12 Nov My Cell Phone Tower Lease Is Expiring, What Should I Do?
Back in the late eighties, the cell phone industry was in its infancy. Cell phone companies like Airtouch, Primeco, AT&T, and the Baby Bells (Bell South, Pac Bell, Bell Atlantic) were all just commencing to deploy cell phone towers in the cities where they were licensed to provide service. In those days, each cell phone company would only lease land for their own cell towers. Nobody had heard of sharing each other’s towers commonly called collocation. Each wireless carrier would build their own tower for provision of cellular service. Since there were only two licensed analog cellular providers in any market and not that many customers using the systems, there weren’t that many towers required.
Because there were not that many towers, there were not many zoning regulations regarding towers and they could be built virtually anywhere. However, in a few years, the municipalities started fighting back. Some municipalities decided that they would simply oppose any cell phone tower. Others tried to manage their growth by encouraging collocation. In 1996, the Telecommunications Act of 1996 changed all this. Not only did it provide for the auctioning of new spectrum (now called Personal Communication Systems or PCS) to six new licensees in any given area, but it also regulated how local municipalities could regulate cell tower placement.
The net result was collocation. Many of the cell phone towers that had been built prior to the enactment of stricter zoning laws now were effectively their own monopolies. New zoning regulations encouraged or even required that a wireless carrier demonstrate that there were no existing towers that met their radio frequency needs. If they could not demonstrate such, they were required to collocate on the existing cell phone tower. So the tower owner now was receiving revenue from another company for use of the tower, sometimes in excess of $2000/mo. Yet the landowner was still receiving the same $500/mo that he had originally negotiated. This prospect was made worse as additional cell phone carriers collocated on the tower, each paying additional revenue.
However, many of those original leases are now coming to the end of their lease term. Landowners now have the chance to negotiate new tower leases with the original company. In some cases, the tower has changed hands a few times. An example of this is when Crown Castle purchased the rights to the Bell Atlantic (currently Verizon) tower portfolio of over 1400 towers or the Bell South portfolio of 2000 towers. Spectrasite (now American Tower Corporation) purchased 2000 towers from Nextel. Many of the ground leases for these towers were originally signed in the late 1980’s or early 1990’s. Some of them had terms as little as 10 years and the ground owners are now being approached to sign new extensions to the leases.
It is rare however, that the offers being made by the tower companies are actually fair. Many times they offer to extend the original lease at the same rate for another 50 years. The tower company may offer some enticement like a signing bonus of $25,000 or such to get the landowner to sign. Ask yourself why would they do this. The answer is quite simple- they expect that the average landowner is too ignorant to know what the tower lease is truly worth.
There are a number of factors which influence the value of a cell phone tower lease which is set to expire:
1. Zoning Regulations: Could the tower be built somewhere else or at the same height?
2. Number of tenants: The number of tenants determines the amount of revenue on the tower. The more tenants, the greater the revenue and the greater the value to the tower company.
3. Location: Is the tower in an urban area serving a heavily trafficked highway? Or is it in a rural area with few customers? The more urban, the more revenue.
4. Availability of suitable alternatives: Are there other suitable places to build a replacement tower nearby? The fewer locations, the better for the landowner.
Before you agree to a new cell phone tower lease agreement, do your homework. Find out what it would take to replace the tower. Find out if the local zoning regulations would allow them to do so. Estimate that amount of revenue that the tower is bringing in. And don’t accept their offer until you know. Time is on the landowner’s side. Use it to your full advantage to negotiate the best cell phone tower lease you can.
By Ken Schmidt