Site Development: Do it Right or Pay the Price

From everything I have seen, heard, and experienced, the rush to upgrade sites to deliver faster download speeds and keep up with data demands is not unlike the old market launch days. There is a lot of pressure, some friendly and some not so friendly competition, and the focus is on speed. One of the things that we have now that we did not have then is a mature network of existing sites. That is the good news. The bad news is that all of the hasty decisions, due diligence lapses, and assorted other open issues that those long ago launch and development teams left to be dealt with later—many of which lay dormant for years like land mines from a long forgotten war—have finally come home to roost. Add to that the fact that landlords and others have also had the benefit of several years of exposure to the industry and you have a potential recipe for disaster.

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Venn and the Art of Wireless Regulation

It’s important to educate legislators and local governments about the 1996 Telecommunications Act, which added Section 332(c)(7) to the Communications Act of 1934. This section, also referred to as Section 704, affects the permitting of wireless facilities by preserving local government authority over tower siting decisions, while placing certain limitations on the exercise of that authority.

Section 704 encouraged rapid development of new communications technology, yet it preserved state and local authority over tower siting. Thus, local government authorities viewed the 1996 Telecommunications Act as affirming their control over tower siting decisions and, in fact, the very title of Section 704 of the Act identifies the preservation of local authority over tower siting as its purpose. Those in the industry viewed the Act as supporting rapid deployment by limiting local government authority. It’s that balancing act that keeps so many site acquisition specialists and attorneys busy and employed.

It also keeps many site developers awake at night, wondering why it takes so long to develop a tower site.  It is because of the multiple layers of regulation and control (see below).  One of the cable news shows has a segment called “Regulation Nation,” which highlights extensive U.S. regulation and its effect on businesses, and you need look no further than wireless telecommunications to find an industry that is heavily regulated by nearly all levels of government.

 A Venn diagram of several sources of regulation and control of wireless
telecommunications antenna site development shows that many requirements must
perfectly intersect to bring about approval for antenna collocation or new site construction.

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Wireless Industry Led By iPhone Sales Poised to Boost Flailing Economy

Last week’s big news for the wireless industry and for the economy at large was the prediction by J.P. Morgan Chase & Co.’s Chief U.S. Economist, Michael Feroli, that Apple would sell about 8 million new iPhone 5s in the last 3 months of this year, resulting potentially in a $3.2 billion boost to GDP in the fourth quarter. If Feroli’s predictions come true, sales of the iPhone 5 could be responsible for a 0.33 percentage point jump in the annualized rate of GDP growth in the last quarter of this year. This would be welcome news given that most economists have lowered their forecasts for economic growth for the 2nd half of this year. If iPhone 5 sales really do boost economic output, this purely market driven event will result in something that the government, despite its many attempts, has thus far failed to do.

While the analyst who made this prediction warns that the estimate should be treated skeptically, he cites the impact from last year’s iPhone 4 sales as a pre-curser to the impact of sales of the iPhone 5. Feroli estimates that most of the boost in retail sales at the end of last year was due to the release of the iPhone 4. Last year’s iPhone sales boosted core retail sales in a way that boosted overall GDP growth by a fifth of a percentage point. Feroli predicts that the launch of the iPhone 5 will be even bigger than last year’s launch. If pre-sales are any indication of how big the iPhone 5 launch will be, Feroli’s predictions may well come true. As of September 17th, the Wall Street Journal reported that Apple sold out of its initial inventory of iPhone 5s just one hour after it began accepting preorders. Customers placed more than 2 million preorders for the iPhone 5 on the first day it was available. The iPhone 4 by comparison sold only 1 million preorders on its first day of availability. This means that 1/4th of the predicted sales for this quarter occurred before the first phones ever hit store shelves. In a press release, Apple reported that customer response to the iPhone has been “phenomenal”.

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Finally, a Carrier Wins at the 4th Circuit Court of Appeals

In my December 21st blog post “Help (& Better Coverage) Could Be On the Way”, I mentioned that many of us were waiting with baited breath to find out whether the new make-up of the Fourth Circuit Court of Appeals would change the court’s interpretation of the 1996 Telecommunications Act (“Telecommunications Act” or the “Act”).  Since the first lawsuit under the Act, wireless carriers have had a tough time turning zoning application denials into approvals in federal court in the states that comprise the 4th Circuit–Maryland, Virginia, West Virginia, North Carolina and South Carolina.  In fact, no carrier had ever won in the 4th Circuit until the end of last month.

In the first two cases the 4th Circuit decided last month, both involving Fairfax County (“County”) denials, T-Mobile Northeast LLC v. Fairfax County Board of Supervisors, No. 11-1060, 2012 WL 664504 (4th Cir. Mar. 1, 2012), and New Cingular Wireless PCS, LLC d/b/a AT&T Mobility v. Fairfax County Board of Supervisors, No. 10-2381, 2012 WL 922435 (4th Cir. Mar. 19, 2012), the 4th Circuit sided once again with the municipality holding that neither of those tower denials violated the Act.  The more surprising of those two opinions was the opinion in the T-Mobile case against the County.  What is most shocking about that case is that it involved the extension of a power pole on which the County had already approved two prior collocation applications.  Interestingly, that case was decided just after President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 (the “Tax Relief Act”) into law. 

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How Much Relief Will the Middle Class Tax Relief Act of 2012 Provide Wireless Carriers & Their Customers?

In my December 28th blog post, I focused on the difficulties many carriers encounter while attempting to develop wireless sites. Even though collocation, or the installation of antennas on existing towers and structures, seems like a no-brainer from an approval standpoint, these types of applications, as well as modifications to existing towers, can often be as costly and cumbersome as obtaining local approval for a new tower. As many of you know by now, the Middle Class Tax Relief and Job Creation Act of 2012 (“Tax Relief Act”), which President Obama signed into law last week, contained a late Christmas gift for the wireless industry. It is a gift that should make collocation on existing tower sites, as well as equipment upgrades a little bit easier. Amidst the other much more talked about provisions in the Tax Relief Act, was Section 6409(a), which was the product of several years of lobbying by the PCIA (the Wireless Infrastructure Association), which provides that “Notwithstanding Section 704 of the Telecommunications Act of 1996…a state or local government may not deny, and shall approve, any “eligible facilities request” for a modification of an existing tower or base station that does not “substantially” change the physical dimensions of such tower or base station.” The term “eligible facilities request” is defined as any request for a modification of an existing tower or base station that involves the addition of new antennas or transmission equipment or the removal or replacement of existing antennas or transmission equipment.

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The Importance of Credibility

Since litigation, especially in the U.S. Court of Appeals for the Fourth Circuit, is not likely to turn a tower denial into an approval, a tremendous amount of care must be given to making a zoning application for a new tower.  This starts with picking the right land (as discussed in my first blog post) and more importantly building credibility with the property owner, neighbors, local community, local government staff and appointed and elected officials.  In this process, credibility is king and often, in close cases, it is the difference between an approval and a denial.

While most development teams split the acquisition and zoning functions, there is such a critical interplay between the two that combining these functions tends to lead to the best results.  There are many reasons effective leasing is important in ultimately securing zoning approval, but the primary reason is its impact on building credibility.  First, in most cases and in most jurisdictions, tower applicants have to prove that they have exhausted collocation alternatives on existing structures and that they have ruled out other nearby properties in the search ring.  If one person handles leasing and zoning, they can effectively address these questions with conviction.  Second, there is no scarier sight than an angry property owner/landlord at a zoning hearing.  As zoning counsel, you never want to see an angry mob, but you especially do not want to see your landlord joining with the angry mob opposing your tower application. 

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Why Won’t My Phone Work?

For many consumers, the best explanation for why their phones drop calls and their data speeds are slow is the explanation that is easiest to grasp, and by easy to grasp, I mean the story pushed by the media at all levels.  It is certainly the explanation about which consumer advocates and so-called industry experts most often blog.  If my phone does not work where or as fast as I would like, the target is always my wireless carrier.  What is most fascinating about this backward logic is it requires the consumer to assume that carriers are in business to lose customers and market share despite having paid billions of dollars to the federal government for frequency spectrum to make their networks work and billions more to develop a network of sites that allows users to continue a call for miles without skipping a beat.  Interestingly, the high cost of market entry is the very reason that consolidation in the industry has been in the cards since the late 90’s.

The number of wireless users and uses has increased exponentially.  According to the CTIA, wireless penetration in the U.S. is 102.4%.  Networks built out in the mid to late 90’s were built largely for the travelling public.  Now more and more people have dropped land lines and have gone wireless only in their homes.  As of June 2011, the percentage of wireless only homes was approaching 30%.  Initial networks have been expanded and upgraded on a fairly constant basis since their original launches.  Throw in the fact that data traffic, which requires even more capacity, has increased several thousand percent over the last couple of years and you have the challenge that faces all wireless carriers.  How do I dramatically increase the capabilities, capacity and reach of my network.  Given what I know about how the technology works, there are likely only three ways to do this — new antenna sites, more and different antennas and equipment per site and additional frequency spectrum.  Since the focus of my efforts in the industry is site development, I thought it would be helpful to educate people on how difficult it is to get new sites on the air and to modify existing antenna sites. 

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Help (& Better Coverage) Could Be on the Way

After a fairly long dry spell, three 1996 Telecommunications Act (“Telecommunications Act” or “Act”) cases impacting the wireless industry have made their way to the Fourth Circuit Court of Appeals. This is of great interest to those developing sites in the states that comprise the 4th Circuit—Maryland, Virginia, West Virginia, North Carolina & South Carolina, for several reasons. The first reason is timing, as indicated in a recent article in The Baltimore Sun, the political leanings of the court based on who appointed the majority of the current sitting justices has changed from conservative to liberal with nine of the current sitting justices having been appointed by Democratic presidents (with one new appointment on the way) and five having been appointed by Republican presidents. Second, over the last several years, the 4th Circuit has developed a reputation as an outlier with regard to its interpretation of the Telecommunications Act. Having never found in favor of a wireless carrier, the 4th Circuit’s interpretation of key provisions of the Act, including the provisions regarding discrimination and prohibition are at the far side of the spectrum favoring the preference of local governments over the rights of carriers in sitting wireless facilities. The 4th Circuit’s interpretation of the Act has rendered it virtually meaningless in the Mid-Atlantic.

Notably, in one of the three cases before the Fourth Circuit Court of Appeals, T-Mobile Northeast LLC v. Fairfax County Bd. of Supervisors, 759 F.Supp.2d 759 (E.D. Va., 2010), the Federal Communications Commission (“FCC”) has filed an amicus or “friend of the court” brief, explaining that the 4th Circuit’s position on what type of government action constitutes “prohibition” runs afoul of the FCC’s interpretation of the Act as set forth in a declaratory ruling it issued on November 18, 2009, commonly referred to as the “Shot Clock” ruling.

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High Land … Low Rent

There is probably no single phrase more likely to attract the attention of wireless site development professionals than “High land…. Low rent”.  It got your attention.  It is the holy grail of site acquisition and a favorite punch line of one of my good friends in the industry.  But as many of you know, that only gets you half-way there, especially if you happen to be developing a wireless network in one of the states governed by the decisions of the Fourth Circuit Court of Appeals (Maryland, Virginia, West Virginia, North Carolina and South Carolina).

For my introductory blog post, I thought I would tackle one of the more difficult areas of site development—zoning.  For over 13 years I have represented clients in the wireless industry in leasing, due diligence review, zoning and permitting.  Through this blog, I intend to share with you my thoughts on the industry and give you what many lawyers are incapable of delivering–real world helpful tips.

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