December 15, 2016 —
Change is disruptive. It creates opportunity and challenge, and catapults some industries and businesses forward, while it and leaves others behind. Well-known examples include the automobile and the horse and buggy; Netflix and Blockbuster; digital and smartphone cameras and Kodak.
The wireless industry is not immune to change. Cellular has undergone significant transformation since early systems were put into operation in the early 1980s. Change currently manifests both in megatrends that we’ve recently examined including 5G and Citizens Broadband Radio Service (CBRS) as well as sector-specific trends such as Public-Safety and E911 Location.
To use a golf metaphor, we’re on the back nine of a series that identifies five key trends and how they’ll impact the in-building wireless ecosystem in 2017 and beyond. Included in the analysis, we forecast when each trend will be felt by the industry, and recommend which key functional areas (R&D, Marketing, Sales) should be focused on them in 2017.
Today we look at the Tier 2 Venue Market.
A Once-in-a-Decade Opportunity for New Market Leadership
A survey conducted by WiredScore reveals that prospective Tier 2 Venue tenants rank cost, location and connectivity (including telecommunications) over access to transportation, quality of building management, environmental sustainability of the building, and features such as gyms and rooftop spaces. The message is loud and clear: indoor cellular connectivity is not an amenity; it is absolutely essential .
The Tier 2 Venue Market is also known as the Enterprise, “Middleprise” or “Other 80 Percent.” This segment refers to venues having between 100k and 500k square feet, and consists of hotels and hospitals as well as education, retail, corporate and multi-tenant high-rise buildings. In these venues, cellular connectivity has become an expectation commonly described as the “fourth utility” because it is such a fundamental part of our business and personal lives.
In contrast to the Tier 1 Venue Market, which is defined as venues having more than 500k square feet and includes airports, subways, convention centers and stadia, the Tier 2 universe is more than 15-times larger and, heretofore, barely penetrated.
There are approximately 128,000 Tier 2 venues in the U.S., according to data collected by the U.S. Energy Information Administration (EIA) in its Commercial Buildings Energy Consumption Survey (CBECS). Wireless 20/20 estimates that less than two percent of these have been enhanced with in-building cellular coverage solutions. In an effort to quantify the Serviceable Available Market (SAM), John Celentano at Skyline Marketing projects the U.S. Tier 2 Venue Market to grow to $1.4 Billion by 2021.
To be sure, the Tier 2 Venue segment represents a future growth market in which there will increasingly be more revenue to compete for every year, and where innovation, disruption and reinvention will be the keys to unlock opportunities as well as differentiate and deliver value to its stakeholders.
Tier 1 Venue Outlooks Don’t Translate to the Tier 2 Venue Market
The in-building wireless ecosystem will require new thinking around business models, technology solutions, buyer personas and market engagement strategies to unlock the Tier 2 Venue Market:
· Carriers and venue owners are diametrically opposed in a debate over who is responsible to provide cellular coverage indoors. Unlike Tier 1 Venues and certain strategic Tier 2 Venues in major metropolitan markets, carriers won’t pay for the electronics or infrastructure. Instead – like the other utilities in the building – the onus will be on the venue. Therefore, integrators will play a significant role in educating and guiding buyers through options.
· The buying decision is not based upon return-on-investment (ROI) but, rather, a requirement informed by financial, legal and regulatory drivers such as tenant expectations for wireless as a utility, lost revenues, life and death legal liabilities, and compliance with public-safety mandates. This will impact how the ecosystem engages and messages buyers.
· Conventional neutral-host business funding models – which are predicated upon owning and operating multiple networks at a single location, thus generating ROI via multiple revenue streams through both carrier “rent” and WiFi advertisement – will struggle to be viable in the Tier 2 Venue segment because venues won’t necessarily require all four operators and ad revenue will be significantly diminished or exist at all.
· CAPEX will determine the in-building solution that gets deployed. Key considerations include the signal source, the scalability of the distribution network infrastructure to accommodate future bands and services, and ease of which to order, deploy and maintain the network. In the foreseeable future, look for off-air repeaters and femtocells to serve as signal sources that drive either boosters or passive and active DAS networks.
· Value propositions will need to shift from carrier-based messaging which focuses on coverage and capacity to venue-based messaging which centers on improving the building to deliver benefits that translate into things the venue cares about such as leasing, retention, property value, favorable online reviews and compliance
Timeframes and Stakeholder Focus
The Tier 2 Venue segment is approximately one-and-a-half years away from taking off as a growth market which will establish new market leaders within the in-building ecosystem. But stakeholders should heed the counsel of Josh Linkner, author of “The Road to Reinvention,” who observes, “We can no longer rely on the past as a game plan for winning” – a cautionary tale that informs stakeholders must disrupt or be disrupted.
Specifically, R&D should be laser-focused in 2017 on addressing the signal source which is the most important product challenge – not platform architecture or network infrastructure – to resolve for the Tier 2 Venue Market. To ready the organization, Marketing (including Corporate Development) should develop and roll out the go-to-market strategy which includes, among other things, portfolio-based business models; value propositions tailored to vertical segments within the venue market; engagement programs to educate venue stakeholders which include building owners, property managers and leasing agents; and identify channel partners who can help accelerate and scale within verticals and regions. Finally, because the Tier 2 Venue segment is still in the “introduction” stage of the market lifecycle where the business model, technology toolkit, value proposition and market engagement are still-nascent, Sales should not focus much effort on this segment in 2017 but, instead, center efforts on the “mature” and established Tier 1 Large Venue Market.
Next trend: The Tier 1 Venue Market.
Mike Collado helps companies win mindshare and capture marketshare. He is a Principal Consultant at Wireless 20/20 and former Vice President of Marketing at SOLiD. He also serves as a strategic advisor for both industry and nonprofit organizations and is an author, blogger and frequent speaker at wireless industry events. Learn more about Wireless 20/20 and the WiROI™