AAA Financing In Real Estate

Given the stable shortage of quality office space, construction of large business centers in the Urals is accelerating. Fault-finding tenants do not only lay claims on the location and comfort of office facilities; they also seek quality telecommunications. At the stage of building design large developers face a dilemma: creating an in-house provider service versus signing a contract with one of the prominent communication operators.

Mutual Interest

Telecommunications became as an important part of the building infrastructure as is electricity, ventilation and air-conditioning. The building’s modern telecom infrastructure is organized as external and internal communications. The former includes fiber-optic lines. “Two self-contained cables are led into a building to provide for signal redundancy; each of them is included in the provider’s data transmission network. The provider ensures their routing to a building, redundancy and round-the-clock technical maintenance,” illumines Maxim Neshcheret, supervisor of the system integration group at YuzhUral –Transtelecom.

A central communications hub used to transmit data from end subscribers is normally created in a building to provide for internal communications while distribution hubs are placed on each floor for subscribers’ hookup. In their turn, distribution centers are linked by fiber-optic lines, also redundant. Traditionally a builder signs contracts for telecom services with one of communication operators. “Providers are interested in such a partnership, since practically all operators active in the Kama region shift their priorities from retail to large corporate clients,” assures Victor Shevchuk, head of the telecom department at Energokomplekt-Perm. In his opinion, this happens because the market of telecom services rendered to natural persons, despite its steady growth, does not bring the return which can cover the operator’s investment in the creation of essential infrastructure within reasonable times. In addition, extra services bringing surplus revenue to a communications operator are lacking on the retail telecom market. The world experience shows that state-of-the-art packet-mode communication, allowing a considerable reduction of expenses on contemporary information infrastructure, should replace traditional circuit switching technologies.

Communication options

The active introduction of automated life-support management in contemporary office construction facilitates the establishment of in-house providers by large developers. Intellectualization of engineering infrastructure consolidates the positions of telecom systems in office information infrastructure. Developers face the dilemma of creating an in-house provider services versus signing a contract with an outsource provider of telecom services. It should be solved already at the stage of design. “A telecom provider is chosen via a tender, sometimes on the basis of personal predilections of people in charge, and oftentimes the matter just takes its course,” shares Grigory Gimplievich, commercial director at Set tsifrovykh kanalov, a public corporation. Dmitry Martynov, spearheading the commercial service at KomLine, suggests the third mixed option when a professional provider renders telecom services while all network resources (telephone lines) are purchased by the building management company which then distributes them among the end users.

«Pocket Provider»

Most experts assume that the developer must decide on the building infrastructure already at the stage of design or soon after construction works commence. “A communications provider, unlike a ‘pocket’ provider, is not prepared for such an approach,” asserts Mr. Shevchuk. This is the first argument in favor of the in-house service. “After an office facility with contemporary infrastructure is completed, the developer should bear in mind that all those ‘smart’ systems have to be maintained by highly-skilled personnel, and so a small in-house engineering division is just indispensable. This division may also render telecom services.” This is the second argument in favor of the “pocket” provider suggested by Shevchuk.

“The in-house provider is always handy,” agrees aide of CEO Tyumen-stroy, Vadim Gorelov. “It is more mobile and if office owners appreciate speedy service, this is exactly the case.”

An in-house communications service provides the landlord with full control of all information infrastructure and flexibility whenever some modifications are requested by occupants. Not only can the building owner optimize utility charges; he also gets a surplus operating margin, in case a “pocket” provider is used, which is a difference between the subscription fees charged in line with the contract of lease, the cost of leasing a communication channel and the wholesale cost of ingoing and outgoing traffic. The profitability of an in-house service will depend on the cost of the license to rendering the services of local telephone communication, telematic services and special equipment costs.

In-house Provider as Indicator of Company’s Development

In line with the Russian law On Communications, the providing of communications services is subject to licensing. Experts recommend the services of special consultancies which will help to collect all necessary documents for an application including a communication arrangement diagram, a feasibility study, essential incorporation papers and the network description.

Furthermore design documents have to be prepared and it is necessary to find contractors willing to do the quality job of installing the telecom infrastructure. Acquisition of billing, a certified firmware system of automated settlement with subscribers, and hiring skilled personnel will be needed for the service’s successful operation.

An in-house provider is an indicator of developer’s advancement. Experts recommend an in-house communication service whenever a company holds several office centers; otherwise it will turn into the unaffordable luxury.

In the opinion of Mr. Gimplievich, a pocket provider is sometimes established by those developers who overestimate their professionalism and investment potential, have poor knowledge of the market or incorrectly draw up business plans. At the same time a developer can get rid of all headaches and possible mistakes by hiring a professional provider.

Hireling Assumes Responsibility

“The cost of keeping an in-house communication division within a single office building often exceeds the possible profit from rendering communications services, so in most cases hiring an outsource company would be a justified solution,” underlines Gimplievich. Indeed a professional provider has all essential technologies for rendering quality services at market prices and timely responding to the requests of consumers.

The scheme of interaction between provider and developer is very simple. After signing a contract specifying the rights and obligations of the parties it remains only to settle such issues as the choice of technology and dedication of certain space inside a building to the accommodation of telecom equipment. A provider signs contracts with end users i.e. the tenants and bears responsibility for the quality of services. “The provider may also cater to a corporate data transmission network of any particular landlord or a developer,” affirms Mr. Neshcheret.

It’s hard to forecast the future development of the telecom services market. At any rate, such services are accessible to developers and tenants. It is important for the builders to offer such a solution to their tenants that would include a package of all up-to-date and essential telecom services with upgrading possibilities, such as extra telephone lines or increasing the speed of access to the Internet. Such opportunities are offered by large communications providers ready to equip the premises with all telecom services already at the stage of construction.

It is these hired providers that become the most optimal solution of telecom problems for most development companies.