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The Hidden Costs of Fitting Buildings With Free Fibre

The Hidden Costs of Fitting Buildings With Free Fibre
11 November 2020
 

The trend towards fitting buildings with free fibre can present significant risks for facilities managers, landlords and tenants in the long term. Jon Seal from technologywithin outlines why he feels this is the case.

Jon has been the Managing Director of technologywithin from its launch at the beginning of 2019, his ambition steering the company’s emergence as the UK market-leading provider of connectivity services to flexible workspace. He has long been driven by an interest in technology and developing commercial models around services that work for both customer and supplier, starting in home automation and moving into the hotel technology sector, designing and implementing WiFi, networks & TV solutions for the leading brands and hotels of the world, including Starwood, Marriott, Gleneagles and Accor. He then joined Stickman Technology as General Manager in 2017, overseeing its purchase of competitor ip-Xchange and the creation of technologywithin.

 

“The tag line pitched to landlords to “Connect Your Space with Free Fibre” is becoming increasingly prevalent in the commercial office sector and, on the face of it, seems like a good deal for landlords.” 

 

Free Internet for Commercial Buildings is Always the Bigger Risk

 

Who doesn’t like a freebie, from the packet of Haribo sweets included in my Wiggle order, to free Wi-Fi at the coffee shop? 

In fact, an experiment In Dan Ariely’s book, “Predictably Irrational,” illustrates this brilliantly.  Participants were asked to decide between spending 26 cents on a luxury Lindt chocolate truffle or spending one cent on a lower-quality Hershey’s chocolate kiss.  Those running the experiment observed an even split of choice.

However, when the prices of both items were lowered by one cent the choice distribution changed heavily. The price difference between the two chocolates was identical, but the lower-value option had become free. The addition of a “free” item meant the vast majority of participants now selected the Hershey’s kiss, which demonstrated clearly the appeal of “free”.

But “free” can also carry risks, a fact that has also become increasingly clear as regards providing internet connectivity in the commercial property sector, with the superficial absence of cost prompting landlords to overlook considerations such as long-term Return on Investment (ROI), overall quality and that level of service provided to tenants that would otherwise be front of mind. To put it honestly, free does not always mean better.  

 

The Hidden Costs of “Free”

 

Free stuff is often irresistible, but it normally comes with hidden costs. I suspect the same is true in so many industries. Hospitality, for example, has battled with the demand for free WiFi, which has become an increasing priority and expectation across attractions and venues.

For instance, the price I pay for a cup of coffee in a café should include heat, electricity to charge my phone and, of course, WiFi to jump online. The fact is that none of these things are actually free – although the cost to produce a cup of coffee is about 20 pence, we are actually happy to pay around £3, which basically means these “free” services are just part of the end price we pay.

But the crucial sticking point is that due to them being free (just like the chocolate selection), we are often prepared to forgo quality and control. Now, when it comes to chocolate that’s no major risk, but when it comes to the commercial property sector and providing internet for tenants in your office space, going for the free option carries a huge risk…

 

Jon Seal

Picture: a photograph of Jon Seal

 

Free Fibre for Office Space

 

The tag line pitched to landlords to “Connect Your Space with Free Fibre” is becoming increasingly prevalent in the commercial office sector and, on the face of it, seems like a good deal for landlords. For property owners, the space is connected and the hassle of providing instantly available internet for new tenants is gone.

With 82 per cent of people believing that digitally unconnected spaces will become obsolete in the near future, a trend that has been further accelerated by the shift to online communication and cloud-based working in lockdown, the need for landlords to provide robust connectivity to tenants is clear. At the same time, landlords have faced new financial pressures in the pandemic, with estimates from Cushman & Wakefield suggesting that European office occupancy will not return to pre-pandemic levels until 2022, requests for rent reductions and a growing preference for working from home.

The whole point of providing these services is to get happy tenants in quickly. Happy tenants are not going to fuss about the rent and that’s the business landlords are in, to sell square footage. So free fibre instillation, offering hassle-free connectivity, is an attractive proposition. Only the truth is that the hassle really isn't gone.

 

Free Fibre Means a Loss of Control for Landlords

  

Unfortunately, free-to-landlord internet services means a loss of control for the building owners over the quality of internet services available to their tenants, as well as the overhead costs that they will pay for it: a loss of control over a mission-critical service in running their building, and for their tenants doing business.

However, this is not the only downside to free fibre. The truth is that someone will pay for the “free” and that’s going to be tenants, most likely in the form of high prices and a potentially substandard service. This, in turn, can have heavy costs for landlords. With the internet being so crucial to businesses’ normal functionality, flexibility and productivity, they are bound to complain when connectivity doesn’t meet expectations or demand, and ultimately apply the pressure and cost back onto you, the landlord.

 

A Viable Alternative to Free Fibre

 

Connectivity is crucial for landlords. In fact, even prior to the pandemic a building certified by WiredScore, the connectivity ratings agency, could change a “digital premium” on London office rents of as much as 5 per cent. In the wake of the coronavirus pandemic, with 61 per cent of desk-based workers wanting to work from home more in future and businesses adopting a more flexible approach to working, robust connectivity will be a crucial attraction and differentiator in the office market.  In this context, the inherent risk of the “Connect Your Space with Free Fibre” message isn’t quite so attractive.  

The alternative for landlords is clear: to invest a little upfront in a quality internet solution for their property assets, and maybe even generate a profit on their connectivity offering. This can still ensure that every office is internet-ready for tenants, but also provides landlords control of the service quality and ensures that tenants receive a fair deal. Property owners that don’t may risk being left behind, both during the coronavirus pandemic and beyond.

Picture: a photograph of a cityscape with fibres representing connectivity moving across

Article written by Jon Seal | Published 11 November 2020

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