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.

 


Vice President, Technology Services, RealPage
henry.pye@realpage.com

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Henry Pye is vice president, Technology Services. His team provides advisory services related to voice, video and data services, access control, audio-video and lifestyle technologies, and other low voltage amenities to multifamily developments, acquisitions, and existing communities. Henry has managed resident technology services for hundreds of communities in the U.S. and Canada. Previously, he led the JPI Resident Solutions team providing expertise and advice internally to JPI and third-party multifamily owners. Prior to that, he worked in JPI’s Luxury Multifamily Development, Luxury Multifamily Acquisitions, Student Living Development, Student Living Acquisitions, Market Research, Project Finance, and Information Services departments. Henry authors the “Owners Corner” series for Broadband Properties Magazine and co-chairs the Multifamily Education Series for the Broadband Properties Summit. He has authored numerous articles and is active in industry organizations and conferences. In 2002 and 2006, Broadband Properties Magazine included him in its quadrennial listing of the Most Influential People in Real Estate & Technology. Henry graduated with a Master of Business Administration degree from the SMU Cox School of Business and a Juris Doctor degree from the SMU Dedman School of Law in 1997.

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