Hardware Games
At the moment IT communications systems are increasingly influential on the business of office building tenants. This means that tenants are making ever more stringent demands on the telecommunications aspect of business centers, which is becoming one of the main competitive advantages when choosing a business center. The telecommunications equipment, which guarantees that the tenant has a highquality connection, now plays a key role.
The Chain
There are hundreds of telecommunications companies offering connection services now operating on the Moscow market. Many of them are now trying to consolidate in the commercial real estate sector, as this market is actively developing. However, before tenants can “settle down” in a building and start to use the communications services, they have to go through a period of planning and installing telecommunications equipment.
Before a property begin to be used, various different bits of work have to be carried out on its telecommunications, starting from its construction to its installation. “According to official standards, first of all exploratory project work should be carried out, the aim of which is to hook up the equipment that is being installed with systems that are already present, to evaluate the possibilities and possible methods of tying the new system into the network of a telecoms operator, and to meet the necessary technical conditions,” explains Evgeny Solomatin, development director at Cominfo Consulting. “After this comes the construction and installation work and finally the launching and debugging. The property is then given over to be used by the tenants, though securing the agreement of all the inspectorates often requires just as much time and effort as the construction itself.” A whole range of companies can be parts of this chain, working on the project at various stages. However, more often than not all the work is taken on by system integrators.
A system integrator is a company that often creates turnkey projects, from the creation of the infrastructure to the installation of the equipment. A system integrator can lay an network of cables, determine the load on the network, refine the clientbuilder’s specific demands, and develop a system of telecoms provision for a business center, which gives the tenant telephones, broadband Internet access, reserved channels, and so on.
Major integrators are, as a rule, the chief contractors in largescale projects for the creation of a telecoms infrastructure in business centers, although, they also involve a lot of subcontractors, who carry out the work that is outside the integrator’s remit. For example, the fire safety, air conditioning, and electricity supply in the room where the equipment will be located. However, they do sometimes carry out this work themselves. “We can provide the platform of main cables for connecting to the relevant operators,” explains Igor Anisimov, head of engineering system management at NVision Group. “And the necessary engineering equipment for the operator to install their hardware. However, we are not very interested in this work, because it could be carried out by companies that are not as technically advanced as us. We are more interested in developers coming to us, wanting to set up their own operating company.”
“We participate in a lot of projects where the telecommunications are a concern of the management company,” continues Igor Anisimov, “and all the equipment belongs to the building’s owner. We are interested in creating turnkey operators centers, where the integrator works out the concept for a business center’s telecoms provision, lays the cable network, installs the equipment and is responsible for keeping it working without interruption. As a rule, these projects require an original, flexible, modular solution, so it is these that we want to be involved in.” In a number of cases the telecom operators act as system integrators. Whether or not the operator acts as the system integrator depends on the developer’s position: do they want to hand over all the telecoms to an operator or operators and get a percentage of their profits from this, or do they want to earn more by providing the services themselves, as the owner of the equipment.
Developers have the right
“Developers rarely worry about buying equipment,” believes Pavel Gorenkov, general director of Gars Telecom. “After the decision has been made to work with a certain operator, the network provider takes on the projecting, assembly, launch and debugging of the telecommunications infrastructure. They themselves choose what equipment to install, based on expediency and cost.” Nevertheless, developers do try to control this process. “Of course we are not experts in telecoms equipment, but we can find out the standard of a manufacturer just by their name,” emphasizes Nikolai Gorelikov, deputy general director of LVN Development. “We also consult with the partner company that is providing the equipment whenever our building’s operator suggests the installation of a certain piece of equipment. We cannot have an influence on this choice, but we nevertheless try to be in the know if it seems to us that the operator is planning to get poorquality equipment, and we will tell them what we think of this. The operator will usually listen to us.”
An honest tender
“A partnership with developers usually starts at the initial construction stage,” emphasizes Lyubov Yulis, director for work with commercial and residential real estate at Comstar OTS, “which is beneficial and convenient for both parties, as it means you can avoid a lot of difficulties concerning the technical organization of the communication systems already constructed or working in the building.” When cooperation starts later, problems often arise, because there are no special rooms for putting the telecommunications equipment in. It is even more difficult when the building is already being used. If it turns out that in a completed building there are no internal communications systems, or even vertical links, then this can mean having to open up ceilings and lay cables.
In order to choose a telecoms operator, the developer holds a tender. “We take part in all the tenders,” Golden Telecom told CRE. “We have longstanding and stable relationships with independent partners, and once they have started to work with us, and have been convinced of the high quality of the services we offer, developers will come to us in the future when they need telecommunications.”
Telecoms operators note that this market is very conservative, and that if a developer has already found one operator to be convenient, and successful in previous projects, they will go back to them. “Nevertheless, developers continue to hold tenders for the development and installation of telecoms infrastructure,” notes Pavel Gorenkov, “according to which work will be awarded to the usual operator. Developers need tenders to help them judge the market situation and to monitor prices. A tender is a way of lowering their partner’s rates.” However, developers confirm that tenders are honest, and that tenders for telecoms services are real competitions and that the developer approaches the question of choosing an operator strictly and seriously. The highlight the fact that they build properties in different parts of the city, and that the influence of telecoms operators is determined by location: some are more developed in the North, some in the South.
Nevertheless, not everyone agrees on when an operator needs to join a project. “We have come to the conclusion that the operator should be chosen during the later stages,” asserts Nikolai Gorelikov, “when a pool of tenants has already been formed, and they are arranging the premises they are renting out. There is enough time, 34 months before the property starts to be used, in which to sort out the telecoms services with an operator.” Naturally, a developer will give some prior thought to preparing the building for the installation of a network and equipment. This later tender is explained by the fact that, as Mr. Gorelikov suggests, some companies in class A offices come with their own operators. An operator who is working with a developer will agree, eventually, to letting a rival in, but only on the condition that the competitor rents the equipment, network and so on from them. This is unprofitable for the ‘guest’ and they will insist on laying their own network, but having several operators in one property, each with their own infrastructure can lead to disharmony in your business center.
Each according to their needs…
Any operator planning to provide a business center with telecommunications will carry out an evaluation – they will determine its class, its size, what range of services it requires, what the management company or tenants want when it comes to quality or technical specification and the like. The technical solution that will eventually be used is decided on the basis of these factors.
“The property’s function and its area have an influence on the choice of equipment,” explained experts at Golden Telecom. “There are several different types of building, so, for example, shopping centers use a standard range of Golden Telecom standards, including telephones and Internet access. Tenants in business centers may use a wider spectrum of telecommunications services in their work.
“Obviously, a class A business center is mostly occupied by large companies that rent whole floors and usually have their own IT services,” confirms Lyibov Yulis. “In this sort of center we only introduce a communications channel and operational equipment. Lower class centers are more often occupied by companies for whom having their own IT services would not be profitable.” In such instances one needs to install a whole complex of telecoms equipment. The building’s internal cable system is one of the main components of an infrastructure, and one of the most expensive.
The operator’s integral service access unit includes a complex of telephone services and a data and internet access transmitter with the necessary additions such as a Firewall (which guarantees multilevel protection for the network’s servers and its users). Telephone connections are provided by a digital ATS.
What’s more, if an office building includes a retail area, cafes or restaurant, then the operator or integrator can employ wireless WiFi internet access, or, if members of staff have to constantly swap places and work in a large area, they can install wireless DEST telephone technology. In this instance there is no need to provide wires and plugs in an office and it is possible to take the handset into any room in the building without losing coverage. This is achieved by installing retransmitters that work out of one telephone station. Centers with a conference room often have equipment for ISDN videoconferencing.
Why A is cheaper than B
Any attempt to reduce the cost price of the service by, for instance, using an inexpensive and lower quality telephone station from a Korean manufacturer, means the network works less well – making it less faulttolerant and more prone to interruptions. “There are a lot of smaller operators working in the market,” notes Pavel Gorenkov, “who offer lower prices and can do his because they buy cheaper equipment. There are consumers for these services as well, because in, for example, class C offices the price is more important than the quality. They are prepared to just get used to small problems with the network or the telephones, as this will not have a major effect on their business.” On the other hand, in highclass offices the quality of the communications system is more important to the tenant than the price, because the success of their business depends on it.
Telecommunications experts confirm that the equipment used in class A and class B offices is exactly the same. Furthermore, if you take into account the practical realization, expenditure on equipment is often lower in class A. The reason is simple: companies renting premises in these office buildings occupy thousands of square meters and come with their own operators and equipment and sometimes only need the building to be fitted with some kind of main cable to their building. The average class B office resident rents hundreds of square meters, and these companies require servicing, equipment and IT maintenance. It ends up being the case that integrating network equipment into class B offices can be more expensive than in class A offices. As far as profit norms and payback periods are concerned, experts consider both markets to be practically identical.
Business Prospects
Development in Russia currently brings in fairly large profits and investors do not want to think about the profits available from providing telecoms services, which are small in comparison with the profits that can be made from construction. However, in the future it will be the norm for there to be a local operator in the building (a BLEC), as a subdivision of the management company, and providing telecoms services will become a standard, commonplace component, much like electricity or air conditioning. On the other hand, as operators point out, there is a trend for developers to refuse to try to create and finance their own operating companies, as they prefer to direct their available funds towards future construction projects rather than run the risk of losing them in an unknown field playing a strange new game. Analysts of this segment believe that we should expect the telecoms business to split up and strengthen at the same time: major network operators will provide services that stop at the door of the building, and the BLEC will become a whole new field, which will guarantee the building’s internal communications, and retransmit the signal from any external operator without lobbying for anyone’s interest.