The Building-Centric Strategy

Most CLECs operate much as their incumbent competitors do, with a scattershot approach that targets individual business and/or residential customers - any and all welcome. But it's not the only way to skin the CLEC cat. 

One innovative group of niche players has adopted a building-centric model for marketing and provisioning voice and data services. Companies such as Teligent, Intermedia Communications and OnSite Access market first to office (and in some cases multi-residential) building owners. Then they install fiber to and through the building. And only then do they market to end customers.

Could you learn something from the way these companies operate? Could you operate in the building-centric - or BLEC - market? We interviewed OnSite Access Inc. chief marketing officer Sharon Kelly to find out.

OnSite, based in New York City, currently operates in 22 of the top 50 U.S. metropolitan market areas including Chicago, Los Angeles, Atlanta, Washington D.C. and Dallas. The firm has just under 200 buildings "lit" - meaning it has cable and other infrastructure in place and is already serving tenants or about to begin. 

OnSite is growing by leaps and bounds. The lit buildings include 60 million square feet of floor space. But the floor space of all buildings the company has under contract but hasn't yet lit totals 350 million square feet. 

In April it announced agreements with two more real estate firm clients, Newmark & Company Real Estate Inc. of New York and Cummings Properties LLC of Boston, adding another 44 buildings. And OnSite expects to be in an additional dozen markets by the end of this year.

At a glance, the building-centric model would appear on the one hand to severely limit a CLEC's market universe, but on the other, to simplify marketing and even reduce the effort required. Neither proposition may be quite accurate, though, Kelly says.

Certainly this model eliminates home-based businesses and companies that own or lease dedicated buildings. And OnSite, which targets only buildings of 50,000 square feet or more, also eliminates firms in smaller buildings. "But the market is still huge," Kelly points out. 

Forrester Research values the small-to-medium-size business market for integrated communications services at between $60 and $100 billion a year. Only one in five of the estimated 6.5 million businesses in this sector is online now. 

OnSite is targeting about 860,000 of these businesses, a market worth $8.3 billion a year. Even if it wins one per cent of this market, it makes for a booming business, Kelly points out. And OnSite thinks it can do a lot better than one per cent.

Marketing in the building-centric model is certainly different, she concedes, but not necessarily easier or less expensive. 

It's different first of all in that it's broken into two distinct segments: marketing to building owners - often national or regional real estate firms that own several buildings - and then marketing to individual tenants. The first part is carried out at the executive level and it's here that BLECs are most apt to compete head to head.

Once an agreement with a building owner is in place, though, it doesn't mean the BLEC can relax, Kelly says. It still has to compete with the incumbents and other CLECs, and while it's rare for more than one BLEC to have a formal agreement with a building owner, if the first one in doesn't do a good job for tenants, it can easily lose its preferred status.

Marketing to end customers is also quite different. Although OnSite may do some brand-awareness advertising before it moves into a new metropolitan market, it typically doesn't make sense for it to advertise the way other LECs do. BLECs don't really need to advertise - they know exactly who their prospective customers are and where to find them.

Instead of media advertising, OnSite uses signage in buildings, "lobby events" - coffee and pastry receptions at which the company introduces itself and its services - and internal mailings to every tenant, often with a small gift. "It's very, very targeted marketing," Kelly observes. "It would not benefit us to spend the money that an AT&T, for example, spends on mass marketing."

The real key to BLEC success is managing customer relationships, she says. For each building, OnSite assigns at least one building communications manager (BCM) - "the mayor of the building," as Kelly calls them. Large buildings like the Empire State Building in New York may have more than one BCM. And some BCMs cover two or three smaller buildings.

It's the BCM's responsibility to forge relationships with each tenant. OnSite makes a commitment to building owners not to cherry pick - it must offer its services to even the smallest tenants. So it's not so much that OnSite spends fewer marketing dollars, Kelly says - it just spends differently. 

"We can probably take some money that other CLECs would put into avertising or collateral material and spend it on more targeted marketing. But I'm not sure it's less expensive. We want to make sure for one thing that the BCMs don't have so many customers they can't adequately service them."

There is no question other CLECs could learn from the BLEC's emphasis on personalized service and relationship management as key marketing tools - although it may be easier for BLECs to execute this strategy. After all, an OnSite BCM can spend a lot more "face time" with clients when they're all in the same building. 

Kelly says conventional CLECs could dabble in the building-centric market themselves, especially if they were going after smaller buildings in smaller markets and didn't have to contend with established competitors such as OnSite. Some already are. There are unique engineering issues, but it's not rocket science.

It might also make sense for BLECs to partner with conventional CLECs in some cases to open up new markets, she says. How receptive would OnSite be to enquiries from would-be partners? "We'd always be willing to listen," she says.