The multiple dwelling unit (MDU) market is firing up, sparked by competitive pressure on service providers to deliver a widening array of video, voice, data and wireless services to the burgeoning, and rapidly changing, market.
And it’s a market hungry for the offerings that both cable and telco providers are delivering, from high definition TV (HDTV) and video on demand (VOD) to high-speed Internet and beyond.
Nearly half of U.S. apartment residents, reports the National Multi-Housing Council, say the availability of broadband influences their rental or buying decisions. Competition "MDUs are highly underpenetrated by DBS (direct broadcast satellite) in the apartment market at just 13 percent. But in hotels, it has a 26 percent penetration level. So clearly, DBS is not at its natural level in apartments, but is overpenetrated in hotels. Clearly, that is an opportunity for competition," said Bruce Leichtman, principal at Leichtman Research Group.
Opportunity indeed. Two of the cable industry’s most formidable opponents, FiOS from Verizon and AT&T’s U-verse are aggressively advancing their MDU, hotel and hospitality strategies. (See sidebar.)
Verizon, via its Enhanced Community group, is currently offering FiOS to 750,000 apartment units in 16 states, and according to Mike Weston, director of marketing operations for Enhanced Communities at Verizon: "We have a huge opportunity in cities like New York and along the East Coast, California, Florida, Oregon and Texas, where we’re head-to-head with cable. We’re working with real estate companies who manage thousands of MDUs and apartments."
Verizon’s latest coup is Trump World Tower at United Nations Plaza and Trump Park Avenue, where FiOS will be serving up Internet access speeds up to 50 Mbps over its all-fiber network, among other services.
AT&T and its Clear Sky project with Marriott International in Boston will bring a number of Internet protocol (IP)-based services to the property, which will act as a forerunner to similar technologies and services slated for launch at other Marriott properties, the company said. Challenges Yet integrating or overbuilding sophisticated, advanced technologies into existing MDUs, replete with disparate networks, outdated equipment and aging infrastructures, isn’t for the faint of heart.
"Space and power are the key challenges, and there are unique wiring requirements," Weston said. "If we’re going into MDUs where wiring has been owned and maintained by the owner, it’s probably not up to par. Many buildings have cloth-covered wiring, and the configurations can be mind-boggling. All MDUs are an adventure."
Bendable fiber, he noted, is helping, and FiOS is considering it for selected MDUs. "It gives us greater flexibility, is pretty tough, and there are corners to turn in MDUs. You can wrap it around nails and staple it with minimal loss and in less space. We’ve also developed a microduct product to protect the fiber. Bendable fiber allows us to get around tight corners and through narrow pathways."
New York City, he added, is a classic example of where bendable fiber can be an asset. "Many MDUs have environmental issues, like asbestos, so they are more complicated. That’s where the flexibility of bendable fiber would be a real asset." Options The MDU market, albeit with its fair share of technical, engineering and business model challenges, is nonetheless on the minds of service providers and their supporting cast of technology and manufacturing companies.
"The competitors are larger now for cable, with Verizon and AT&T taking the overbuild approach," said Jim Honiotes, principal at Lynch Cable Resources, a consultant to the MDU and residential markets. "There are old buildings that don’t support a full broadband platform, so to do post-wire is very expensive. But it’s a competitive disadvantage if they can’t run a full platform, and MDUs are loathe to do post-wiring. They do not want cable on the outside of their buildings."
They do want their cable, however. But inside and with as little disruption, both aesthetically and technically, as possible. And there are three options, maintains Dave Gaetani, director of marketing for Motorola’s access network solutions.
"First is fiber to the living unit, second is fiber to the basement using Ethernet point-to-point, then back to the living unit, and third is VDSL (very high-speed digital subscriber line) to the living unit," Gaetani said. "There are real challenges with brownfields and existing buildings, which require bandwidth and need technologies that deliver speed. And just getting to the wiring is a challenge. But the MDU market is an area of growth and is getting more attention."
WiMAX, he maintains, could be one answer. "Some providers must have compelling products like HDTV, VOD, interactive video services, phone, Internet, and with multiple set-top boxes. We’re talking large bandwidth requirements. Can WiMAX and (similar) technologies deliver that? Yes, they can. Our WiMAX team is looking to cover MDUs." Strategy The ultimate goal, say most experts in the MDU space, is essentially creating a mini-headend at the MDU.
"We’re seeing these mini-headends bring cable feeds for security, local channels and more," said Tom Williams, vice president of marketing and business development for Arris. "And we’re seeing more wiring cabinets in MDUs, with builders and cable operations located in the actual MDU. It’s easier to troubleshoot, install and service."
The mini-headend strategy can also help the sell as well. Said Weston of Verizon: "A big part of the value proposition is giving residents access to video, voice and data services, and for owners to have an opportunity to participate financially to help market the MDU strategy that ‘FiOS is available here.’ We want to press that as a differentiator, and we have main feeder fiber already in the ground. Now, it’s about getting permission from owners to bring fiber inside the building and understanding that FiOS isn’t a me-too product."
FiOS may or may not be a me-too depending on whom you ask, but doing business in the MDU world remains a dicey proposition, from both a technology and business perspective.
"We’re seeing wiring challenges and bandwidth limitations that are causing headaches for service providers who want to provide 750 MHz but can only get 550 MHz. And there are major maneuvers in video and bandwidth reclamation. Then they’ve got to think about powering and lifeline services," said Jay Lee, vice president of business development and engineering for ATX Networks. Tough, but worth it Despite the myriad hurdles facing service providers in their push to provide triple and quad-play services to MDUs, it remains an appealing market, with a half-million facilities of 50 units and above in the United States, and more than 2 million four-plexes and duplexes, according to Al Johnson, vice president of marketing and business development for Broadlogic, a chipset maker for the MDU market.
"It’s always been an expensive market to serve, wire, support and maintain. So, we’ve always looked for simple, cost-effective solutions. Satellite has done well, especially in the hospitality market. Now, cable wants to attack the MDU market," Johnson said.
Cable companies Cablevision, Cox Communications and Time Warner Cable, all players in the MDU market, chose not to participate in the story.
For competitors such as Verizon, the MDU market is high on the radar screen. "New builds are the easiest, but they represent a small portion of what we’re after, especially in New York City," Weston said. "We’re looking at each building as a separate job and will custom design a solution to bring fiber to individual units, with optical network terminals. And, we want to get fiber as close to the user before the analog to digital conversion."
Craig Kuhl is a contributor to Communications Technology. Reach him at [email protected]. Sidebar: Hotels/Hospitality The hotel and hospitality market is getting the same message as its MDU brethren that advanced services count as a crucial competitive and technological edge in their march toward service upgrades.
And the stakes are rising as more customers look to the hospitality industry, most notably hotels, to provide a near-home entertainment and communications experience.
"Hotels must have advanced services to compete, and connectivity aspects are now so important," said Doug Rice, executive vice president and CFO for the Hotel Technology Next Generation group. "But content is a big issue as well. In hotels, it’s totally disorganized. Customers want sports, live events, documentaries, concerts, syndicated shows and music. But the typical configuration of video in hotels is a mess."
That frank assessment, coupled with the mounting pressure on hotels to offer services such as HDTV, VOD, high-speed Internet and more, is pushing the hotel industry deeper into advancing technologies, creative engineering and new business models.
And the ultimate prize, Rice maintains, is the converged network.
"CIOs and CEOs will tell you they must move to a converged network. They understand costs and product differentials," he said.
They also are painfully aware of the technology, engineering and installation challenges of bringing advanced services to their guests.
"Hotel data centers can have as many as 150 boxes to handle the channels, and bandwidth capacity is a big issue, and growing exponentially," Rice said. "If we can’t get content to customers in rooms more effectively, they’ll do it themselves. So we’re moving to fiber models because everyone wants 3 Mbps. Hotels are now being forced to consider the benefits of fiber."
Other benefits, such as HDTV and VOD, are also on the radar screen of most of the leading hotel chains. "Some have them; some don’t," he said.
Another crucial issue, he noted, is content, or the lack thereof. "The hotel industry isn’t large enough to have the attention of content providers. There’s not enough visibility at the studios."
Nevertheless, the hotel industry and its supporting group of technology, engineering and content providers are pressing ahead with the effort to enhance the hotel room experience.
"HDTV and high-speed Internet services are mandatory, and I’m watching with great interest the actions of the emerging Y Gen who carry their own content," said Fraser Hickox of the Peninsula Group, an upscale chain of hotels in the United States and Asia. "And as much as possible, we want one fiber strand to the room – a converged network."
Marriott International, according to spokesman John Wolf, is looking at converged networks as well. "They will include IPTV and VOD in the properties, the first of which will be in Boston (Clear Sky project with AT&T). We’re also looking at deploying one scalable network with plug-and-play capabilities."
The emergence of HDTV as a potential differentiator for hotels, said David Bankers, senior vice president of product technology development for LodgeNet, is changing the technical dynamics at many hotels.
"Clearly, new equipment is needed like QAM modulators and transcoders, which are expensive," he said. "It’s a big hotel challenge, along with content. These new services like HD and Internet access have completely changed the technology we use to deliver service to hotels. They require different meters to measure signal quality in the digital domain and a whole new set of skills, meters and installation services. There are many disparate networks in hotels, and video is the most technically demanding."
Once those demands are met, however, most experts agree the hotel industry and their guests will have a much more enjoyable entertainment/communications experience.