MTU Dreams Shattered by Sobering Realities

The Scottsdale, Arizona-based research firm contends that the Multi-Tenant Unit (MTU) model does afford great potential, but that it is proving more difficult than expected to extract a profitable business model in the real world.

In-Stat/MDR reports that, given a combination of various constraints and drivers, worldwide MTU service and equipment revenue will only grow moderately over the next five years, $429.1 million in 2001 to $9.0 billion by 2006.

The new report, High-Speed Dreams: the Myths and Realities of MTU Broadband, discusses the technologies and evolution of strategies that support the continued evolution of the MTU market.

Amy Cravens, In-Stat/MDR analyst, said the current economic situation has changed the value originally offered by the MTU business model.

“The in-building broadband delivery model was created as a more cost-effective means of bringing broadband services to tenants of multi-tenant buildings, that would also allow providers to introduce advanced service offerings and develop a high-touch relationship with subscribers,” Cravens explained. “However, many of the providers in this market have filed bankruptcy or dissolved, and those that survived are struggling to generate the revenues necessary to make the venture profitable.”

Despite these challenges, the model still carries some promise. While the initial dreams of MTU glory will likely never be a reality, on-premise deployment still offers merit. As the market continues to develop, equipment vendors and service providers will continue to adjust products and strategies to best suit the reality of the current MTU market. Additional findings include:

• Through 2006, total revenue will increasingly be concentrated in service revenue, resulting in increased service revenue to equipment (capital expenditure) revenue ratio.
• Due to the diversity of MTU verticals, building types, and tenants, a full spectrum of solutions has become available for the MTU market from a wide variety of equipment providers. Additionally, price points, especially for the low-cost solutions, have taken a dramatic plunge since early 2001, especially as Asian manufacturers become more dominant in the market.
• The commercial/office (MCU) vertical is the largest of the three MTU verticals through 2006, both in terms of service and equipment revenue. The MCU vertical offers the greatest potential for marketing high value services, therefore affording the greatest potential for deployment of high-end, high-cost equipment.

While the MCU market sustains the highest potential for revenues, the hospitality market affords the highest revenue growth potential, especially in the early years of the developing market.

In April 2001, In-Stat/MDR analysts estimated that the market for multi-hospitality unit (MHU) broadband hardware and services would resume robust growth through 2002 and surge from $59 million in 2000 to $679 million in 2005.

At the time, the research group cited the drastic tightening of capital markets as the reason for the forced slowdown in the deployment of broadband connectivity in hotels and apartments. Those providers that had not already succumbed to financial attrition were forced to scale back deployment schedules.

Reprinted from ISP-Planet, an internet.com site