Managed Wi-Fi Providers Must Adapt to Shifting Dynamics in the Real Estate Market to Retain Market Share

Multi-Dwelling Units (MDUs) is a term used throughout the connectivity industry for buildings consisting of multiple individual residences—think apartment complexes, university dormitories, or assisted living facilities. The 2021 U.S. census recorded that just under 25% of the population lived in MDUs with ≥4 units, and the percentage continues to increase alongside the growth of Real Estate Investment Trusts (REITs) in the United States, which buy, sell, manage, and develop MDUs. Managed Wi-Fi services, in which Wi-Fi is provided as-a-Service by Managed Service Providers (MSPs), have now become a central component of the value proposition of MDUs, particularly for rentals. This, in turn, has helped drive rapid growth in the Total Addressable Market (TAM) for MDUs, leading Wi-Fi equipment vendors to expand their investments into developing equipment optimized for the needs of MDUs and creating new sales channels in the vertical. This ABI Insight examines the key trends underway in the managed Wi-Fi market for MDUs, scrutinizing the role of REITs and MSPs in the industry and analyzing the shifting go-to-market strategies for Wi-Fi equipment vendors. The ABI Insight then concludes with some recommendations for how MSPs and Wi-Fi equipment vendors can harness the opportunities that this lucrative vertical has to offer.

Managed Wi-Fi contracts between MDU REITs/landlords are typically Network-as-a-Service arrangements—in other words, the MSP installs, manages, and maintains Wi-Fi networks for the REIT/landlord on a “pay-as-you-go” subscription basis. The final cost is determined by various factors, including the Service-Level Agreement (SLA) that defines the network performance metrics the MSP must deliver. Enabling high-performance Wi-Fi networks within MDUs can significantly increase their value, especially for rental properties. This is clearly illustrated by UDR, a REIT which manages over 34,000 luxury apartments across the United States, and which sources its managed Wi-Fi services from MSP Gigstreem. Across the 2020-2022 period, Gigstreem deployed approximately 500,000 CommScope Ruckus Wi-Fi Access Points (APs) across UDR’s apartment portfolio, and the reliable Wi-Fi that this delivered was claimed by UDR to have added US$20 million gross to its bottom line annually. Given that managed Wi-Fi has the potential to impact a REIT’s/landlord’s Return On Investment (ROI) for an MDU, they are understandably putting greater consideration into their choice of MSP.

Fortunately for them, there are countless MSPs targeting MDUs to choose from. Some of the largest in the United States include Single Digits, which services over 1 million rooms across more than 3,600 clients globally, and Pavlov Media, which differentiates itself through its use of equipment supporting OpenWiFi, an open-source, vendor-neutral, easy-to-manage, and low-cost alternative to the traditional proprietary enterprise Wireless Local Area Network (WLAN) solutions. Other MSPs distinguish themselves through specializing in select MDU types, such as Dual Path, which targets senior living properties, and Securus, which concentrates on prisons (an often overlooked subset of MDUs). While some MSPs solely deliver managed Wi-Fi services, there also exists a range of MSPs, like SmartRent, with network management that extends to smart home automation (access control, smart thermostats, etc.). While this MSP diversity brings market competition and vertical/application optimization, it also results in a highly fractured market, with most MSPs remaining regional in nature. That said, in anticipation that real estate investments are set to rebound alongside falling interest rates, 2024 saw several MSPs acquire their rivals to expand market share and broaden coverage. Recently, in June 2024, Smartaira, a Utah-based MSP specializing in managed Wi-Fi for MDUs, acquired fellow MSP Lux Speed to help expand into the East Coast market.

Wi-Fi equipment vendors must work with both REITs/landlords and MSPs to address the MDU market, although their approach to each differs depending on whether the MDU is a new construction or an existing property in need of a retrofit. For the former, there is an increasing trend for Wi-Fi equipment vendors to develop relationships directly with property developers, who will then mandate that all MSPs supplying their properties must support the equipment of their partner vendor. This is a way for the property developer to ensure quality control on the Wi-Fi equipment, but this also acts to lock out smaller vendors and new entrants from the market. In contrast, within the retrofit market, the property manager is less likely to have an equipment partner of choice, and the property is likely to already have legacy equipment. In such circumstances, Wi-Fi equipment vendor relationships with MSPs are more important. The economics of retrofit upgrades are also considerably different from those of new construction, as the costs and complexities resulting from the disruption caused to tenants during the network upgrade and the additional step of dismantling the old network before installing the new one must be factored in.

Major WLAN equipment vendors targeting the MDU vertical include Cambium Networks, Cisco Meraki, Hewlett Packard Enterprise (HPE) Aruba Networking, Juniper Networks, Ruckus Networks, and Ubiquiti. All of these have developed solutions optimized for the vertical. For example, Ruckus Networks has introduced the 6 Gigahertz (GHz)-enabled R760 and R560, both of which were designed for MDU environments, and Cisco Meraki has developed the Splash Access solution, which supports the simple deployment and management of Virtual Local Area Network (vLAN) networks within MDUs. While these vendors all have over a decade of experience in the MDU market, several new entrants have been attracted to the vertical due to its rapid growth in recent years. One example is NETGEAR, which historically focused on the residential, Small and Medium Business (SMB), and education markets. As discussed earlier, all of these vendors will have developed relationships with MSPs and, in some cases, REITs/landlords so that they can serve either as their exclusive supplier (as Ruckus Networks is for MSP Whitesky) or, as is more often the case, as one of several strategic partners (Single Digits, for example, works with numerous vendors, including Cisco Meraki, HPE Aruba Networking, Ruckus Networks, and Cambium Networks). The equipment they do supply for MDUs is currently predominantly Wi-Fi 6, with Wi-Fi 6E virtually non-existent in MDU deployments, and Wi-Fi 7 found only in top-end luxury apartments.

Slowing inflation and falling interest rates are set to fuel further investment into real estate, helping to spur the construction of new MDUs. At the same time, converting what were previously office blocks into residential apartments, a trend that began post-COVID-19 and has gradually picked up pace since, will also help expand the stock of MDUs. These developments should give the industry confidence that the robust growth witnessed in the MDU market in recent years is set to continue. In light of this, what strategies should Wi-Fi equipment vendors and MSPs employ to best position themselves to exploit opportunities in the lucrative managed Wi-Fi for MDUs market?

• Optimize Solutions for MDUs: MDU environments present unique demands not found in other verticals. For example, due to the challenges of installing and replacing infrastructure within MDUs, Wi-Fi equipment for MDUs typically have longer deployment lifecycles than those of Single-Family Units (SFUs) or even in carpeted enterprise. This means that MDU equipment must be more future proof and have greater remote troubleshooting capabilities. Equipment vendors should account for demands such as these when engineering their solutions for MDUs.
• Support Multi-Tenant Wi-Fi: It is simpler, more efficient, and more scalable for an MSP to manage all of its MDU accounts from one central platform than to have multiple separate platforms. Equipment vendors should introduce cloud-native network management platforms that allow for the centralized management of muti-tenant Wi-Fi networks. To further support MSPs for MDUs, create MDU profiles for the management platform, and apply Artificial Intelligence (AI) to enable automation.
• Unlock Additional Value Add: MSPs should look beyond managed Wi-Fi to create additional value for customers. Extending to smart home and Internet of Things (IoT) management (as some have already done) is one way to achieve this. Other options include partnering with value-added service providers to introduce emerging technologies such as Wi-Fi sensing, or creating mesh across the entire network, encompassing public and outdoor areas, to enable seamless roaming across the entire building.
• Be Wary of Regulation: In 1Q 2022 the current Chairwoman of the U.S. Federal Communications Commission (FCC) Jessica Rosenworcel proposed a ban on “bulk billing” agreements, which involve an MDU owner bargaining with an Internet Service Provider (ISP) or MSP for reduced “bulk” Internet access rates, with the caveat that all residents are restricted to that provider. Equipment vendors and MSPs must keep an eye on this and other such regulatory developments, and if they believe that those could adversely impact their business, should band together with like-minded companies to petition against the change.