Verizon Questioned about Forum Shopping for Cell Tower Sites
From the Associated Press: "Two state officials want to know if Verizon Wireless is putting cell towers on the New Hampshire side of the Connecticut River to avoid Vermont's rigorous permitting process." From Verizon: "Vermont has been very good to use (sic) over the last five or six years. We have not lost a local zoning or an Act 250 application in the last five years."
Having zoned or permitted hundreds of towers over the course of my career, I can assure you that forum shopping (ie- the choosing of one jurisdiction over another due to easier zoning regulations) does in fact occur and it occurs often. Some of the carriers even require that the site acquisition agent includes information about the zoning requirements of any jurisdiction that falls within the "search ring". There are questions about the time to complete the whole process and the perceived difficulty of each jurisdiction.
The decision of where towers go is not made simply on this distinction- instead a number of factors are weighed- including potential coverage, cost of procurement ect. If all things are equal between two different locations- the one with the easier zoning process will always be chosen first.
Verizon sees wireless margins near 50 pct: CFO - (Reuters)
Verizon Wireless posted a 44.5% margin for 2006 first-quarter earnings before interest, tax, depreciation and amortization. A Verizon executive apparently wonders if they can get to 50%.
Cingular announced its first quarter margin at 31.9%.
Not too shabby.
Ownership of Towers by the Carriers
From
AGL Magazine: the numbers of towers owned directly by the wireless carriers:
Cingular- 7000 (minus 500 or so towers that are being sold)
TMobile- 4500
Sprint/Nextel- 2000
Verizon- unknown
None of the carriers were willing to express they might be selling anytime soon...
Number of Cell Towers Expected to Grow Significantly by 2010
CTIA figures show that the number of cell towers is expected to grow from 175,000 to 260,000 in 2010. That represents a 48% increase.
It is clear that many municipalities expected that the growth of cell towers had slowed- not increased in pace. We spoke to a planner director in a top 10 city who suggested that she currently had 85 new applications in- and that the shear number of applications were preventing her from focusing on other planning matters. (She also said that some of the site ac/zoning contractors were some of her worst constituents to deal with- apparently they believe they are entitled to immediate review and can't understand that they are in line).
Many municipalities wrongfully believed that they had already experienced the worst- but that is frankly incorrect. The industry has already gotten the easy sites- the industrial and commercial sites- now the carriers are looking to infill the more difficult areas to cover and are willing to pay for that coverage. New applications are being submitted in residential areas- where historically the municipality had no issue with keeping them out. From my own data- there are far more stealth type structures being proposed- partially because zoning and planning commissions are getting smarter.
If you are a municipality- feel free to post your experience or
contact us directly for more information.
Cell Carriers and Tower Companies all Joining the Renegotiation Fray
In the last few weeks, I have received inquiries from a number of cell site lease holders who have been approached to renegotiate their cell site lease.
The reasons for these requests run the gambit from funny to just outright sad. Sometimes, there is a legitimate reason- such as the fact that Cingular and AT&T merged or that Sprint and Nextel merged. In these cases, there is some duplication. And in some cases, the original lease has escalated to the point where it actually is more cost efficient for the carrier to start looking for a new site. Some examples of negotiating tactics:
TMobile has been sending out letters implying that the fate of TMobile hinges upon the cell site leaseholder reducing their rent. That the landowner should bear the responsibility of TMobile's spectrum woes and 3G upgrade path difficulties. This is laughable.
Crown Castle is sending letters to landowners suggesting that the towers aren't as profitable as some of their other towers. Yes, they confirm that they are making a profit, but Crown thinks that they should be making more. The best way for that to occur is for the landowner to contribute to Crown's profit by reducing their rent. Crown will even go as far as to share their revenue and expenses on the tower so that the landowner understands how "dire" of a situation this actually is.
Verizon takes a much more reserved approach- suggesting that the lease is simply not fair compared to their average lease in the area. They fail to mention that not every parcel has the same value for a cell site- and that they agreed to pay more in the beginning because of that. That averages consist of both higher and lower lease rates.
In any case, the game is the same. For the most part, there is no reason for the landowner to consider these negotiation ploys and reduce their cell site lease payments. But if you have a cell site lease that is higher than average, then you should probably evaluate this further. If you need assistance, please contact us and we can help.
Et tu, Crown Castle?
I have been contacted by numerous landowners who have received calls or letters from Crown Castle. These calls or letters attempt to convince the Crown Castle ground lease owner that the tower is "under-performing" and that the landowner needs to accept a reduction in rent to assure the continued use of the tower. Crown Castle actually goes as far as sharing their revenue from the tower and their expenses to operate the structure.
This tactic- previously used by Blackdot on behalf of Cingular, Sprint, and TMobile- creates doubt in the mind of the landowner who negotiated a fair deal in the beginning and now is being asked to evaluate the reduction. Unfortunately, this tactic preys on the ignorance on the behalf of the landowner who are ill-prepared to understand how to evaluate the "offer" if you can call it that.
To be candid, there are situations whereby the tower is underperforming, or there is possible risk to the lease should the landowner choose not to accept the reduction. But in many cases, these towers are "under-performing" only in the sense that there are better performing towers in the Crown Castle portfolio.
Landowners who are approached should evaluate two aspects of the Crown Castle tower.
1. Current value- demonstrated by the lease rate and expenses
2. Future or potential value- the possibility of future collocation/revenue on the tower
Lastly, they should consider whether there are specific risks to the tower revenue due to the Sprint/Nextel or Cingular/AT&T mergers. If Crown is not making money on the tower they could terminate the lease.
In any case, it is foolish to extend the lease 50 years- this is a one sided obligation which the landowner will undboubtedly regret in the future when the property becomes more valuable or the tower does.
If you are unsure of what to do- please
contact us. We can assist you in evaluating the risk of not negotiating as well as counsel you on the true value of the tower to Crown Castle.
Please note that Steel in the Air is not affiliated with Crown Castle in any way shape or form. Crown Castle is a registered trademark of Crown Castle International.
