It isn’t quite a war, but the relationship between building owners and managers and the many telecommunications companies seeking access to buildings remains dynamic and sometimes charged. The purpose of this article is to move beyond the struggles of power, ego and control to an examination of the essential operational matters that will ultimately control how owners and providers work together. Make no mistake. In the final analysis everybody knows that there is too much at stake and too much to be gained not to develop areas of achievable compromise. The issues of control will yield to the issues of shared revenue, and the business of doing business will move forward and find common ground on which to better serve system users and make money. So once a decision is made to hammer out an agreement to wire a building, shopping center, apartment project or any other structure, how can you get it done? Here are some key points and ideas.

Get Smart

The Federal Communications Commission (FCC) and most states, either through legislation or regulation, have developed and are in the process of continuing to develop systems and procedures to guide and manage how telecommunications services and facilities are provided. Some states, such as Texas and Connecticut, provide some form of mandatory access in multitenant buildings. Other jurisdictions, like the District of Columbia, have delegated to the Public Service Commission the authority to promulgate regulations. There are also regulatory requirements governing ancillary issues such as inside wiring, antenna placement and satellite dishes. Regardless of the applicable authority, owners, managers and providers must become informed about what the current state of the law requires, permits and limits. In addition, given the rapid pace of change, the knowledge base must be reviewed and maintained as "current" at all times. The recent rulemaking by the FCC relating to mandatory access to privately owned commercial buildings is just one example of possible future change that should be watched. Whether you are an owner or a provider, finding a way to get smart and stay smart is a primary task.

Term of Agreement

Every telecommunications provider needs the chance to recover the expense of their due diligence, system installation and commencement of operations. Every owner needs the ability to limit the term, and, if they can, use the term of the agreement as another tool to better insure performance by the provider. It is fairly common to see an initial term of ten years, followed by a series of renewal periods. ten years is a long time for an owner, and provides plenty of opportunities for the provider to falter, and, in the process, negatively impact the relationship between the owner and its tenants. Performance criteria and events of default will be covered in greater detail later, but initially they should be raised in relation to the term of the agreement. Something as simple as linking the term to performance can be a significant help. (Drafting Tip: Try something like "The Term of this Agreement shall continue for a period ten (10) years, subject to performance of the terms and conditions set forth herein, unless this Agreement is terminated earlier or extended...").

The extension options can also be structured to provide flexibility to the provider and comfort for the owner. An automatic renewal or series of renewals, unless a party takes affirmative action to stop it, provides simplicity and consistency. These provisions require no approvals and frequently have no performance criteria associated with their exercise. But another option is to convert the automatic renewal into an option to renew, subject to not only events of default under the agreement, but also maintaining a threshold level of penetration. A provider that is unable to get and retain customers might be worth taking a second look at before extending their agreement. (Drafting Tip: Try something like "The Term of this Agreement may be renewed for successive ___ year terms thereafter so long as the Provider is not in default hereunder and has a penetration as of the date of the exercise of the renewal option of not less than ___%.")

"Penetration" is a concept that might require some additional consideration depending on the nature of the structure. For an apartment building, it is generally pretty simple to define the percentage of the total rental units available that subscribe to the services of the provider as of a certain date. For shopping centers or commercial buildings, the same formula could be used, or the formula could be varied to include rentable square footage.

Define the Services

With a wealth of telecommunications providers to choose from, and the potential for nonexclusive agreements that serve the property and the tenants, it is important for an owner or manager to know who is providing what. The universe of cable, communications, Internet, entertainment and related services is still in the expansion phase, and even those with vision may have trouble figuring out what will happen next. The answer, more clearly defined "services" in the agreement, and, particularly for the owner or manager, better operational record keeping. There will be times when a general description like "communications, Internet, cable, entertainment and other services" will work just fine for describing the "Services." But be mindful of the mix of exclusive and nonexclusive agreements and the possibility that a provider might be delivering to the property less than its full array of services, and limit the definition accordingly. (Drafting Tip: Try something like "The term ‘Services’ shall mean ______________, but shall expressly exclude making available to tenants ____________________, unless expressly approved by the Owner.").

Operational accuracy in record keeping is more often than not a question of allocation of resources rather than a lack of skill. There are plenty of basic software programs to manage data of this sort. For owners and managers, the revenue stream from telecommunications agreements may not be perceived to justify the time and energy to pay sufficient attention to telecommunications and roof top licensing matters. The care and attention to a telecommunications system cannot measure up to the care and attention to an anchor tenant or a multifloor office tenant. It is simply too hard to justify the cost. Nevertheless, owners and managers will be challenged to find a middle ground between paying too little attention to telecommunications matters and paying too much attention to such matters. Efforts to standardize agreements and procedures is a good first step. This can be followed by consistency in the in-house personnel and outside consultants working on telecommunications matters for the owner. At least owners and managers can find ways to save time and money by bringing consistency and continuity to the process.

Define the Facilities

The systems that deliver the services to the tenants are always a little less complex than they first appear, and a little more involved than they first appear. For example, it is common and logical to focus on the actual antennae that a provider desires to put on your roof top. But what about the related entry rights to closets, conduits and risers, and the potential need to run cables through portions of the building? Similarly, the "facilities" or "system" will involve a series of coaxial cable, fiber optic cable, and various combinations of wireline or wireless delivery systems. The provider’s interest in being general must be balanced with the owner’s interest in being specific. This is particularly true when closet space and access to existing conduits and risers are issues. It frequently helps to add an exhibit to depict those portions of the building that are available to the provider for related equipment. The owner can provide some flexibility as to cables and wires, but be more restrictive when closet space is involved. It will avoid problems later if both parties clearly set forth the components of the system and any limitations imposed upon the provider that effect installation, maintenance and removal of the system.

Include Covenants and Monitor Performance

Many providers have developed a standard form to deliver to owners and managers. Many form agreements proposed by telecommunications providers say nothing about the provider’s obligation to perform and the ramifications of inadequate or failed performance. This is a mistake. Particularly if the parties contemplate a 5 to 10 year agreement with renewal options. Owners care about their share of the revenue, but they care more about maintaining happy tenants. Tenant satisfaction requires someone to keep an eye on what is happening day-to-day, and that there be a mechanism to compel a change in behavior if things turn out badly.

One example is in the area of interference. Owners simply must have some mechanism to manage interference, especially when agreements are not exclusive. (Drafting Tip: Get covenants from the provider on such things as keeping the facilities in good order, repair and condition, complying with all applicable laws, orders, rules and regulations, and not interfering with other providers of services or with any tenant’s use and enjoyment of their leased premises.").

The next step is to clearly describe what will occur if interference becomes an issue. (Drafting Tip: Specifically provide that the facilities shall not interfere with the equipment, facilities, site use and marketability or operations of Owner, or the equipment, facilities or operations of Owner’s present licensees or tenants at the premises. If any interference is positively identified as being caused by the installation, maintenance and operation of the facilities, the provider shall, upon request, suspend its operations until such time as the interference has been eliminated, except for intermittent testing after correcting the interference. If the provider is unable to rectify the interference, then either party may terminate the agreement.)

The concept of "penetration" has a role to play in the area of performance as well as with respect to the term of the agreement as discussed earlier. If a provider cannot maintain some modest level of penetration after a period of time to stabilize operations, it might indicate that something is wrong. It is worth considering an owner’s option to terminate, after notice, and perhaps after the first year or two of the agreement, if the provider fails to maintain an agreed upon customer base at the property. This will keep the provider on its toes, and give the owner a reasonable way to insure that its tenants receive good service. (Drafting Tip: Specifically provide that the owner shall have the right to terminate the agreement, after the first 24 months of the term, upon 60-days prior written notice, if the Provider has a penetration during three of the six months immediately prior to the date of the exercise of the termination option of less than _____%.).

Ensuring Security

In too many buildings, telecommunications closets and pathways have had no greater security than the janitor’s storage closets. For both building owners and service providers, however, this poses an unacceptable risk which must be addressed. Telecommunications closets are the "nerve centers" of a building’s telecommunications system and contain equipment that is expensive, sensitive and easily damaged. If the equipment is damaged, tenants will find themselves without service. Whoever may be at fault, tenants will more likely than not blame the building owner, not the service provider.

Building owners and service providers should address these problems in their license agreements by prohibiting or drastically limiting access to telecommunications spaces. Access to spaces should be restricted on an "as needed" basis to only authorized personnel, who must give building owners advance notice before they enter the premises. A system of procedures should be established to monitor who accesses the telecommunications spaces, and to ensure that equipment owned by other telecommunications service providers is protected. In short, the security system must address not only access, but also the frequency, type and quality of work performed in a building’s telecommunications spaces.

Find New Ideas and Get Smart

There are many other components of a good agreement, and many variations of every component that has already been identified. Owners, managers and providers will often come full circle and recognize the importance of continuing their efforts to get smart and find creative solutions so that each side can win both comfort and profit. That is the real challenge. It is not to have owners and providers each beef up their own side with contractual requirements that are intolerable, but rather to seek precision in resolving issues and concentrate on reaching a good solution that can provide a framework for resolving other issues as they arise.

'The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.'