The World Is Going Mobile –What About Your Building?

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You probably own a “smart phone” – a device that can send and receive voice and data messages, surf the web, and allow you to run various applications and third party software right on the phone. You probably also own a lap top that has a wireless function that can do all of the above and more – by connecting to your company's network. Now multiply that by 50% of the employees of every tenant in your building. It is estimated that there are 200,000 text messages sent every second in the United States, and that by the year 2020 there will be 50 billion internet connected devices. Where is the signal coming from to provide the bandwidth to power these devices? If this is too abstract to make an impression, focus on the managing partner or chief executive of each tenant that is rushing from his office to the elevator to the ground floor lobby or garage in the building and loses reception on his smart phone multiple times along the way. What does that do to enhance the tenant experience and branding of the building as a first class office building?

At its most basic, a DAS is a targeted wireless system that distributes the signals of licensed carriers as well as unlicensed “wi-fi” signals – if enabled – within a designated coverage area through a design that increases coverage areas and boosts bandwidth capacity, without increasing demand on the “macro” network of a carrier. And while we refer to a DAS as “wireless,” as with everything in a building, a significant amount of equipment, cabling, and antennas are required to create a “wireless” experience.

These systems will have an enormous impact on commercial buildings, whether office properties, shopping centers, university campuses, hospitals, stadiums, train stations, airports and other large capacity venues. Once again, owners of office buildings and other commercial properties must face a change in technology that tenants and other visitors to their properties will expect to be supported by the property. Coupling a DAS with building engineering and public safety and security systems, such as remotely monitored smart meters, video cameras, fire/life safety and access control panels, and lighting controls, can add significant efficiency to a building.

Who are the key players? There are two categories of service providers: (i) third party “integrators” and (ii) carriers. In each case, the question is whether the system is a “neutral host” system that can and does allow for multiple carrier signals, or whether it is a “dedicated carrier” system (think stadiums where AT&T promotes its wireless coverage).

What do owners and managers of office buildings need to understand about these systems. Single tenant occupancy buildings may not need a “neutral host” system; multi-tenant occupancy buildings probably do need a “neutral host” system. Does a building/project add “wi-fi” to the system or not? Engineering the antenna placements for maximum coverage and bandwidth capacity is key to a successful installation. Many carriers have specific standards for installation – is your provider designing the system for current and future standards compatibility? Educating the provider as to the way floor areas change within a building over time and the need to accommodate restacking and retenanting of floors is a key negotiating issue. Compliance with law upgrades may also be triggered based on the installation. The revenue model and term of these agreements are still in flux. Most providers need a minimum of 10 years to get a return on their capital investment (which can in excess of $2MM) and reaching “break even” is dependent on getting at least two national carriers to ride the system. Most providers require at least two, five-year options on top of the initial term. What should, and can, buildings charge the carrier or integrator? Given that the market is in its infancy, a long term “no-fee” agreement may be problematic. In certain circumstances, the owner may assume ownership and management responsibility. For example, in hospitals, single tenant occupancy corporate headquarters and certain other venues, a “no fee,” “owner financed” system may be the norm. Most carriers and integrators demand “exclusivity” in their contracts – but building owners need to negotiate exceptions to this. What happens if a system promoted to the owner as neutral host does not attract a second carrier? Lastly, as with any service provider and occupant in the building, customary allocation of risk issues (insurance, indemnification, interference, casualty) have to be addressed from a building's perspective.

One thing is clear – the demand for more bandwidth and coverage within commercial buildings for wireless devices is on a significant and irreversible growth trajectory. Relying on the public network may not be practical for communications for other than “wi-fi” over unlicensed spectrum. For certain large tenants, a leasing decision will include, as an RFP item, the availability or right to install a DAS. For their part, carriers understand that they cannot charge their customers for data plans when they cannot deliver the data. As carriers roll out 4G devices, the need for more antennas and proximity thereto becomes more critical. Both sides have a mutual interest in reaching the user of the smart phone during peak business hours when that person is in the building, and there is a growing understanding in the industry that RF and IP design has to transition from an outside-in building, to an in building-outside methodology.

Given the “ground zero” nature of large metropolitan markets for mobile communications and computing, integrators and carriers are making a push to sign up first class buildings. A building owner and manager should consider a team comprised of leasing, a strategic telecommunications consultant (as distinguished from a riser management company), engineering and legal to develop an action plan for consideration of whether and how a DAS system can enhance the value of your building.

About the Author:

Manuel Fishman

Manuel Fishman is a real estate lawyer and partner at the law firm of Buchalter Nemer in San Francisco. He specializes in telecommunications and real estate transactions, and has negotiated numerous DAS agreements for buildings. Mr. Fishman is a BOMA California board member and a member of BOMA San Francisco.

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