A handful of new entrants have emerged in recent weeks offering a package of voice and high-speed Internet services for businesses located in office parks, high-rise towers and other multi-tenant units, which highlights the growing demand for high-speed, or "broadband," Internet services and the lack of offices that have them.
Analysts say the semi-exclusive access arrangements will mean intense competition for some of the nation's most attractive towers and office parks.
"You're just seeing a mad scramble now for these companies to get a foot in the door," said Jeff Kagan, an independent telecommunications industry analyst. "If you can lock up a building you've got a captive audience."
These new bandwidth companies are striking deals with real estate owners to install fiber-optic connections and communications gear in the basement of major commercial properties in hopes of servicing as many tenants as possible. Businesses across the United States will require 3.6 terabits--a huge chunk of capacity--of Net access bandwidth by 2003, according to Forrester Research.
Bandwidth demand has given rise to a new batch of communications providers, so-called on-site service providers (OSPs), or "in-building carriers," cropping up to capitalize on the much-needed business network connections.
Several have made strategic moves in recent weeks, hoping to stake their claim in the market before it takes off.
PhatPipe, a business service provider, launched its service last week, making it among the latest to dive into the emerging market for in-building communications service providers.
Other competitors including Everest Broadband Networks, eLink Communications, Wired Environments, Eureka Broadband, OnSite Access and Intellispace have announced a variety of partnerships and deals with real estate firms and technology partners. For example, Everest last month closed a $17 million second round of funding while Eureka closed a $22 million first round late last year.
The companies follow an earlier wave of entrants, including Allied Riser Communications, Urban Media, Broadband Office, Cypress Communications and Brix Communications.
While some of these earlier players are showing substantial growth--Allied Riser announced today its revenue and customer base increased by 50 percent from its previous quarter and said it has doubled its sales force--these newer entrants are upping the ante in an already-competitive market.
"I don't see a lot of barriers to entry, so there will be a blood bath ultimately in terms of price," said Roger Wery, a partner at technology consulting firm PRTM. "What was originally a good idea has attracted a lot of players."
That competition has lead to a mad dash to secure access rights in the nation's more than 2 billion square feet of commercial office space.
"It's getting more difficult to find building owner partners. I think the reason is the owners have so many choices," said PhatPipe chief executive Dave Robinson. "It's a land grab right now. It's a battle for the desktop...Everybody is just going to go full out to sign up as many buildings as possible."
Some industry executives believe that in order to differentiate themselves from competitors in the busy industry they must devise a unique strategy.
For example, Urban Media plans to offer free high-speed Internet access to businesses, enticing customers and landlord partners who can market the broadband Net access as a selling point with potential tenants.
PhatPipe won't stop at communications services, instead planning also to offer energy services and even goods such as office furniture. The company believes it also sets itself apart by offering landlords a revenue sharing deal, rather than paying them access fees or giving them an equity stake in the company as many other on-site service providers have done.
Other executives believe a strong management team and a simple ability to execute their plans will inevitably weed out many "pretenders" from the pack. Naturally, executives from Broadband Office, which received an investment from venture capital firm Kleiner Perkins Caufield & Byers and touts relationships reaching 25 percent of the nation's office space, believe their company is among the earliest entrants with solid prospects for success.
"In every service provider market there have been providers who have led the way and gotten to scale. And there are always a bunch of people following in their wake," said Broadband Office president and founder Dan Chu. "It's just a fact of a hot market. You've seen the same thing here."