Improving your telecommunications contracts can save money and help you avoid customer service problems, but doing so requires arming yourself with knowledge.
The telecommunications world is changing rapidly, with cable TV providers offering voice service, phone providers offering cable TV service, and much more. In addition, the growth of fiber-to-the-premises (FTTP – the spread of high-speed fiber optic networks directly into buildings) is increasing the number and quality of telecom services being offered.
To get advice for setting up strong telecom agreements, Apartment Finance Today spoke with Ian Davis, an attorney at the Dallas-based law firm Munsch Hardt Kopf & Harr, P.C. He is a member of the firm’s telecommunications and real estate practice groups, where he represents multifamily clients in telecommunications and technology-related matters.
Q What are the most important telecommunications issues confronting apartment owners?
A The biggest issue currently confronting owners is FTTP from the Baby Bells. I’m cautiously optimistic that FTTP services will have a positive impact on the number and quality of services available to residents, and will create competition between service providers. A project with both an FTTP provider and a traditional cable operator will be able to offer residents multiple options for telephone, video, and Internet service, and likely cellular service. Because both providers will want to market this “triple play” or “quad play” of services, marketing rights from owners will become more valuable.
On the other hand, owners should be cautious about what rights providers are requesting in exchange for delivering FTTP services.
Q What are some of the most important issues apartment owners should include in their telecom agreements?
A In 2006, the most important issues are service-level terms, service competitiveness requirements, and default provisions that enable an owner to enforce the service-level terms and competitiveness requirements.
I regularly speak with owners who accepted large sums of money from providers only to then sign the provider’s standard form agreement – a form that typically doesn’t contain enforceable service terms. Then when something goes wrong, there is no remedy the owner can exercise, unless you consider it an effective remedy to give notice every time a resident complains about poor service and then wait 30 days for the problem to be remedied. For these owners, the per-unit fee that looked so attractive initially is paltry compared to the lost revenue caused by residents leaving or not renewing due to poor service.
This same thinking applies to the latest and greatest FTTP services. I have a hard time getting comfortable with the idea of having only one provider providing all of the telecom services at a project unless that provider agrees to very strong service-level and competitiveness terms – especially because the FTTP services will be delivered over what might be a proprietary system.
Q What are some common problems multifamily owners have with their telecom service providers?
A Over the past 18 months, the problems we’ve seen most frequently are poor customer service, poor quality of service, and uncompetitive services.
There are two basic ways owners can address these issues. The first and best method is to put teeth into service agreements. I prefer contractual provisions that govern not only response times, but also cure times. I prefer an express statement that a provider’s services will be competitive with any other providers’ offerings in the market place. The more detail, the better.
The second method, which is really nothing more than promoting economic forces, is to have as many competitive providers as possible at a project. If one provider is doing a poor job, market forces will typically drive business to the competitors. For instance, if you have an FTTP provider who can provide a triple play, a cable provider who can offer a triple play, and a satellite provider capable of offering video service, then there is a high likelihood not every provider’s service will be poor.
We’re also seeing an increase in construction-related problems, like providers whose installation fails to meet the owner’s construction schedule or the approved plans and specifications. The best methods for addressing these problems are to require providers to attend the owner’s construction meetings and to install facilities in accordance with the owner’s construction schedule. As for correctly installing facilities, I prefer to incorporate exact specifications and, if available, plans, as an exhibit to the service agreement. That eliminates most questions and finger pointing, provided the owner inspects the provider’s work to ensure compliance with the plans, code and industry standards.
Q From the telecom providers’ side, do they have any items that they wish multifamily property owners knew about when entering into these agreements?
A Providers want owners to better communicate their desires and expectations about both business terms and legal terms.
In my experience, if you explain what you want and why you want it, providers will regularly go to great lengths to find an agreeable resolution. If you communicate what you want and you’re informed that it can’t be done because it’s “against the provider’s policy,” then you’re talking to the wrong person. Instead, you need a decision maker who understands your request, understands the purported logic behind the policy, and will work toward a mutually satisfactory resolution. If the decision maker isn’t willing to work with you to find a resolution or workaround, then you’re probably better off doing business with another provider.