January 22, 2002

The New Frontier — Telecom Access

Holland & Knight Newsletter
Janis Boyarsky Schiff


In 1996, Congress enacted the Telecommunications Act with a goal of assuring the availability of competitive and advanced telecommunications services to all Americans. The Act contemplated the growth of competitive local exchange carriers (CLECs) to compete with the local Bell operating companies (ILECs). Under current FCC rules a demarcation point may be established for a building, so that an owner can control, install and reconfigure wiring (including wiring originally installed by the telephone company) on the owner's side of the demarcation point. Depending on whether wiring was installed before or after August 13, 1990, the local carrier had broad authority to establish the demarcation points between its wiring and that of the owner. Effective May 11, 2001, upon an owner's request, the ILECs must move the demarcation point to the closest point at which the wiring crosses the property line or enters the building (Minimum Point of Entry). Thus, owners will be in a position to negotiate with a variety of service providers to gain access to their building.

The FCC also has interpreted Section 224 of the Communications Act to require utilities, including telephone (the ILEC), gas and electric companies, to provide telecommunications and cable operators with reasonable and nondiscriminatory access to poles, ducts, conduits and rights-of-way that the utility owns or controls within buildings. This regulation provides the opportunity for a variety of carriers to have a means of access to shopping centers. Because of some of the language in the legislation and the orders of the FCC the scope of such access is somewhat unclear, but by addressing commercial property, it affords the shopping center owner with the opportunity to negotiate agreements and share in revenue streams.

In addition, the FCC has prospectively banned telecommunications carriers from entering into exclusive contracts for commercial buildings. Again, while the language is not ideal, this order is considered to extend to shopping centers as "commercial" rather than residential buildings, which remain excluded from the order. It should be noted however that the FCC requested additional comments on this issue in its "Further Proposed Rulemaking" and may attempt to ban exclusive contracts by telecommunications providers for apartments. In addition, the FCC is considering further regulations concerning restricting exclusive marketing agreements and preferences and the use of home-run wiring previously installed by a cable provider.

Finally, various states such as Texas, Massachusetts and Connecticut have enacted some form of mandatory access for telecom companies to multi-tenant environments, including shopping centers.

Industrywide Response

Shopping center owners and managers have a new tool to assist them in their negotiations with the many telecommunications service providers (TSPs) seeking access to their commercial, multi-tenant properties. The document, named the Telecommunications License Agreement (Multi-Tenant Office Building), but more commonly called the Model Agreement, is the product of an effort that began last summer under the direction of the Real Access Alliance (the Alliance), and is available on the Alliance's Web site, www.realaccess.org. Although the primary thrust of the Model Agreement was directed to the office building environment, ICSC, as a member of the Alliance, participated in the development of the Model Agreement. The key elements of the Model Agreement apply to the shopping center environment.

This article will provide insight into the background for the Model Agreement, certain key elements of the Model Agreement and where shopping center owners, managers and service providers might be going from here.

The Model Agreement responds to the need for property owners and managers and TSPs have a common starting point for their dealings with each other in matters relating to access for telecommunications in any multi-tenant environment. There can be so many issues and competing priorities in the negotiation of access agreements, the theory was and is to narrow and more clearly define those issues and competing priorities through the development of a Model Agreement as the template to at least begin most access discussions. A Model Agreement has the capacity to provide the interested parties with a solid place to start, without dictating where the parties will ultimately end up.

There were many forces at work in this developing theory and many supporting parties behind the Real Access Alliance. The mission of the Alliance is to encourage competition among telecommunications companies in the delivery of reliable, high-quality services to tenants, while protecting the private property rights of property owners. The members of the Alliance are the Building Owners and Managers Association International, Institute of Real Estate Management, International Council of Shopping Centers, Manufactured Housing Institute, National Apartment Association, National Association of Home Builders, National Association of Industrial and Office Properties, National Association of Real Estate Investment Trusts, National Association of Realtors, National Multi Housing Council, and Real Estate Roundtable. The 11 members of the Alliance represent the interests of over 1 million members. Each of those members played an active role in the development of the Model Agreement.

A unique aspect of the Agreement, and one of its chief merits, is that it is a product of intense and constructive collaboration between the real estate and telecommunications industries. In working toward the final draft, the Alliance actively solicited comment from all sectors of the telecommunications industry, and incorporated numerous proposed revisions. The final document reflects this collaborative effort.

Structure and Use of the Model Agreement

The Model Agreement is structured for use in many diverse circumstances relating to multi-tenant environments. The first two and a half pages are the transaction-specific terms and conditions. These pages contain the essential deal points of special interest to the parties such as commencement date, term, renewal and financial conditions. Next are the general terms and conditions. These take up about 23 pages of text, and raise and address the body of the relationship of the parties. Next are the various exhibits and schedules. There are 14 exhibits and 4 schedules provided. Not every exhibit or schedule will be important in every relationship. The parties can use those that apply and are welcome to use others based upon their unique transaction and circumstances. Certain exhibits should always be a part of any access agreement because they identify and define the equipment, the location of the equipment and the services to be provided. Beyond that, the Model Agreement does not dictate how parties should negotiate or document their agreement.

The Model Agreement is not intended to dictate where parties, negotiating at arm's length, will end up. There are blanks in the document for the parties to decide all periods of time for performance and all economic terms and conditions of their relationship. For example, the parties will decide if the license fee will be a fixed monthly amount or tied to a profit sharing formula or some combination of the two. Similarly, the parties will decide if there will be annual increases in the license fee or other increases upon extension or renewal of the term. The Model Agreement anticipates that certain center owners, property managers or TSPs might have their own unique "special provisions" or crucial issues. These can be addressed in the first few pages of the Model Agreement, which are the transaction-specific terms and conditions, or by an exhibit or schedule attached to the Model Agreement. Either way, the Model Agreement provides the common point of beginning for the dialogue, and in that way can make the entire negotiation process faster and more keenly focused on open issues.

Key Elements and Key Concerns

Fill in the Blanks and Behave Reasonably

The Model Agreement is designed with blanks to be completed by the parties in the course of their negotiations. These include not only more obvious items such as the effective date and commencement date, but also the exhibits that will identify the equipment, equipment room space, rooftop space and communications spaces and pathways. Taking it even one step further, the Model Agreement leaves it to the parties to complete the notice periods, cure periods and all time deadlines. In completing the blanks, the parties are encouraged to apply the standard that permeates the Model Agreement, that of "reasonableness" or a "commercially reasonable" standard. There are very few instances in which a discretionary act is qualified by other than a reasonableness standard.

Strive for Parity

The Model Agreement may be used in different ways by different property owners and managers as best fits their business plan and method of operating. One of the chief goals that the Model Agreement seeks to achieve is some degree of parity among the various types of carriers (wireless/wireline; incumbent/competitive carriers) and the way in which they may gain access. The focus here is on service to tenants. Those using the Model Agreement may have a better chance to gain access into a center faster, and achieve more efficient arrangements for equipment installation, maintenance and repair. For example, under Sections 8(c) and 9, building entry by the TSP during normal business hours requires no prior notice, but does require compliance with the normal security procedures of the building. Entry to cure an outage or disruption in the delivery of the provider's services to building tenants also requires no prior notice.

Customer Relationships

The Model Agreement limits owner involvement in the relationship between the TSP and its tenant customers. In the early stages of the development of this issue, owners seemed eager to play a significant role in the dealings between the providers and their customers (the owner's tenants). During the drafting process, however, this view shifted, and the final document reflects a more limited role. Among owners, there remains some concern that providers might sign tenants to service agreements that have a term longer than the provider's access agreement with the property owner, or that providers might solicit tenants as the provider that has been "endorsed" or "recommended" by the owner. Nevertheless, most property owners are prepared to deal with the TSPs solely as to their access into the property, and deal with their tenants through the lease to clarify what the owner will and will not do for its tenants. Since the Model Agreement should be used in response to an access request by a provider supported by a tenant demand, the owner should be able to focus on the question of access, while the tenant protects its own interests.

Interference as a TSP Issue

The approach taken above in managing customer relationships also applies in the interference arena. The center owner agrees to use commercially reasonable efforts not to permit new licensees into the center if they will interfere with existing users, but if material interference arises anyway, it is left to the competing providers to resolve the issue among themselves, without owner intervention. If all else fails, there is the right of the licensee to terminate.

Where Do We Go from Here?

The Model Agreement is intended to be the vehicle that gets providers into buildings and services to tenants faster and more easily. This goal can be realized as the agreement is more frequently used by property owners, managers and service providers. Like anything else that is new, it will take time to become accustomed to the structure and approach of the Model Agreement. This effort, however, should be amply rewarded as parties are able to work from a standard document, focus on their limited issues, and bypass the lengthy negotiation process, which access arrangements often entail. This type of expedited service can serve all interested parties well.

Related Insights