PhatPipe Serves Growing Industrial Telecom Demand

Broadband Arrives at Your Local Park... Wired Industrial real estate real estate is no longer an oxymoron -- not in the Internet Age. Just ask Don Ankeny, CEO of PhatPipe, a broadband technology company aimed at the industrial sector. Just as the workforce in office buildings needs broadband connectivity, warehouse and distribution building tenants also require high-speed connectivity. That's because state-of-the-art inventory management, automated warehouses and expert management systems must be Internet enabled. According to Ankeny, "Every SKU, every piece of merchandise, will eventually need its own IP address." That's because we'll eventually track products from manufacture to distribution to support -- the full life cycle.

Remember the original pitch of telecom providers: "Let us wire your building. We'll pay for the fiber infrastructure. You don't pay a nickel. We'll provide telecom service to your tenants and pay you part of the revenue. AND if you work exclusively with our firm, we'll give you warrants in our company." (Warrants, hmm.) But that model hasn't worked very well. And Ankeny thinks that he knows why. These telecos were raising capital from venture capital firms seeking 30 per cent annual returns. That's a mismatch. Why shouldn't real estate owners, who are normally looking for 12-15 per cent internal rates of return, pay for the infrastructure? Then these owners can keep 60-65% of the income, rather than 5-7%. But the owner will still need to outsource the installation, maintenance and support of this infrastructure, and that's exactly the service that PhatPipe provides.

PhatPipe focuses on the industrial sector and has signed up all the major industrial players, like AMB, CenterPoint Properties, First Industrial and ProLogis. It looks like PhatPipe has created its own industry consortium. And the beauty is that, as these companies wire their properties in the same business parks, the more the pricing drops as fixed costs are spread over buildings owned by different owners. Very cool.

--Peter Pike