When Focusing on Revenue, Don’t Forget to Consider the Liabilities, Too
When providing voice, video, and high-speed Internet services to residents, property owners sometimes focus too hard on the potential revenue from these services. But if they don’t consider the potential expenses and liabilities associated with providing these services, owners may discover that these services may actually be costing them more money than they’re bringing in.
Through regulatory changes implemented by the FCC in 2003 and 2007, many property owners now actually own the coaxial cable used inside their buildings. In the past, service providers had assumed responsibility for repairing and upgrading the coax they used. Today, because of shrinking budgets and increasing competition, some providers attempt to shift this obligation to owners when negotiating a new contract. This could turn out to be a real problem for owners’ expense management, especially if the cable is not in good condition or requires a great deal of upgrading.
The industry estimates the cost for rewiring coaxial cable is at least $225 per unit. Rewiring an entire 200-unit community at one time costs upwards to $45,000. Rewiring the same building one unit at a time escalates the cost to more than $350 per unit or $70,000. We’re talking about a big expense here. Not to mention the potential lost value through poor resident satisfaction when services don’t work or are undeliverable because of infrastructure problems.
Surprisingly, many owners fail to consider these potential costs when negotiating a new contract or renewal for resident technology services. It’s much easier to focus on the potential revenue from voice, video, and data contracts. However, unless contract negotiations cover both sides of inventory accounting—the potential revenue and liabilities—owners may find themselves shelling out much more than they bargained for originally.