnity. And Kok brought up leak detection, a protection that can go a long way in preserving a network against the risks involving potential flooding.
With security, a resident might want to know “who let Hacker Joe’ into the community .” Privacy breaches can be expensive. IBM says that on average they cost operators $3.2 million. What is the cap on your cyber insurance policy?
When considering cybersecurity vendors, ask how often they are auditing themselves, then ask to see the report. What type of cybersecurity certification do your vendors have? There are several, including SOC 1, SOC 2 and SOC 3. Here’s how those compare to each other, ISO 27001.
The bottom line: Just because you have a bunch of vendors whose products and services you like, doesn’t mean they are all going to be compatible with each other, the panelists said.
Here is the replay: