Do Local Jurisdictions Really Need A Middleman?
Aug/18/2010 Filed in: Articles
mid·dle·man (mdl-mn) n.
1. A trader who buys from producers and sells to retailers or consumers.
2. An intermediary; a go-between
by Mark Carney, Director of Development, Core Development Services
When I look out on the wireless landscape I’m always amused and amazed by the myriad of service companies and the niches they’ve found for themselves.
I spend some of my hour-long daily commute comparing and contrasting what I know about these companies and what they say their business plans looks like versus the way they really do business, what their corporate mottos are and what truths and falsehoods are revealed by their “elevator statements”.
The companies that fail to live up to their values or work against them come and go in quickly. So let’s put them aside and focus on the ones that seem to “hang on” for far too long.
As far as I’m concerned, one type of company that falls in that category is municipal wireless consultants or MWCs. If one were so inclined, one could also say the initials stand for Middleman Wireless Consultants. No rational business people would hang out their shingle without asking themselves a few basic questions. In the case of a wireless middleman, those questions would probably go something like this:
Step One – Do local jurisdictions really need a middleman?
Step Two – How will the middleman get paid for his services?
Step Three – How does the jurisdiction benefit? Step Four – Are you really an expert?
The answers to those questions will lead you down one of two paths. One, you come to the conclusion that the wireless middleman business model is faulty and decide to allocate your resources elsewhere. Two, you come to the conclusion that the wireless middleman business model may be faulty, but decide that “smoke and mirrors” is a profitable substitute for outstanding service.
Am I being too harsh? Let’s go back and take a closer look at each of the questions and answers.
First, site acquisition companies are excellent at finding the right people to talk to no matter who owns the property.
What about connecting the JLs with the carriers? It’s true that many jurisdictional entities are fairly passive when it comes to marketing their sites and may need some marketing help. The MWCs argue that a JL’s staff isn’t qualified to negotiate real estate contracts with wireless companies and that they can do it more effectively. On its face, this argument may make sense. But look at it a little closer and it falls apart. The fact is that MWCs don’t really remove the process from the JL. They don’t, negotiate, design and then turn over a completed site lease. JL employees are involved throughout the process, so in the end, they really won’t realize any significant employee time savings.
Nearly every JL has completed previous wireless leases, so the old leases are typically used as templates and JL staff is extremely competent at negotiating all types of leases. It would be great if there was a single, universal jurisdictional template, but there isn’t. Each JL is different and that eliminates the argument that a third party can be more effective or additive. Whether the carriers are negotiating directly with the JL or through the MWC, the JL staff is involved. The consultant is simply an additional layer in the process.
Bottom line: JLs are thoroughly familiar with wireless telecommunication sites these days, they’ve already negotiated and signed leases, they have a process and they don’t appear to need a MWC.
First, they sell the JL a master plan. It’s usually nothing more than a faux effort to demonstrate wireless “competence” that nets the JL a fancy-looking report that tells them what properties they own (as if they already didn’t know). Sometimes, the MWC will even offer a “free” plan if it will help them close the deal.
Second, the MWC takes a cut off the top of every lease they “facilitate” (a ten dollar word that’s defined as “getting in between the JL and the carrier). Sometimes this fee can be as high as 25% of the monthly rent FOR THE LIFE OF THE 25 YEAR LEASE. If the lease is $2000 per month, that’s $6000 per year that goes straight into the WMC’s pocket in the first year of the lease. With just a modest 3% annual escalator, that adds up $218,755.59 over the life of the agreement. Obviously, that’s a lot of money for simply helping to negotiate a lease and “manage” a 3-4 month process.
Sometimes the MWC decides that’s not enough immediate income, so it “capitalizes” the lease. The revenue streams is packaged and sold on the open market, which gives the JL a hefty lump sum payout, but creates an awkward issue for the JL.
They now have a partner in the lease that they don’t know and have never met. The MWC is no longer involved, so who manages the lease for the next 25 years? What happens when the final lease expires?
Some JLs have even been encouraged by their MWC to capitalize their own leases for pennies on the dollar. They trade a steady income stream for a one-time payment, but cede some control and lose a lot of future earnings in the process.
If there were an expert who could help carriers understand JLs from a wireless perspective, translate their needs and help fast track a lease agreement, that would be a person who would deserve every penny of an expediting fee.
Instead, MWCs typically create more problems for carriers and JLs than they solve.
For example, I was representing a carrier that was working with a city that was represented by a MWC. The city made one unreasonable demand after another because their middleman assured them that carriers had agreed to these requests before and they were positive they would agree to them again.
The negotiations finally failed, the site was not built and the city lost out on almost $800,000 in rent.
It’s possible, I suppose, that the MWC was simply representing the JL’s interests to the best of its abilities. But understanding what carriers have agreed to is the past in only half the equation. The MWC must also balance that historic knowledge with today’s reality. The unreasonable demands created a scenario in which the JLs’ properties could be tagged with an industry-wide label that says, “Viable only if it is absolutely necessary and there are no other options”.
And on top of that, imagine how frustrating it is for a JL to pay a steep fee to a middleman only to have him make difficult negotiation even more difficult.
Unfortunately, all too often they interpret ad-hoc historic decisions as proof of future acceptance. Just because one carrier listened to one bad vendor and designed a $750,000 clock tower site, in the days of the cellular network boom, it should not be touted as an acceptable and reproducible design.
The recession is national and global. The carriers cannot afford to build these types of sites today. Giving JLs false hope of massive capital contributions, exorbitant rent rates and intricate site designs simply keeps the JLs from gaining additional revenue.
Based on my experience, the lack of MWC knowledge is not limited to understanding the wireless economic topography. It also extends to far more mundane areas. If you are going to represent a JL you’d better be an expert on their processes, procedures and leases. I’ve too often seen carriers led down the wrong path by MWCs, causing unnecessary friction, missed timelines and frustration. My experience tells me that MWC sites cost more to build, the lease rates creep higher and negotiations slow to a crawl.
As Einstein pointed out, “Any intelligent fool can make things bigger and more complex. It takes a touch of genius and a lot of courage to move in the opposite direction.”
Carriers are pushing deeper into the surrounding communities eager to provide the coverage and services that the community needs. Preferred sites are becoming parks, schools and other public properties located in or near neighborhoods. The JLs are clamoring for new income streams and new ways to attract or keep residents. More often than not, the new residents are young families that have lived without the tether of a landline based phone. Ask them to buy a home or open a business in a wireless unfriendly community and you’ll hear a resounding, “No, thanks!”
So, there is a valuable product to sell with producer and consumer being forced together by the constituents that they both serve. If, and that’s a big if, a middleman is going to survive in this environment, then current and future MWCs need to change the way they answer the four questions above.
Step Two – Take a one-time fee or an hourly rate and leave the income streams alone. You’ll make up the loss in individual site earnings with volume. The JLs need all the money they can get right now and high rent rates (caused by adding in your 25% fee) are a primary reason carriers are walking away from public properties. Quit selling “master plans”.
Step Three – Work with the wireless carriers and the JLs to develop a win/win lease that doesn’t have to be reinvented with each proposed site. Prepare a simple process chart with agreed upon timelines for you and the JL Staff. Help move the sites forward when the projects bog down in the bureaucracy and stop being the reason a site bogs down.
Step Four – Become the expert you’ve always claimed to be. Manage your JL properties like a tower company manages its assets. Drive the carriers to your sites, not away. Bring your clients more income and help bridge the gap between wireless providers and the JLs. Considering that both entities serve the same people and need each other, you should have a fairly profitable business model.
If you don’t make these changes sooner rather than later, the JLs will come to the same conclusion as I have and simply eliminate the middleman.
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1. A trader who buys from producers and sells to retailers or consumers.
2. An intermediary; a go-between
by Mark Carney, Director of Development, Core Development Services
When I look out on the wireless landscape I’m always amused and amazed by the myriad of service companies and the niches they’ve found for themselves.
I spend some of my hour-long daily commute comparing and contrasting what I know about these companies and what they say their business plans looks like versus the way they really do business, what their corporate mottos are and what truths and falsehoods are revealed by their “elevator statements”.
The companies that fail to live up to their values or work against them come and go in quickly. So let’s put them aside and focus on the ones that seem to “hang on” for far too long.
As far as I’m concerned, one type of company that falls in that category is municipal wireless consultants or MWCs. If one were so inclined, one could also say the initials stand for Middleman Wireless Consultants. No rational business people would hang out their shingle without asking themselves a few basic questions. In the case of a wireless middleman, those questions would probably go something like this:
Step One – Do local jurisdictions really need a middleman?
Step Two – How will the middleman get paid for his services?
Step Three – How does the jurisdiction benefit? Step Four – Are you really an expert?
The answers to those questions will lead you down one of two paths. One, you come to the conclusion that the wireless middleman business model is faulty and decide to allocate your resources elsewhere. Two, you come to the conclusion that the wireless middleman business model may be faulty, but decide that “smoke and mirrors” is a profitable substitute for outstanding service.
Am I being too harsh? Let’s go back and take a closer look at each of the questions and answers.
Do local jurisdictions really need a middleman?
Is there a need for someone to connect wireless carriers with the “jurisdictional landlords” or JLs (cities, school districts, water districts, counties, etc.)? The answer to that is a definite “No” for several reasons.First, site acquisition companies are excellent at finding the right people to talk to no matter who owns the property.
What about connecting the JLs with the carriers? It’s true that many jurisdictional entities are fairly passive when it comes to marketing their sites and may need some marketing help. The MWCs argue that a JL’s staff isn’t qualified to negotiate real estate contracts with wireless companies and that they can do it more effectively. On its face, this argument may make sense. But look at it a little closer and it falls apart. The fact is that MWCs don’t really remove the process from the JL. They don’t, negotiate, design and then turn over a completed site lease. JL employees are involved throughout the process, so in the end, they really won’t realize any significant employee time savings.
Nearly every JL has completed previous wireless leases, so the old leases are typically used as templates and JL staff is extremely competent at negotiating all types of leases. It would be great if there was a single, universal jurisdictional template, but there isn’t. Each JL is different and that eliminates the argument that a third party can be more effective or additive. Whether the carriers are negotiating directly with the JL or through the MWC, the JL staff is involved. The consultant is simply an additional layer in the process.
Bottom line: JLs are thoroughly familiar with wireless telecommunication sites these days, they’ve already negotiated and signed leases, they have a process and they don’t appear to need a MWC.
How is the middlemen paid?
In a word, handsomely, because MWCs have figured out two completely different and very profitable ways to dig deeper into a JL’s pocket.First, they sell the JL a master plan. It’s usually nothing more than a faux effort to demonstrate wireless “competence” that nets the JL a fancy-looking report that tells them what properties they own (as if they already didn’t know). Sometimes, the MWC will even offer a “free” plan if it will help them close the deal.
Second, the MWC takes a cut off the top of every lease they “facilitate” (a ten dollar word that’s defined as “getting in between the JL and the carrier). Sometimes this fee can be as high as 25% of the monthly rent FOR THE LIFE OF THE 25 YEAR LEASE. If the lease is $2000 per month, that’s $6000 per year that goes straight into the WMC’s pocket in the first year of the lease. With just a modest 3% annual escalator, that adds up $218,755.59 over the life of the agreement. Obviously, that’s a lot of money for simply helping to negotiate a lease and “manage” a 3-4 month process.
Sometimes the MWC decides that’s not enough immediate income, so it “capitalizes” the lease. The revenue streams is packaged and sold on the open market, which gives the JL a hefty lump sum payout, but creates an awkward issue for the JL.
They now have a partner in the lease that they don’t know and have never met. The MWC is no longer involved, so who manages the lease for the next 25 years? What happens when the final lease expires?
Some JLs have even been encouraged by their MWC to capitalize their own leases for pennies on the dollar. They trade a steady income stream for a one-time payment, but cede some control and lose a lot of future earnings in the process.
How does the jurisdiction benefit?
Certainly, an experienced wireless leasing manager will acknowledge that every JL is an enigma, both from a legal perspective and a process perspective. Weaving an agreement through a JL requires quite a bit of talent, a bit of luck and more than a bit of persistence.If there were an expert who could help carriers understand JLs from a wireless perspective, translate their needs and help fast track a lease agreement, that would be a person who would deserve every penny of an expediting fee.
Instead, MWCs typically create more problems for carriers and JLs than they solve.
For example, I was representing a carrier that was working with a city that was represented by a MWC. The city made one unreasonable demand after another because their middleman assured them that carriers had agreed to these requests before and they were positive they would agree to them again.
The negotiations finally failed, the site was not built and the city lost out on almost $800,000 in rent.
It’s possible, I suppose, that the MWC was simply representing the JL’s interests to the best of its abilities. But understanding what carriers have agreed to is the past in only half the equation. The MWC must also balance that historic knowledge with today’s reality. The unreasonable demands created a scenario in which the JLs’ properties could be tagged with an industry-wide label that says, “Viable only if it is absolutely necessary and there are no other options”.
And on top of that, imagine how frustrating it is for a JL to pay a steep fee to a middleman only to have him make difficult negotiation even more difficult.
Are you really an expert?
Who are these MWCs? Often, they are simply individuals from the wireless industry who switched sides of the “table”. They “learned” the industry from working for the wireless carriers and now seek to profit from them in another way.Unfortunately, all too often they interpret ad-hoc historic decisions as proof of future acceptance. Just because one carrier listened to one bad vendor and designed a $750,000 clock tower site, in the days of the cellular network boom, it should not be touted as an acceptable and reproducible design.
The recession is national and global. The carriers cannot afford to build these types of sites today. Giving JLs false hope of massive capital contributions, exorbitant rent rates and intricate site designs simply keeps the JLs from gaining additional revenue.
Based on my experience, the lack of MWC knowledge is not limited to understanding the wireless economic topography. It also extends to far more mundane areas. If you are going to represent a JL you’d better be an expert on their processes, procedures and leases. I’ve too often seen carriers led down the wrong path by MWCs, causing unnecessary friction, missed timelines and frustration. My experience tells me that MWC sites cost more to build, the lease rates creep higher and negotiations slow to a crawl.
As Einstein pointed out, “Any intelligent fool can make things bigger and more complex. It takes a touch of genius and a lot of courage to move in the opposite direction.”
How MWCs can serve their clients and save themselves
There may be a place for a middleman in this process, but a different type of middleman, a different type of MWC.Carriers are pushing deeper into the surrounding communities eager to provide the coverage and services that the community needs. Preferred sites are becoming parks, schools and other public properties located in or near neighborhoods. The JLs are clamoring for new income streams and new ways to attract or keep residents. More often than not, the new residents are young families that have lived without the tether of a landline based phone. Ask them to buy a home or open a business in a wireless unfriendly community and you’ll hear a resounding, “No, thanks!”
So, there is a valuable product to sell with producer and consumer being forced together by the constituents that they both serve. If, and that’s a big if, a middleman is going to survive in this environment, then current and future MWCs need to change the way they answer the four questions above.
No one asked, but here’s the way I think they should answer them:
Step One – Start marketing the JL-owned sites to the carriers. Passive marketing (waiting for the carriers to approach you) is insufficient for your client. Help them create a streamlined procedure and eliminate wireless unfriendly terms from their code. Speed to market serves the JL and the carrier.Step Two – Take a one-time fee or an hourly rate and leave the income streams alone. You’ll make up the loss in individual site earnings with volume. The JLs need all the money they can get right now and high rent rates (caused by adding in your 25% fee) are a primary reason carriers are walking away from public properties. Quit selling “master plans”.
Step Three – Work with the wireless carriers and the JLs to develop a win/win lease that doesn’t have to be reinvented with each proposed site. Prepare a simple process chart with agreed upon timelines for you and the JL Staff. Help move the sites forward when the projects bog down in the bureaucracy and stop being the reason a site bogs down.
Step Four – Become the expert you’ve always claimed to be. Manage your JL properties like a tower company manages its assets. Drive the carriers to your sites, not away. Bring your clients more income and help bridge the gap between wireless providers and the JLs. Considering that both entities serve the same people and need each other, you should have a fairly profitable business model.
If you don’t make these changes sooner rather than later, the JLs will come to the same conclusion as I have and simply eliminate the middleman.
Download the White Paper
Green Meets Telecom
Aug/04/2010 Filed in: Articles
Carrier Initiatives for a Greener Tomorrow and what Vendors can do to Help
By Julia Mailsos, LEED AP, CGBPZoning Manager, Core Development Services
Greening information and communications technology (ICT) networks has been driven by the reduction of energy consumption, decrease in operating costs, greater efficiency of organization and network infrastructure, and better equipment. According to Gartner Inc., a worldwide information technology research and advisory company, as of 2007, 2% of global carbon dioxide (CO2) emissions are attributed to the ICT industry. According to the Environmental Protection Agency (EPA), CO2 is the largest contributor to greenhouse gas (GHG). Since the Industrial Revolution, global atmospheric concentrations of CO2 have increased by 35%. CO2 is a gas that occurs naturally and by human activities. Natural sources of CO2 occur during the carbon cycle while harmful sources occur through actions such as burning coal, oil, and gas as well as deforestation.
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Urban Land Institute Talk to Feature John Koos
Jul/29/2010 Filed in: Events
The Urban Land Institute Orange County/Inland Empire Young Leaders Group invites you to attend a Coffee Talk featuring John Koos, Founding Principal, CORE Development Services. The program will be held on Friday, August 27th, 2010 at 7:30am at Brandman University. Cost is $10 per person.
Mr. Koos began his career as a professional urban planner, working for the City of Orange, County of Orange, Los Angeles County Metropolitan Transportation Authority, and the Southern California Association of Governments. Prior to co-founding Core Development Services, he applied his knowledge and experience to the wireless industry. At Whalen & Company, he served as the leading entitlements manager and then senior project manager, overseeing a multi-disciplinary team of professionals managing site acquisition through construction.
Over the past decade, clients have turned to him when they’ve needed seemingly impossible land use projects approved. He has also rescued projects heading for denial and transformed them into approvals, including many high profile appeals in the City of Los Angeles and the City of Santa Monica. Additionally, John has been instrumental in working with city staffs to modify city municipal codes in order to serve his clients, including the zoning codes of Los Angeles, Colton, Buena Park, Anaheim and Tustin. Consensus building with affected communities, identification of particular jurisdictional nuances, and long-standing personal and political relationships set John Koos apart from the rest.
Public service is extremely important to John, and he currently serves as the Chair of the City of Brea Planning Commission. He previously served as a City of Anaheim Planning Commissioner from 1998 to 2003 (serving as Chairman in 2001), the Orange County Transportation Authority’s Citizens Advisory Committee from 1999 to 2003 (Vice Chair, 2001-2003) and successfully ran a $111 million school bond campaign for the Anaheim City School District in 2002. John is also a member of the Orange County Public Affairs Association and holds a Bachelor of Science degree in Urban and Regional Planning from California State Polytechnic University, Pomona.
YLG Coffee Talks are designed to connect senior industry professionals with the next generation of real estate industry leaders in Orange County. Coffee Talks offer a unique opportunity for a small group of professionals, who are under 35 years old, to hear about career steps that led these senior professionals to where they are today. Speakers share personal anecdotes, market outlooks, and career mistakes and successes. Time for Q&A is also allotted to make the meeting interactive and informational.
The Urban Land Institute website
Mr. Koos began his career as a professional urban planner, working for the City of Orange, County of Orange, Los Angeles County Metropolitan Transportation Authority, and the Southern California Association of Governments. Prior to co-founding Core Development Services, he applied his knowledge and experience to the wireless industry. At Whalen & Company, he served as the leading entitlements manager and then senior project manager, overseeing a multi-disciplinary team of professionals managing site acquisition through construction.
Over the past decade, clients have turned to him when they’ve needed seemingly impossible land use projects approved. He has also rescued projects heading for denial and transformed them into approvals, including many high profile appeals in the City of Los Angeles and the City of Santa Monica. Additionally, John has been instrumental in working with city staffs to modify city municipal codes in order to serve his clients, including the zoning codes of Los Angeles, Colton, Buena Park, Anaheim and Tustin. Consensus building with affected communities, identification of particular jurisdictional nuances, and long-standing personal and political relationships set John Koos apart from the rest.
Public service is extremely important to John, and he currently serves as the Chair of the City of Brea Planning Commission. He previously served as a City of Anaheim Planning Commissioner from 1998 to 2003 (serving as Chairman in 2001), the Orange County Transportation Authority’s Citizens Advisory Committee from 1999 to 2003 (Vice Chair, 2001-2003) and successfully ran a $111 million school bond campaign for the Anaheim City School District in 2002. John is also a member of the Orange County Public Affairs Association and holds a Bachelor of Science degree in Urban and Regional Planning from California State Polytechnic University, Pomona.
YLG Coffee Talks are designed to connect senior industry professionals with the next generation of real estate industry leaders in Orange County. Coffee Talks offer a unique opportunity for a small group of professionals, who are under 35 years old, to hear about career steps that led these senior professionals to where they are today. Speakers share personal anecdotes, market outlooks, and career mistakes and successes. Time for Q&A is also allotted to make the meeting interactive and informational.
The Urban Land Institute website
Kim Nicholson, appointed to H.B. Environmental Review Board
Jul/13/2010 Filed in: Community Involvement
On July 6, 2010, Core's own Kim Nicholson, Permitting Manager, was appointed to the City of Huntington Beach's Environmental Review Board by the Huntington Beach City Council. Kim's appointment is consistent with an overarching principle at Core--to be involved in one's community. This follows Core Senior Project Manager Patty Mejia's February appointment as a Northwest Commission in the City of Pasadena.
The L.A. Broadband Summit
Jul/09/2010 Filed in: Events
The Challenges of Delivering 4-G
by Michelle Felten, Zoning Manager, Core Development Services
On June 23, 2010, the University of Southern California’s Marshall School of Business was the place to be.
That’s when the University held a Los Angeles Broadband Summit to discuss the challenges of delivering 4-G. The event was organized by the school’s Institute for Communication Technology Management (CTM) which brought together some of the industry’s brightest minds. The event was attended by over 100 industry and public sector personnel. John Koos, Founding Principal of Core Development Services, was honored to be one of the panelists. Read More...
Core sponsors L.A. Broadband Summit
Jun/14/2010 Filed in: Events
"Challenges to Delivering 4-G"
Mobile broadband adoption is reaching new heights despite the challenges currently facing the global economy. Nevertheless, the industry faces a number of challenges if it is to continue to expand, spanning the spectrum from regulatory to technological. This summit will bring together thought leaders from government, telecommunications, technology, content, and academia to discuss opportunities, challenges and potential solutions.Read More...
Second-gen political strategies need updating for 4G realities
Jun/14/2010 Filed in: Articles
As all carriers move toward 4G deployments of one technology or another, the wireless industry also needs to move beyond 2G network deployment strategies in working with local jurisdictional approval authorities. Alas, aside from some isolated attempts, there hasn't been much strategy employed at all.
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Making it happen
May/19/2010 Filed in: Articles
Thomas Edison in a conversation with Henry Ford said, “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy — sun, wind and tide. ... I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that.”
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Core receives RCR Ecosystem Award
Apr/20/2010 Filed in: Awards
Brea, California – Core Communications Group, the leading California wireless site development organization announced its honor of winning the RCR Wireless Ecosystem Award for Facilitators. The award was presented by Arden Media Company, publishers of acclaimed wireless news source, RCR Wireless. In its inaugural year, the awards highlight top achievements in 10 broad "RCR Wireless Ecosystem" segments of the wireless, telecom, media and IT market and showcase companies that have demonstrated success, innovation and excellence in the industry.
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Alex Hernandez appointed as General Manager
Apr/20/2010 Filed in: Promotions
Brea, California - Core Development Services, a professional services organization focused in the development industry, has named Alex G. Hernandez General Manager of its Planning Services division. In this role, Mr. Hernandez will be responsible for the division’s expansion and ongoing operations. Mr. Hernandez is a former Senior Vice President of TELACU Development and Senior Vice President/Managing Director of The Olson Company.
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