BY MAX GROSS
Russ Hamm started his career as a music producer. There was always an urgent need in that business, he said during an interview at the office of his company, Rainbow Broadband, to get today’s work in one city to the next city. “I can remember seeing the chairman of Sony holding a phone up to a speaker to play music for people in Tokyo,” he said.
Mr. Hamm came to see that there was a connectivity problem in media and saw an opportunity. Now, he’s the CEO of Rainbow Broadband, a company that uses microwave technology to transmit the Internet above our heads. Internet access is usually thought of as cables in the ground, DSL, copper or (ever so slowly here) fiber optics. Microwaves offer an attractive option for buildings that have struggled to get a telecom to bring them commercial-grade service.
In fact, Rainbow is providing service through the sky to well known tech and media companies, like Manhattan’s Guardian and Twitter and Brooklyn’s Vice and Kickstarter.
A frequent theme with members of the tech community in New York City is frustration with broadband access. Multiple sources Commercial Observer spoke to for this story referred to parts of Brooklyn, for example, as a broadband desert, but even parts of Manhattan are underserved. And average speeds here are lamentable compared to other major cities globally.
As TAMI tenants make up a larger part of the mix in commercial buildings, it’s becoming increasingly important for landlords to bring multiple providers into their buildings, so that tenants have options and a backup source of access. In IT terminology, that’s called redundancy. For businesses that exist entirely online, losing access amounts to shutting down the business. It’s not an option.
One way to guarantee a building stays connected? Make sure it has more than one path to the Internet.
Rudin Management realized this early on, when its founder and COO both read Being Digital by Nicolas Negroponte (Knopf, 1995), according to its vice president, Michael Rudin. The book convinced the two that wiring buildings could give their properties a competitive edge. In the mid-’90s, one of their buildings, 55 Broad Street, between Beaver Street and Exchange Place, stood empty, along with 30 million square feet of empty office space in lower Manhattan. Rudin Management decided to take the opportunity to wire the building, complete with access points on each floor, a pathway for bringing new providers in through the whole building and a meet-me room. Mr. Rudin called it the first completely wired office building in the world.
Fifty-five Broad Street proved to make a difference for them in a slow market, so the company moved to do the same in the rest of its portfolio.
Since then, Rudin has made connectivity a differentiator for its buildings. It bought the former headquarters of AT&T, 32 Sixth Avenue, between Walker and Lispenard Streets, in 1999. In its retrofit, it turned an entire floor into a carrier hotel and put two radio towers on its roof. Mr. Rudin said it was one of the most important connectivity hubs in the city. Roofs owned by Rudin are also home to some of Rainbow Broadband’s hubs.
From the start, the company opted to be carrier-neutral in its buildings. “We have nothing to do with how they run their business,” Mr. Rudin told CO in a phone call. “So if they want to choose someone who’s not in the building it’s easy for us to go out and create a relationship with that provider.“
As multiple sources confirmed, there are providers in New York City that attempt to convince landlords to sign exclusivity agreements that bar other providers from coming in. In other words, if anything goes wrong with that company’s path to the Internet, tenants in such buildings will lose access until that one provider gets it fixed.
Deals like that aren’t acceptable for start-ups with a finite amount of venture capital funded runway to prove their products.
“Power, Internet and coffee, those are the three things that have to be taken care of,” Timmy Wahba, a co-founder of the coworking space, Projective Space, told CO in a phone call. Wahba said that New York can’t afford to have buildings without redundant ways to get online. “We’re finance, we’re media, we’re advertising and tech. How commercial buildings are reliant on one provider based on some vendor contract or on one carrier is really terrifying.”
Verizon kept coming up as the infrastructure of broadband here. In Manhattan and the Bronx, its Empire City Subway controls the franchise on conduit for connectivity. In Brooklyn, it has the best network of conduit that providers can lease access to.Time Warner Cable and Cablevision are also incumbent providers.
In Brooklyn, Queens and Staten Island, a Verizon spokesperson noted other providers have the option of building conduit. Doing so can cost up to $300 per linear foot, according to knowledgeable sources.
We asked the company if it had plans to improve access to high quality broadband in Brooklyn, where the tech community is quickly expanding well outside of Dumbo, where it first arose. The company answered, via a spokesperson, “We would not share any future plans due to competitive reasons. What about CVC and TWC? They provide Internet access, too. Not to mention other providers.”
The New Museum opted to go with Rainbow Broadband’s 150-Mbps fixed wireless carrier-class network when it opened its museum-led incubator, NEW INC.
“When we worked with the city’s dominant telco to connect the New Museum’s main building to fiber, the logistics were endless: we had to talk to five different crews to accomplish one thing, and everything took months,” Doron Ben-Avraham, the museum’s director of technology said, in prepared remarks. The museum needed to get its incubator set up quickly. “We contacted Rainbow Broadband this time, and we saw that the alternative really is in the air. They gave us the speed we need very quickly.”
Mr. Wahba had two problems when Projective Space opened its site on the Lower East Side. First, Verizon never replied to its request for a price for a commercial connection. TWC got back to him saying it would take two weeks to get the space set up, and it wanted $2,200 per month for a 100 Mbps symmetrical connection on a five year lease.
Projective is a startup company that serves startups, such as Buffer, Stripe and Instacart. “A start-up can’t predict what’s going to be going on in five years.” The coworking space has TWC in its portfolio now as its backup, but its main line to the Internet is Stealth Communications, which offered the company 100 Mbps for $800 per month, with a shorter lease that included a fair exit clause. Stealth has since bumped its customers with that package up to a 1 Gbps dedicated connection for the same price. Mr. Wahba was very excited when he got this surprise.
Stealth is one of the upstart Internet providers CO spoke to. It recently expanded its footprint in the city to Brooklyn. CO previously covered its installation at 161 Bowery, between Delancey and Broome Streets, which helped make it possible for the ISP to begin providing service to that part of Manhattan.
Shrihari Pandit, CEO and co-founder of Stealth, explained that it is very hard for any one provider to offer all the kinds of services that might be needed in a building, everything from cheap cable service where multiple users share a connection and service levels aren’t guaranteed (which could be all the more a retail shop really needs), up to dark fiber where the tenant actually owns their thread of fiber (which is what financial companies are likely to want).
Mr. Pandit’s business is all fiber. It has both dedicated and shared fiber service. It just launched a $250-per-month shared, symmetrical 1 Gbps commercial fiber service from 70th Street down in Manhattan, in Downtown Brooklyn, Red Hook and into Sunset Park.
Of the providers we looked into for this story, Stealth has the clearest, simplest breakdown of pricing for it services on its website.
Symmetrical service means that sending data to the Internet is as fast as retrieving it. Until recently, most providers offered much faster download speeds than upload speeds, which is not very helpful for a company that relies a lot on Skype or collaborates with other companies on video projects. All of the packages Verizon and TWC list on their sites for small businesses show large disparities between down and up.
“Everyone is using the cloud. If you don’t give sufficient upload speeds, they are crippled,” Mr. Pandit said, in a phone call.
The challenge for bringing Stealth or other fiber services into a building can be the cost of installation. In Manhattan, fiber providers can get access to Verizon’s Empire City Subway System, but the provider still has to get their line from the conduit access point to the building. Modern technology, micro-tranching, has brought down the cost of that last connection, but that can still be $20,000 to $30,000, which can be a cost that’s basically impossible for Stealth to amortize across a few tenants in a smaller commercial building, like 161 Bowery was.
In that case, the landlord incorporated the cost of connecting the building into its rehabilitation, so tenants would only have to pay their monthly subscription. Mr. Rudin, while not mentioning this specific example, said that WiredNYC has helped to convince owners to connect their buildings, because they want to get a good rating on the site.
The price of that fiber connection is relatively small in terms of the total cost of a building’s rehabilitation, so it might make sense for property owners to incorporate fiber connections into the retrofitting of a building. If owners can pay for the cost of connecting a building to fiber and extending the connection to each floor, it could become much more attractive to potential TAMI tenants at a relatively small cost to the landlord.
Mr. Pandit’s company recently expanded to Brooklyn, thanks, in part, to support from the New York City Economic Development Council’s Connect IBZ program, which provided some funding support for two providers to create more options in the city’s industrial areas. Stealth is bringing fiber primarily into Downtown and southwest Brooklyn. The other provider, XChange Telecom, has the potential to reach 80 percent of Brooklyn now, but joined the program in order to set up new relays in north Brooklyn, so that the company could provide access to more buildings there as well as Long Island City, in Queens.
While it provides some fiber as well, XChange’s main business is microwave-based, like Rainbow’s. Any building that has line-of-sight access from its roof to one of XChange’s relays can get access by setting up a receiver on its roof. XChange (like Rainbow) doesn’t charge to install access in a building, according to its chairman, Alan Levy, who spoke to CO during a recent phone call.
“With fixed wireless the cost points to deploy it are much lower,” Mr. Levy said. “We’re not digging up streets.”
Mr. Levy said, “We’re in the part of the map that has nothing. They are generally very eager for us to go in.” That said, he added that most of his company’s growth right now is in service to buildings on the western side of Manhattan, which he argues is also underserved.
XChange offers services from 10Mbps up to 1Gbps, with monthly prices ranging from $500 to $1,900 per month, depending on speed and service level-agreement (how much up time is guaranteed). It is currently finalizing an agreement to provide services at SL Green’s 16 Court Street, between Montague Street and Remsen Street, across from Borough Hall.
Rainbow is in a comparable space to XChange, but it solely does microwave connections, though it offers VoIP by microwaves and provides managed services (basically, it will take care of the IT setup and administration for small to medium companies).
Mr. Hamm said he first started looking into microwave technology in 2004, a technology proven by a company called Windstar, which was a little too far ahead of its time to sustain itself through the first dot-com bubble. The first building Rainbow wired was 524 Broadway, between Spring and Broome Streets, after a DVD studio expressed interest in a connection. Another company in the building signed up, as well, as it had been trying to secure a DS3 connection from Verizon, but was told it would have to wait 18 months. He said Rainbow had them connected in a couple days.
Once Rainbow approached the landlord, he was glad to give it access. The company’s second building, 525 Broadway, had the same owner. “Landlords who recognize that this is a service their customers can use are our best salespeople,” Mr. Hamm said.
As landlords begin to look for ways to diversify routes to the Internet, it could be helpful for them to consider a mix of fiber and microwave access. One provides a route from the ground, the other from the air. That way, if there’s a disruption above or below, there’s an alternative route. If there’s a water main break or pipeline explosion, for example, there’s a decent chance that multiple providers would have their lines in the same damaged conduit.
Rainbow, XChange and Stealth are all looking forward to greater expansions in Brooklyn. Public money, by way of the NYCEDC, is finally going toward improving Internet infrastructure. The progress is such that 2015 could one day be seen as the turning point year when industrialized world speeds of a gigabit or faster became widely available in New York City, and businesses that wanted to locate in the outer boroughs worried more about selecting the right providers than whether or not they could find one at all.
Stealth has reached around 90 new buildings in the last two years, he said, and Mr. Pandit is glad to see his competitors expanding, as well. “I think the more choice the better in general.”