The Cell Tower Ground Lease: An Atypical Commercial Lease– What Attorneys Should Know, 0318 ALBJ, 79 The Alabama Lawyer 114 (2018)

Author:William M. Lawrence, J.
Position:Vol. 79 2 Pg. 114
 
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THE CELL TOWER GROUND LEASE: An Atypical Commercial Lease– What Attorneys Should Know

Vol. 79 No. 2 Pg. 114

Alabama Bar Lawyer

March, 2018

William M. Lawrence, J.

Introduction

Despite being only a decade old, smart phones drive the United States’ increasingly fast-paced culture. Americans used approximately 262,000,000 smart phones during 2016.1 Smart phones are vitally important to our daily lives: we wake up to their alarms; we communicate verbally and in writing with them through phone, text and social media applications; we use them to stay current with local and world news; we play games on them; we use them as GPS devices; and we watch live sporting events and cable programming on them. Smart phones are the quintessential all-in-one gadget.

Carriers, the companies to which consumers pay smart phone bills, provide smart phone-connectivity services using cellular networks. Cellular networks depend upon two crucial components: radio spectrum2 and infrastructures. Radio spectrum is the radio frequency (RF) portion of the electromagnetic spectrum, which fuels cellular communications. Infrastructures are the network deployment areas, called “cells” or “cell sites,” which include towers, poles and other structures and facilities that support signal transmissions, increase network capacities and expand network coverages. An estimated 308,334 cell sites operated in the United States during 2016.3

Based upon whether carriers own portions of the radio spectrum purchased from the federal government and build and own their own infrastructures, the wireless industry classifies them as mobile network operators (MNOs) or mobile virtual network operators (MVNOs). MNOs own radio spectrum and their own transmission infrastructures. The United States has five MNOs-Verizon Wireless, Sprint, AT&T Mobility, T-Mobile and U.S. Cellular. Unlike MNOs, MVNOs do not own radio spectrum or their own transmission infrastructures. Instead, MVNOs piggyback their networks on MNO networks by leasing or purchasing from them access to radio spectrum and infrastructure. MVNOs tend to market to specific geographic areas or population niches and offer contract-free or less expensive connectivity plans than MNOs. MVNOs include Cricket Wireless, Metro PCS, TracFone, Straight Talk and Total Wireless.

Each cell site involves at least one and usually multiple leases.4 Many attorneys negotiate cell site leases no differently than typical commercial leases, but cell site leases involve material and subtle differences from, and unique issues without corollary in, typical commercial leases. This article (i) provides wireless industry background and cellular technology deployment information to help attorneys understand cell sites generally and (i) addresses material negotiation components relating to one particular type cell site lease-cell tower ground leases.

Cell Site Types

Cell sites consist of four main types: cell towers, rooftops, small cells and distributed antenna systems (DAS). Known as "macro sites" or "macrocells," cell towers and rooftop sites are carriers' cellular network foundations because they canvas vast geographic areas and transmit signals great distances. Insatiable wireless demand and technology advances have spurred carriers deployments of small cell and DAS "micro sites" or "microcells," which integrate smaller, less powerful technologies to densify network architectures and add network capacities and coverages.

A. Cell Towers

Due to their imposing size and omnipresent visibility along American highways, the most well-known cell sites are cell towers. Cell towers are elevated, vertical structures built on land, on and around which carriers install high-powered antenna arrays and supporting transmission equipment. Cell towers provide carriers the widest coverage radius of all cell sites. Depending upon how many carriers have elected to "co-locate" on the tower,5 one cell tower can serve multiple carriers' cell sites.

Some MNO carriers own and operate their own cell towers. In what some attorneys find to be a counterintuitive business model, tower-owning carriers install their own antennas and transmission equipment on their towers, while simultaneously leasing tower "co-location" space to competitor carriers to generate revenue. For example, Verizon Wireless may own a tower and operate its own antennas and transmission equipment on the tower, while also leasing tower "co-location" space to Sprint and T-Mobile.

Carriers do not require their own towers to run their networks. More often, carriers lease tower space from companies specializing in owning and operating tower portfolios to support carrier networks. Unlike carriers, which consumers know well due to their ubiquitous print and television ads, consumers are less familiar with tower portfolio companies, despite many being publicly traded or Fortune 500 companies. The United States' five major tower portfolio companies are: Crown Castle (NYSE: CCI), American Tower Corporation (NYSE: AMT), SB A Communications (NASDAQ: SB AC), United States Cellular Corporation (NYSE: USM) and privately-owned Vertical Bridge.6

B. Rooftop Sites

Rooftop cell sites provide the second widest coverage radius of cell sites. Rooftop sites consist of high-powered antenna arrays and supporting transmission equipment similar to what carriers install on cell towers, but which carriers install on building rooftops. The term "rooftop site" is a catchall and misnomer, because carriers install functionally equivalent antenna arrays and transmission equipment on and around water tanks, church steeples, bell towers and other pre-existing, tall structures.

C. Small Cell sites

Small cell sites are single carrier-owned, low-powered, self-contained cell site nodes, which consist of single antennas and supporting transmission equipment. As their name implies, small cell nodes are smaller in size, power and coverage radius than cell tower sites and rooftop sites. Small cell nodes are often no larger than smoke detectors, fire alarms or paper reams and need limited installation space, which makes them discrete and aesthetically more pleasing than cell tower sites or rooftop sites.

Carriers deploy small cell nodes in smaller footprints to densify and increase overall network coverage and capacity, often in densely populated, congregational or topographically challenging areas that macro sites cannot serve alone or where zoning regulations make cell towers or rooftop sites impractical or impossible. Carriers deploy small cell nodes on right-of-way infrastructure (e.g., utility poles7 and street signs), on mass transportation means that travel to remote locations (e.g., cruise ships and commercial airliners) and in commercial settings (e.g., hotel lobbies and office buildings).

d. Das sites

Similar to small cell sites, DAS sites are low-powered cell sites. Unlike self-contained small cell sites, DAS cabling interconnects multiple antenna nodes within defined geographical areas or buildings to hubs containing transmission equipment that all antenna nodes use collectively. Among other deployments, carriers deploy DAS sites for outdoor purposes (e.g., the French Quarter in New Orleans) or inside large buildings, stadiums and arenas. DAS sites relieve pressure from cell tower and rooftop sites by removing DAS site coverage areas from the capacity outputs of cell tower and rooftop sites. Like small cell sites, carriers often use outdoor DAS sites in densely populated, congregational or topographically challenging areas that macro sites cannot serve alone or where zoning regulations make cell towers or rooftop sites impractical or impossible.

Cell Tower Types

Cell towers consist of three main types: self-supporting towers (a.k.a. lattice towers), guyed towers and monopole towers.

A. Self-supporting Towers

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