The U.S. Senate has passed the National Defense Authorization Act (NDAA), which includes full funding for the "Rip and Replace" program. This development has significant implications for the wireless industry and cell tower landlords across the country.

What is the "Rip and Replace" Program?

The Secure and Trusted Communications Network Reimbursement Program, commonly known as "Rip and Replace," aims to remove and replace telecommunications equipment from companies deemed national security threats by the U.S. government[1]. Initially, Congress allocated $1.9 billion for this program, but it fell short of the estimated $4.98 billion needed[1].

Key Points for Cell Tower Landlords

1. Increased Funding: The NDAA authorizes an additional $3.08 billion, bringing the total funding to $4.98 billion[1].

2. Spectrum Auction: The funding will come from an auction of AWS-3 spectrum, with the FCC granted limited authority to conduct the auction[1].

3. **Rural Focus**: The program primarily benefits small and rural telecommunications carriers, which could lead to increased activity in these areas[1].

Potential Impact on Tower Construction Activity

This substantial funding increase is likely to spark a surge in tower construction and equipment replacement activities across the country, particularly in rural areas. Here's what cell tower landlords can expect:

1. Increased Demand: As carriers rush to replace equipment, there may be a higher demand for existing tower space and new tower locations.

2. Equipment Upgrades: Existing towers may see significant equipment upgrades or replacements, potentially leading to lease renegotiations.

3. Rural Expansion: With a focus on small and rural carriers, previously underserved areas may see increased tower construction activity.

4. Tight Timelines: Carriers will likely work on accelerated schedules to meet program deadlines, potentially leading to more frequent site visits and modifications.

How Landlords Can Capitalize on This Opportunity

While landlords cannot directly access the "Rip and Replace" funding, they can position themselves to benefit from the increased activity by charging Carriers and TowerCo’s for parking, staging and constructing outside the Lease Premises. For Landlords who want to be prepared we suggest:

1. Stay Informed: Keep up with local carriers' plans for equipment replacement and network upgrades.

2. Prepare Your Property: Ensure your property is ready for potential new equipment or tower construction.

3. Review Lease Terms: Consider reviewing and potentially renegotiating lease terms to accommodate new equipment or increased site access.

4. Network with Carriers: Reach out to local carriers to express interest in hosting new or upgraded equipment.

5. Consult Experts: Consider working with telecom consultants to understand the technical requirements and potential lease implications of the "Rip and Replace" program.

CSA has created a Cell Site Optimization Program designed to Assess, Prioritize then Execute a plan to help landlords maximize the value of their lease while also protecting their property and rights. For more information call 213-986-7620, email info@cellsiteappraiser.com or click here to request and receive the info you need in Cell Site Appraisers FREE Cell Site Optimization Guide.

“Rip and Replace” funding represents a significant opportunity for the wireless industry and cell tower landlords. By staying informed and proactive, landlords can position themselves to benefit from the increased activity and investment in wireless infrastructure.

Citations: [1] https://www.rcrwireless.com/20241218/policy/rip-and-replace-funding

Since 2010, wireless carriers AT&T, Verizon, and T-Mobile (Carriers) have slowly divested out of managing and or owning cell towers by way of Master Lease Agreements (MLA’s). MLAs provide a means for Carriers to offset the costs of upgrading and improving their networks (such as upgrading equipment from 4G to 5G) by having tower companies (TowerCo’s) pay lump sums upfront in exchange for the ability to manage and or own out right cell towers the Carriers now own.

On paper, this sounds like a great deal for the Carrier and TowerCo but as you’ll see it’s clearly a nightmare in the making for Landlords who want and deserve to receive market lease rates. 

So, let's break down the Verizon/Vertical Bridge deal to see what Landlords can expect to get.

What are the key points of this deal? 

The deal is a game-changing transaction between Verizon wireless and Vertical Bridge, the largest private owner of communications infrastructure in the US. Here's what you need to know:

• Vertical Bridge gains exclusive rights to lease, operate, and manage over 6,300 wireless towers across all 50 states.

• The deal is valued at approximately $3.3 billion, including certain commercial benefits for Verizon.

• Verizon will lease back capacity on the same towers, at a lower rate and escalator for 10 years, with options to extend up to 50 years.

• This move aims to help Verizon reduce tower-related costs and increase vendor diversity; so no one tower company or entity can own a majority of Verizon’s cell site locations.

• In exchange, Vertical Bridge gains the right to sublease all 6,300 towers and nearly all of the additional rent less revenue share owed to landlords that have revenue share.

• Vertical Bridge's portfolio now includes over 500,000 sites, with 17,000 owned and master-leased towers.

Why should Landlords care about this deal?

Verizon has basically handed the keys to Vertical Bridge. The deal allows Verizon to lease back on towers assigned to Vertical Bridge often at a lower rate than what landlords receive now which means Vertical Bridge will have to pay the difference to landlords. 

In exchange, Vertical Bridge will get 100% of any additional tenants added to the towers less what they have to pay landlords, so what this means Vertical Bridge now has an overwhelming incentive to do everything they can to increase profits by reducing and/or eliminating the rent and rights landlords have now. 

So how will Vertical Bridge turn a profit on this deal?

Of course, Vertical Bridge will be looking to add new tenants to towers wherever possible but they may also contact affected Verizon landlords about reducing or eliminating their rent by way of rent reductions or lease buyouts. Additionally, Vertical Bridge could be looking to add clauses into existing cell site leases that ultimately hurt landlords. 

Telemarketing companies such as Blackdot and MD7 are often hired by tower companies to bully landlords into adding rights of refusal, non-compete and or confidentiality clauses into their leases. In other cases, landlords are offered one time signing fees to extend and amend their cell tower lease.  

What can happen if a landlord falls prey to common MLA tactics?

Unknowing landlords could be convinced to sign away their rights for pennies on the dollar without fully understanding the true value of their cell site lease. Oftentimes, a landlord will be assured by a trusted advisor like their attorney who often knows little if anything about cell site leasing to take a deal that will not be in the best interest of the landlord in the long run.

For example, a recent client contacted CSA after signing a lease extension that included a right of refusal (ROFR) that required the Landlord to contact the TowerCo before they agreed to sell their entire property to any 3rd party.

Soon after, the Landlord received an offer from a buyer to purchase his entire property at a premium, so without hesitation, the client accepted the offer and went immediately into escrow.

The Landlord thought the ROFR only applied to offers to buy the cell tower lease but later found out the hard way, the ROFR covered his entire property, so even a property offer would have to be first reviewed by the TowerCo then matched or refused by the TowerCo before the Landlord could sell to a 3rd party. 

During the due diligence process, the buyer contacted the Landlord about the ROFR and the Landlord had to admit he did not contact the TowerCo for consent before accepting the buyer's offer.

As a result, the Landlord not only lost the sale of his property but the TowerCo threatened to sue the Landlord if he did not pay restitution and give the TowerCo a significant rent reduction. If this sounds like extortion, it is about as close as you can get and you want to avoid this happening to you at all cost.  

So, what can I do to protect my income and my property when MLAs occur?

Here are five things CSA recommends you do if you are affected by a MLA:

1. Review Your Lease - Make sure you understand your current landlord rights as they relate to assignability, permitting, construction, indemnification and property taxes.

2. Follow Assignment Requirements - Make sure your tenant follows the lease assignment requirements. If lease assignment requires your written consent, DO NOT GIVE ANY WRITTEN CONSENT UNTIL YOU KNOW YOUR SITES TRUE VALUE AND YOU RECEIVE THAT VALUE AS A CONDITION FOR YOUR CONSENT.

3. Confirm Sublease Requirements - Remember if Verizon assigns your lease to Vertical Bridge then stays on the tower that makes Verizon a sublease and you could be due additional sublease rent. If so, demand additional rent for the additional sublease.

4. Update Insurance - If Vertical Bridge is now your tenant then make sure they provide a certificate of insurance naming you as additionally insured. 

5. DO NOT SIGN OR AGREE TO ANYTHING WITHOUT A CELL SITE PROFESSIONAL - Signing a simple authorization letter could cost you thousands of dollars or cause you to lose control of your site or property so beware have all documents reviewed BEFORE you sign.

Additionally, our CSA analysts, each with over 20 years of cell site leasing knowledge have  developed a Cell Site Optimization (CSO) plan designed to help Landlords defend themselves and their property against the perils related to Master Lease Agreements. 

Each CSO plan calls for CSA to help Landlords in Assess, Prioritize then Execute a plan that protects while increasing the value of cell site leases for Landlords like you.

So, if you are interested in reading and hearing more about how you can benefit from a customized Cell Site Optimization plan:

CALL NOW! 213-986-7620 and request our FREE Cell Site Optimization guide 

Final thought

Master Lease Agreements, rent reductions and ROFR’s are just a few of the things Landlords need to know about wireless leasing and for that reason we would like to remind you, at CSA,

Our Knowledge Is Your POWER!

Don’t Agree To Sign Anything Without A CSA Professional On Your Side

Best Regards,

Clarence McDowell

Managing Partner, Cell Site Appraiser

PS. We’re here to help! Call 24/7 213-986-7620 or email us at info@cellsiteappraiser.com