By Anthony Casareale
Negotiations with Internet, Cable TV, and Wireless Technology providers can be challenging and time consuming for owners of multifamily, condominium and homeowner associations, property managers and their counsel. Why is this the case?
First, owners and their counsel generally do not have experience negotiating internet/cable TV/technology agreements and are not familiar with the contractual arrangements and pricing options available. These arrangements include: (1) Bulk Service Agreements; (2) Exclusive Marketing Agreements; and (3) Non-Exclusive Marketing Agreements.
Second, providers present their most profitable options, which is not always the best option for an owner financially and for the business plan of the asset.
In order to negotiate effectively, owners need to understand the main agreement structures.
In a Bulk Service Agreement, the owner agrees to pay a monthly fee per unit for the provider to provide internet and perhaps cable TV (cable TV is becoming less attractive with streaming options available to tenants) to residential apartments and common areas. The service is an amenity to the project. Owners then can charge tenants a fee for the service at a profit. However, please note that some states are pushing back on an owners’ right to profit. The provider is also typically granted an exclusive marketing arrangement as well to market and sell upgrades to the tenants.
In an Exclusive Marketing Agreement (EMA), the owner agrees to allow a provider to market its services to tenants at a project on an exclusive basis with the aid of the property manager in such marketing. The owner, in return, shares in the revenue generated by the provider from individual tenant accounts. Please note that some Exclusive Marketing Agreements are prohibited by the FCC for certain owners.
Non-Exclusive Marketing Agreements (NEMA) are, as the name suggests, marketing agreements where the owner allows a provider to market to tenants at a project but does not grant an exclusive right to market.
As noted briefly above, the agreements with internet/cable TV providers are governed by the FCC and, as such, several aspects of the agreements are subject to FCC rulings and regulations. Owners need experienced counsel and consultants familiar with the existing body of FCC law and who are keeping up on newly proposed FCC rulings and regulations. For instance, the FCC banned ‘graduated revenue sharing’ arrangements between an owner and a provider. In the past, in an EMA, the applicable percentage share would increase as the gross revenue amount received by a provider from tenant accounts increased (e.g., 2% up to $10,000; 3% from $10,001 to $20,000; etc.). The FCC now requires that an owner be paid a single percentage share by a provider irrespective of the gross revenue amount.
By far the thorniest issue facing owners and their counsel is working with different providers, each with its own form of agreement. As a result, many provisions governing the same matters, both legal and technical, vary considerably for each provider. For example, here are two provisions each from a different provider describing Bulk Internet Service:
Example 1:
Owner is purchasing from Operator on a bulk-billed basis (a) the Service currently known as Advanced Community WiFi Ultra ( Mbps x Mbps) (“Advanced Community WiFi” for the purposes of the Bulk Internet Services Attachment), including the following common areas: [pool area,] [clubhouse,] [roof deck,] [business lounge,] [yoga room,] [mail room,] dog park,]
[parking garage,] [elevator lobbies,] and [hallways] at the following speeds __ Mbps x __ Mbps; and (b) the CPE listed in the Section below, if any (collectively, the “Bulk Internet Service”). The Bulk Internet Service will be provided to the appropriately installed CPE provided by Operator. Upgrades to the Bulk Internet Service, if available, will be provided per Operator’s then-current terms and conditions. Concurrently with signing the Agreement, Owner shall provide Operator with a complete list of addresses of all Units to receive the Bulk Internet Service.
Example 2:
Company shall provide the Bulk Services listed in the Service Order (the “Bulk Service(s)”) as set forth in this Bulk Services Attachment and in the Service Order.
| Internet Bulk Service | # of Outlets/Unit | Total # of Units | Included Equipment |
| Fast | 1 | 297 | Gateway |
EXAMPLE 2 does not specify the up/down speeds or detail what common areas are provided with internet.
In addition, providers view themselves as ‘utilities’ providing an indispensable service to a multifamily project and frown upon any negotiations. Providers are often apt to say, “this provision is never changed” or “we never agree to XYZ”.
As a result, without an experienced telecom counsel and consultant, an owner and its everyday counsel cannot point to previous transactions where the provider conceded to the owner’s position. Likewise, an owner and inexperienced counsel may become insistent on positions that providers, in fact, do not concede. In both cases, owners become frustrated with the passage of time and the growing legal fees. Their project is either nearing completion or an existing project is saddled with a sub-par provider that is adversely affecting leasing.
The Solution:
The solution for owners is to work with telecom counsel and consultants that have been involved in numerous negotiations and signed agreements with a number of the providers. This expertise results in a negotiation focused on the critical issues of the agreement, both on the technical and legal side. Having been through other negotiations, these experts know what the providers have agreed to in the past. They also understand the ‘hot buttons’ of the providers and do not spend time overreaching in these negotiations. Casareale & Partners can provide that counsel having represented owners in negotiations with every national telecom provider and several regional and local providers.
Anthony Casareale is a Partner with Casareale & Partners (www.casarealepartners.com) and Chief Legal Officer of Broadband Consulting Group (BBCG). Mr. Casareale has over 30 years of legal experience as a commercial real estate attorney having closed acquisition and sale, financing and leasing transactions throughout the United States for private equity firms, investment banks and developers.
Mr. Casareale would like to thank John Russo, Principal/President of Broadband Consulting Group (BBCG), for his contributions to this article and in guiding clients in telecom negotiations. John leads BBCG, a telecommunications asset management firm with a team of experts with over 80 years of combined experience. John and BBCG specialize in technology project oversight for owners of multifamily. By representing over 1,000,000 multi-family units, BBCG has the expertise and industry influence to obtain maximum value for your telecommunication rights.