Searching for the fastest Internet speeds on the planet? Thinking about contracting with a gigabit Internet provider? Read on before you decide.
The Internet is not just a convenience in 2016, it is an essential tool for most residents. The White House has stated that broadband is a "core utility" that has "[taken] its place alongside water, sewer and electricity as essential infrastructure for communities."
Not only is connectivity ever-increasing, but so too is the rate at which ones and zeroes zip through cyberspace, carrying the latest Pinterest post, status update, Adam Sandler movie and important work-related email.
Residents, especially those at the cutting edge of technological advancement, seem to be fixated on speed and continue to clamor for lightning in a bottle (in this case a box). Understandably then, apartment residents seek a benchmark that indicates they are getting "good Internet."
Fixated on bandwidth as a measure of quality, residents salivate at the prospect of top speeds-enter the gigabit Internet service.
But don't jump on the bandwagon just yet; an upgrade may not be the best move for your community. There are many contractual issues to be aware of when negotiating with gigabit Internet providers on behalf of market-rate and student housing communities. Following is a discussion of some of the most common issues.
Gigabit Internet and Telecom Contracts
So it's been decided that a community might benefit from gigabit service. There are several issues to understand before applying a John Hancock to a service agreement, beginning, of course, with a review of the agreement itself.
Reviewing the other telecom agreements. When evaluating new telecom providers to deliver gigabit service to residents, first look at other telecom providers' agreements and determine which wiring the gigabit provider can use, and which marketing rights can be granted to the gigabit provider. Consider whether the gigabit provider's service offerings create conflicts with the community's other agreements.
Wiring usage rights. If no other provider has any right to use a certain set of wiring, then the community may grant the gigabit provider exclusive or non-exclusive use of that wiring. If all other providers using a certain set of wiring have, at most, the non-exclusive right to use that wiring, then the gigabit provider can use that wiring on a non-exclusive basis, if needed.
If an agreement gives another provider exclusive use of wiring that the community owns and the gigabit provider needs to use, then the gigabit provider cannot serve that community unless (1) the contract is renegotiated with the other provider to limit that provider to non-exclusive use of the wiring; or (2) the wiring exclusivity language is limited to a defined set of wiring, and either the owner or the gigabit provider overbuilds the property with a new set of wiring sufficient for the gigabit provider's use.
If the agreement with the other provider gives that provider exclusive use of all wiring at the property-not a defined set or run of wiring-then even if the owner adds new wiring, it will not be usable by the gigabit provider unless the other provider's agreement is renegotiated to free up the wiring usage.
If another provider's contract gives that provider exclusive use of certain wiring, and if the contract says the existing provider owns that wiring, then it may be helpful to determine whether the FCC's Inside Wiring rules (47 CFR Part 76) apply. Those rules can be used under certain circumstances to seize ownership (and usage rights) of cabling from cable providers, thereby freeing up its use for the gigabit provider. But careful analysis is necessary to determine whether and how those rules apply.
Additionally, wiring usage rights can be freed up using the FCC's demarcation rules (47 CFR Part 68) in certain circumstances and with certain providers. For example, imagine a property where an incumbent local exchange carrier (ILEC) has installed its own Cat5e cabling all the way to each unit. The "demarc" is where the ILEC's wiring hands off to the owner's wiring-in this case, the unit. The property owner may want to allow another provider access to the Cat5e run between the secondary telecom closets (or lockboxes) and the units. Under the demarc rules, the property owner can simply order the ILEC to shift the demarc to the main telecom room for the property. Physically, nothing changes. But the wiring ownership between the unit and the main telecom closet changes. The owner can then grant the gigabit provider the right to use that wiring. As with the FCC's Inside Wiring rules, careful analysis is necessary to determine the applicability of the demarc rules and how they work in a given scenario.
Marketing rights. Make sure the marketing rights in the telecom agreements align. If an agreement gives one provider exclusive marketing rights for certain services, the owner cannot give the gigabit provider any marketing rights for those services. If all other agreements give other providers, at most, non-exclusive marketing rights for certain services, the owner can give the gigabit provider non-exclusive marketing rights or no marketing rights for those services. If no other agreement gives another provider any marketing rights, the owner can give the gigabit provider exclusive marketing rights, non-exclusive marketing rights or no marketing rights for those services.
Anti-bulk language. If a provider wants to offer free low-bandwidth service to all residents (with gigabit service as the upsell service), look at other agreements to see if securing bulk Internet services from a third party is prohibited. Some providers might consider the free low-bandwidth service to be a bulk Internet service. Whether there is merit to that argument is debatable. What is not debatable is the annoyance of dealing with a lawsuit. The thought of a telecom provider suing one of its long-term customers over this issue seems farfetched, but stranger things have happened-so be aware of the possibility and take steps to reduce your risk.
Negotiating or renegotiating agreements with other providers. If an owner is in a position to negotiate new agreements with all telecom providers, make sure that the provisions in the various agreements do not conflict.
If the property already has agreements in place with existing providers, the owner may be able to renegotiate the agreement and clear up potential conflicts. In exchange for a longer agreement term, existing providers may be willing to enter into new agreements that free up marketing or wiring usage rights. Timing is key. If the community is two years into a 10-year agreement, the odds are low that this will work, but if the owner is nine years into a 10-year agreement, the odds are good.
Mandatory access. Be aware of mandatory access laws. Mandatory access laws are state laws that allow some telecom providers to serve properties without agreements.
The existenceand contentsof mandatory access laws differ from state to state. Mandatory access laws do not typically give a provider the right to use the property owner's wiring.
Negotiating agreements with gigabit providers. Some gigabit providers may insist on things no other providers get away with in their agreements, hoping to convince owners that the lure of gigabit service makes those provisions worthwhile.
Perpetual easements, perpetual access, or extremely long terms; exclusive use of excessive amounts of wiring; exclusive use of equipment rooms; the ability to stop serving the property and use the property as an equipment storage site-are all unreasonable requests, and owners should not have to agree to them.
Moreover, if any provider refuses to commit in its agreement to remain competitive and to abide by service level terms (response times for outages, for instance), the owner should ask himself or herself why that provider would refuse to agree to such fundamental and important aspects of Internet service.
Also, if the only reason an owner wishes to have a certain provider serve a community is to have that provider's gigabit service available to residents, consider asking the provider to contractually commit to making its gigabit service available at the community.
Look at the business terms the provider offers. Some providers making gigabit service available do so at such a great expense that they are unable to offer attractive business terms to property owners. Is the provider willing to give the owner a door fee or a revenue share? Or is the provider actually going to cost you revenue share at the community by taking subscribers from another provider who would pay that owner a revenue share?
Make sure that the agreement specifies who installs what so that everyone knows what each party is responsible for.
If an owner is counting on the gigabit provider meeting certain construction timelines, ask that provider to contractually agree to building out and providing service by certain dates. If the provider refuses, ask for a termination right if the provider doesn't appear by a certain date.
Outlook
When looking at contracts from providers of gigabit service, realize that the novelty of gigabit will only last a few more years. It's likely that all the major providers will make it available in the next few years. Verizon Communications CEO Lowell McAdam recently indicated it will begin trials of 5G service in January, with a plan to begin a slow commercial rollout in 2017. Verizon's 5G service may make a gigabit available on phones. Therefore, owners should avoid selling their souls to providers in a long-term contract to get something that will not be the "cool thing" in just a few years.
Ian Davis, Chris Johnston and Laura Arbeiter are attorneys with Davis Craig & Taylor PLLC in Dallas. Visit www.mdulaw.com.
Gigabit Provider Agreement Checklist
Have you taken these steps? If not, you're not ready to sign a new contract with a gigabit provider.
Review your other telecom providers' agreements with the assistance of legal counsel. For each agreement:
a. Determine the other provider's marketing rights.
b. Assess the other provider's right to use wiring that the gigabit provider is requesting to use.
c. Analyze whether the other provider has any other exclusive rights that might need to be renegotiated or might prevent the gigabit provider from building out to the property (e.g., the exclusive right to use telecom closets).
d. Review the anti-bulk provisions, if applicable.
e. Renegotiate the terms of existing agreements, as able and as necessary.
f. Revise the terms of agreements under negotiation with other providers,
if applicable and as necessary.
Negotiate and request written confirmation of the gigabit provider's proposed deal terms, including:
a. The scope of work (i.e., who installs what, along with how, where, and when).
b. The gigabit provider's right to use and access particular wiring and spaces at the property.
c. The gigabit providers' marketing rights.
d. The timeline for service activation.
e. The up-front door fee, revenue share, gratis accounts and other compensation, as applicable.
f. The agreement term length.
g. Negotiate the gigabit provider's agreement with the assistance of legal counsel.
Be sure that you address issues described above and in this article.
The Fast and the Curious: Is a Gigabit Too Much?
Those new to telecom who attended recent industry events about telecom MDUs could quickly be convinced that gigabit Internet is necessary to keep residents happy.
But as of today: Not true. That said, gigabit Internet service is becoming more widely available and is generating interest among property owners. But before deciding to get gigabit Internet, owners should consider exactly what it is they think they need.
What is a gigabit? A "bit" is the most basic unit of information in computing. A "gigabit" is a billion bits, and a "megabit" is a million bits. In telecom, people commonly use the term "gigabit" to mean a gigabit transferred per second (Gps). A "megabit" is a megabit transferred per second (Mbps). "Bandwidth" is the capacity to get data to a destination.
To put it into perspective, Netflix recommends a 5 Mbps download speed connection for viewing an HD quality video; compare that to a recommended 25 Mbps download speed connection for an Ultra HD quality video. Needless to say, if the words "kilobit" (1,000 bits) or Kbps (kilobits per second) are used in online reviews of market-rate or student housing properties anytime during the past five years, then the property management team probably knows a thing or two about social media damage control.
Why get a gig? Why care about gigabit Internet? Because most Internet users believe that bandwidth is the measure of the overall quality of their Internet experience.
It is not. Bandwidth is only one facet of the experience, just as carats are only one of the 4 Cs referred to during the purchase of precious stones. Over the course of a year, residents (or student residents) asked whether they were satisfied with their Internet, will speak about outages and whether their Internet problems were fixed on time. If the bandwidth is low, owners hear about it.
Residents may not know this, but latency (a measure of the time it takes for data to travel physically over networks) has a big impact on their experience.
And packet loss (the number of data packets that are lost when the data travels) can be a major annoyance. Outages, responsiveness by provider employees, latency and packet loss are different metrics from bandwidth. In short, residents could get gigabit Internet service, have computers that can actually process it, and still hate their Internet connection.
You probably do not need a gigabit. Although the FCC does not consider anything under 25 Mbps to be "broadband," U.S. Internet users have an average Internet connection speed of 11.9 Mbps, according to Akamai's State of the Internet Report from Q1 2015.
Residents like the idea of gigabit Internet because they use bandwidth as a proxy for the overall Internet experience. But it isn't. A gigabit equals 84 times the average. Average is not a standard to aim for, but many of the highest-end student housing properties (full of gamers and students streaming online content) are currently purchasing 100 Mbps download speeds per user-one-tenth of a gigabit.
Most computers and devices residents use today cannot receive a gigabit of data. One Gbps theoretically can be sent over Wi-Fi but, in the real world, most residents will not receive it even if a full gigabit travels over the wire that is connected to the wireless access point sending the Wi-Fi signal.
The future. When people say that a gigabit is more than most people really need, they are referring to today-early 2016. Within as few as five years, it will be different. By then, gigabit will be a lot more common.
Want More?
"Internet for Residents: Get It Right" will be presented at the 2016 NAA Student Housing Conference Feb. 16-17, 2016 in Chicago.
See speakers Chris Johnston, Associate, Davis Craig & Tayor, PLLC; Jason Rios, Contracts Manager, American Campus Communities; and Richard Holtz, CEO, InfiniSys discuss strategy and solutions.Visit www.naahq.org/SHC for registration details.
Learn More
"Gigabit Fiber and the Telecom Revolution" was presented at MAXIMIZE: 2015 Multifamily Asset Management Conference in October. Ian Davis was among the panelists, who discussed strategy and solutions. Visit www.naahq.org/maximize.