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Fixed Wireless Business

It's Not a Kickback

Members of the ISP-Wireless list discuss how to pay landlords for access to tenants without breaking the law. Keep in mind that the landlord is also bound by law.

[September 17, 2002]

On the ISP-Wireless list in August, CW inquired,

"We're negotiating access rights to become the 'preferred' broadband provider for some landlords. How exactly does one structure the agreement for the landlord so they can receive a percentage of revenues? Since direct kickbacks are illegal, do you term the landlord as a 'reseller'?"

A number of respondents offered advice on the right way to word the deal:

[JD advised] "Never call it a kickback: initiate a revenue-sharing agreement. That is what we do with apartments when we have to."

[AM added] "Our agreements in these cases are often similar to rental agreements—renting space for our equipment, paying for power, access to the complex, etc."

[MC suggested] "Have the landlord sign up as a reseller for you, and just let them collect the one-time bounty for your services."

[TD noted] "You could sign them up as a sales agent or you could state that the commission per client is actually a fee for renting space for the wire to their suite, or for compensating the landlord for his inconvenience in working to accommodate your needs in the building."

Others discussed the difference between a kickback and a revenue sharing agreement:

[MK explained] "Kickbacks are the result of refusing to allow access without payment. Revenue sharing is where the person is actively involved in getting and keeping the customer, and gets nothing if nobody signs up. It's a fine line, but what's illegal is to demand money before you can do business."

[DN added] "Giving a landlord a percentage is not a kickback: it's a variable rent for the space you need for your equipment. A kickback is when you give someone a payment for doing something unethical, like giving free equipment in exchange for recommending your product."

[AM observed] "Paying someone rent or royalties is not a kickback. When a user pays you and you pay a landlord, there is no one kicking anything back to the same person. A kickback is when person A gives money to person B, and person B gives some money back to person A (usually under the table). They are illegal when the money wasn't person A's to begin with (such as a corporate purchase)."

Still others suggested that, in the situation described, there's no need to be concerned about kickbacks:

[DN offered] "You can't have a kickback in this situation, because there is no published or 'normal' price: you are working out a deal that suits both of you. It's called doing business."

[CZ added] "A payment made to an owner of property is not illegal or unethical. If I own it, and you want use of it then I have every right to ask for an agreed price."

MK pointed out that the difference ultimately lies in who's asking for the money:

"If it's the manager, not the owner, who wants the money, then you are dealing with a kickback. Regardless, it's generally a pretty good idea to consult a lawyer when any third party says it has a right to place itself between you and your customer."

—End