Telecoms Seek Critical Mass of Tenants for Survival

The Rise and Fall of Telecoms... Remember, a few years ago when telecom was hot?  This was the deal.  A telecom would wire your building for free and share the revenue stream.  Best of all, they'd give you warrants in a hot stock.  So the telecoms raised a zillion dollars on Wall Street and set out to bring broadband speed to every building and tenant in America.  In fact, there were so many telecoms with so much money fighting to wire buildings that BOMA International lobbied hard against "forced access" in order to prevent all the purple hairs from running amok in their members' risers.  Well, that was then, and this is now.

Last week Winstar, the granddaddy of wireless telecoms, which had seen its stock plunge from $23 in January to 14 cents, filed for bankruptcy after burning through $5 billion.  So I'm thinking, "Holy cow, that's a lot of money."  Then I read their press release.  Winstar has wired 4,800 buildings and has 30,000 business customers.  That means an average of 6.25 customers per building at $166,000 per customer.   Ah, ha.  That's the problem, I think.  They're installing an infrastructure to serve a whole building, but they're actually serving only a small fraction of the tenants.  I know that these are crude numbers, so don't shoot me.  But I'll bet that's the same problem that all telecoms have.

That brings me to Teligent, which according to the Wall Street Journal (April 20, 2001) has raised $2.6 billion, and whose auditors have expressed "substantial" doubt" about Teligent's ability to carry on.  In its 10-K Statement, Teligent said that they had wired 4,469 buildings and were serving 35,500 customers by the end of 2000 -- that's about 8 customers per building at $73,000 per customer -- considerably less than Winstar.  I don't really know if I'm comparing apples with apples.  But it looks pretty bleak for telecom providers.  And landlords can forget about those warrants. ... Are there any success stories out there?  Is anybody making money?  Are tenants happy with their existing high-speed service providers?

--Peter Pike / ppike@pikenet.com