Imagine telephones and personal computers waiting for tenants when they move into a Virginia office building. The tenants' long-distance calls are routed to the least expensive lines over a shared telecommunications network. When they make local calls, they share the local telephone company's lines, cutting their costs.
If they need to use their personal computers, they share a system that already has been wired into the building. If they leave their desks, calls are automatically forwarded to a computerized "message center." If they need to telex, telecopy or send cablegrams, they walk down to the "electronic mail center." Once a month, they get a bill that charges them for equipment leasing, long-distance and local calling, and other services used.
It may sound like the office building of tomorrow, but it already exists: The building just described is owned by the McLean-based Planning Research Corp., an international engineering and information services company. PRC provides its 20 tenants with shared telecommunications services using a computerized device, manufactured by Northern Telecom Inc., located on its premises.
The device, called a PBX (Private Branch eXchange), is hooked up to tenants' telephones and routes all long-distance calls over the cheapest available lines -- whether they are MCI's, Sprint's or American Telephone & Telegraph's. The PBX also is capable of transmitting data over telephone lines. Tenants have the option of sharing local lines or leasing their own from Chesapeake & Potomac Telephone Co. of Virginia. PRC also leases computers and telephones to tenants.
"This is going to explode like you can't imagine," said John Daly, telecommunications manager at PRC. "Just as buildings must offer heat, power and light, buildings will have to provide the communications networks and shared PBXs."
In fact, if developers have their way, they will offer "a nationwide uniformity of communications -- the ability to have multiple offices tied together in an information network with electronic mail and word processing," said Robert P. Dammeyer, executive vice president of marketing for LinCom Corp., a shared-telecommunications-system subsidiary of Lincoln Property Co., a Dallas-based real estate company.
The PBX already is capable of connecting buildings in close proximity, but Joseph M. Baker, national marketing manager for Northern Telecom Inc., envisions "a big private network" of such buildings across the country.
At the PRC building in McLean, Daly projects a savings of more than $1 million in five years through sharing telecommunications services and using the building's wiring to connect computer terminals to computers and telephones to the PBX. "Tenants of PRC have also realized an average of 30 percent in total savings in both equipment and long-distance expenses," he said.
Debbie Joseph, administrative manager for NetExpress Inc., expresses satisfaction with the PRC system. Her firm, a communications research company, is a tenant at the building.
"If you need a new extension, you have to have 10 to 15 working days' advance notice on a new C&P install," said Joseph. Not so with PRC, she said. "They generally do it in two or three days." Likewise, PRC services broken equipment "usually within 24 hours. With C&P, there's no telling," she said. Joseph said her firm's long-distance savings have been substantial.
PRC isn't the only office building in the area that has been trying out the concept of shared telecommunications. Three buildings in Washington -- the National Press Building, National Place and 1401 New York Ave. -- provide shared tenant services. So do the three Gateway buildings in Crystal City and five Skyline office buildings in Skyline City at Bailey's Crossroads.
The marriage of real estate and high-tech services has been inspired by a soft real estate market and a more deregulated telephone industry since the breakup of the Bell System, according to Pamela Janis, editor of Shared Tenant Services News, a TeleStrategies newsletter."Large users have greater communications needs and can benefit from high-speed data processing. Smaller users can benefit through getting services they wouldn't be able to afford by themselves," she said.
Over the past four years, real estate developers, third-party equipment distribution and maintenance companies, and building occupants who own their buildings but have extra space left over -- such as PRC -- have begun providing the service. Even telephone companies are edging into the business.
TeleStrategies Inc., a McLean-based consulting firm, estimates that the number of buildings offering shared telecommunications services will grow from 70 this year to more than 15,000 in 1994. Revenue from equipment sales and operations will climb from about $252 million to more than $12 billion by 1994, the firm says. Many more buildings are expected to be retrofitted to provide shared systems.
Dallas currently is the mecca for shared tenant services, with the Washington area second in line, according to TeleStrategies.
Most Washington-area buildings with shared tenant services are being constructed in Virginia, because in the District, government buildings use the federal telecommunications system and phone company business services, said Jerome Lucas, president of TeleStrategies. In Virginia, business is booming.
"Commercial businesses, consultants, chiropractors, dentists, large corporations -- they all have a need for phones, and data transmission has undergone a great deal of change," said Tricia Blatz, a marketing representative for United Technologies Integrated Office Services, which maintains United Technologies Building Systems equipment for The Charles E. Smith Cos.' Skyline City and Gateway projects. "More and more people are asking for voice and data capabilities up front, while six or eight months ago people didn't know to ask," she said. About 80 percent of the 52 tenant businesses in each of three Gateway buildings use the service, she said.
The PBX installed in Gateway 2 also links up Gateway 1 and 3, said Blatz. While savings are hard to estimate, telephone lines that must usually be rented by individual tenants are shared, and, consequently, tenants need only one-fifth the number of lines, she said.
Some tenants, such as lawyers and brokers, require special security to prevent incoming calls or data traveling over the network from being intercepted by the wrong party. No problem, said Blatz. The PBX is electronically "partitioned," meaning that certain telephone circuits are reserved for tenants with special needs.
Still, some tenants in shared-tenant-service buildings prefer their own equipment, either because of the tax benefits associated with owning it, or because their computer system cannot communicate with the one offered in the building.
"We are not on the system, because our company prefers the benefits of ownership over leasing and because the service would have been expensive if we had required many changes in the way our system's configured," said one tenant in the National Press Building, where a telephone and low-speed data network is offered by SBS Real Estate Communications Corp.
But the future of shared telecommunications will depend on far more than customer preferences. The service is likely to be affected by shifting regulatory tides that are changing to keep up with new technologies, and the reaction of local phone companies.
"The regulation of shared tenant services is as inevitable as tomorrow's taxes," said Commissioner Edward P. Larkin of the New York Public Service Commission. States currently are reevaluating telephone company regulations on the resale of local telephone service and shared tenant services.
Services shared among buildings allow tenants to bypass the local telephone network and reduce the number of lines rented from local telephone companies, according to telecommunications consultants.
Regulators, thus, are concerned about the impact of such networks on local telephone rates. "We perceive an erosion of telephone company revenues," said David Jones, manager of rates and tariffs for the Virginia State Corporation Commission.
"Local telephone company revenues go down, local rates go up, and you can see some of the social and political issues raised by this," said Joseph Kraemer, a partner in Touche Ross & Co., a consulting firm.
Fears also have surfaced among regulators that companies may not be able to follow through with service. "You feel your tenants benefit," Jones said to developers at a conference last week, "but who are they going to call when their service goes down? . . . The customer will come to us because, in his perception, we caused it."
Southwestern Bell, the regional holding company for telephone companies serving Arkansas, Missouri, Kansas, Texas and Oklahoma, is claiming before the Texas Public Utility Commission that the proliferation of shared telephone systems threatens its earnings and violates its franchise to be the sole provider of local telephone service.
At the same time, however, telephone companies themselves are attempting to enter the business. Ameritech, for example, recently was denied permission by the Justice Department to select long-distance services for customers as part of a shared-tenant-services package. Nynex, the New York regional telephone company, "is also selling [PBXs] to shared-tenant operators, and Pacific Bell Telephone is also involved in shared-tenant services," said TeleStrategies' Lucas. Indiana Bell, Mountain Bell and Southwestern Bell are providing the service, he said.
The whole regulatory picture is one of dichotomies. "Southwestern Bell doesn't like us sharing the circuits. . . . But I have a phone message from Southwestern Bell Telecom [a subsidiary of Southwestern Bell] -- they are wanting to sell a shared tenant system to me. It's really ironic, really bizarre," said one Texas developer who provides shared tenant services.
Developers and building owners also are learning about shared tenant services by doing -- sometimes the hard way. Developers and manufacturers of equipment warn that third-party distributing and maintenance companies must be evaluated carefully for financial solidity and technical expertise. One real estate consultant described the situation at 1401 New York Ave. as "a mess."
Developed by the John Akridge Co., 1401 New York Ave. is owned by the National Food Processors Association, also a tenant in the building, and Northwestern Mutual Life Insurance Co., according to Patrick McGuire, regional manager of the insurance company's Washington real estate investment branch.
"If we were to do it again, boy would I do it differently," McGuire said of his purchase of a shared-tenant-services telecommunications system two years ago. McGuire and the National Food Processors Association originally purchased a package of telecommunications equipment that included a Northern Telecom PBX and a billing accounting system manufactured by another vendor. The package was sold by National Telecom Inc., a company that distributed telecommunications equipment and provided equipment maintenance and servicing.
It turned out that the billing system was not able to calculate bills accurately and broke down for 18 days, during which time no bill was being calculated, McGuire said. The vendor that manufactured the equipment had filed Chapter 11 in the meantime, he said.
"Essentially, it was a National Telecom mistake. Northern Telecom would not have sold [us] that piece of equipment," McGuire said. The National Food Processors Association, at the time the only tenant in the building, "was tolerant" of the situation, McGuire said. Meanwhile, Northern Telecom acquired National Telecom, and McGuire has just signed a contract with Northern Telecom to manage the equipment and market it to tenants.
"I bought that switch [PBX], I own that switch, whereas I would dearly love for someone else to own it," McGuire said. "We're breaking new ground every step of the way. That's been a painful experience for people who are not in the telephone business." But McGuire is far from sour on the concept of shared tenant systems. "I would do it again. I think these are services the tenants need. This is a powerful concept that goes very far to meeting tenants' future needs."