Special Designation Legal for Internet on Common Property?

Jan 6, 2014

To The Board of Directors
S-bag Lake Resort Homeowners Association

During the December special SLohA meeting at which B S presented his proposal for a community-wide internet system, I took the opportunity to raise a number of questions regarding that proposal. I now want to take the opportunity to share my thoughts with the SLohA Board of Directors.

While I am generally in favor of a community-wide internet system, I believe Mr. S can give us much better terms. Despite his representation that he is "making no money" from the present K C N service arrangement to individual customers, I believe he is receiving a sizable amount of outside revenue. During a heated exchange with a resident at the aforementioned meeting, Mr. S let it slip that, in addition to broadcasting K C N's internet signals from his the towers on his property, he is also providing a "feed" for Verizon cellular. Based upon my experience in municipal government, I am familiar with how much cellular companies are willing to pay a city for the privilege of installing a cellular transmitter on our water tower or emergency communications tower. The same is true for private property owners who allow the installation of cellular transmitters on top of their office buildings, barns, etc.

But that begs the question: Under the rules and regulations of S-bag currently in force, is S legally able to erect these towers on his property? I cite paragraph 11 of the S-bag Owners Association Revised Covenants and Restrictions dated March 31,
1989:

"No commercial activity of any kind sH all be conducted on any site, except as provided in the Regulations, and those designated by the Association for commercial use"

To my knowledge, no "special designation" of Mr. S's property for the construction
of a Verizon repeater tower has ever been approved by the Association. This is critically important because of the leverage it provides us in negotiating a service agreement with K C N for a community-wide internet system. Borrowing again from my experience in municipal government, it is a longstanding legal precedent that local cable television companies are required pay a "franchise fee" to the city or village in return for allowing the company to run its cable along public right-of-way. Since K C N is
housing its broadcast towers within the Resorts jurisdiction (some of whom are on
SLohA's common land), we should rightfully be receiving compensation. As an
alternative to monetary compensation, however, I propose that K C N provide the resort
free basic internet service.

What do I mean by basic. Although K C N currently supplies ultra high-speed download service, it is far more than many of us:need. A basic download speed of
512KPS is perfectly adequate for email and web browsing (but not for streaming video). Moreover, the lowering of speed would also lower K C N's operating costs because it would not have to purchase as much bandwidth from the primary source (Verizon? Brighthouse?). Now, for those who wish higher speed service, they can enter into separate service agreements with K C N . This a-la-carte arrangement is much the same as the internet plans offered by the telephone companies via DSL lines. K C N would be free to price its expanded service options based upon its operating costs - including the cost of purchasing additional bandwidth from the primary supplier.

The other reason for enforcing Paragraph 11 of the S-bag covenants is the protection
it provides us in case K C N opts to sell its operations. Just as in the case of the cable company franchise agreement with the local cable company, the S-bag Owners Association would be in a position to prevent a massive•price increase by the new owner. If the proposed price increase is too steep, the association can threaten to revoke its permission to allow the existence of broadcast towers in accordance with Paragraph 11.

Finally• I strongly suggest that- prior to entering any agreement with K C N- we should seek the services of a consultant with expertise in this technology. We have only K C N's word, for instance, that under the present structure it is not making a profit. I believe in President Reagan's wise admonition ''trust but verify". In all my years of negotiating with local developers over the sale of land in city-owned industrial parks, I cannot remember one case where the developer didn't claim•that the terms we offered
me the project financially untenable. I didn't consider them to be liars. It was just how the game was played. But, fortunately I would always have an expert consultant "on my
side of the table, such as a real estate attorney, who could counter their claims. •• Considering that the current proposal Mr S has put on the table would cost the Association over $140,000 annually, it would be highly prudent of us to spend a few thousand on outside help during negotiations.

Thank you for your attention.
J H
14 Pink Lady Lane