Property and equipment:

12 Months Ended

Dec. 31, 2017

Property and equipment:

Property and equipment:

2. Property and equipment:

        Property and equipment consisted of the following (in thousands):

	December 31,
	2017			2016
Owned assets:
Network equipment	$	510,327		$	476,786
Leasehold improvements		200,184			182,734
System infrastructure		114,046			102,502
Software		9,701			9,523
Office and other equipment		14,591			13,735
Building		1,334			1,171
Land		113			99
		850,296			786,550
Less—Accumulated depreciation and amortization		(680,114	)		(621,162	)
		170,182			165,388
Assets under capital leases:
IRUs		383,460			349,920
Less—Accumulated depreciation and amortization		(172,360	)		(153,667	)
		211,100			196,253
Property and equipment, net	$	381,282		$	361,641

        Depreciation and amortization expense related to property and equipment and capital leases was $75.9 million, $75.2 million and $70.5 million, for 2017, 2016 and 2015, respectively.

        The Company capitalizes the compensation cost of employees directly involved with its construction activities. In 2017, 2016 and 2015, the Company capitalized compensation costs of $9.7 million, $8.7 million and $8.3 million respectively. These amounts are included in system infrastructure costs.

Exchange agreement

        In 2017, 2016 and 2015 the Company exchanged certain used network equipment and cash consideration for new network equipment. The fair value of the new network equipment received was estimated to be $9.1 million, $15.5 million and $17.9 million resulting in gains of $3.9 million, $7.7 million and $5.3 million respectively. The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3).

Installment payment agreement

        In March 2015, the Company entered into an installment payment agreement ("IPA") with a vendor. Under the IPA the Company may purchase network equipment in exchange for interest free note obligations each with a twenty-four month term. There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term. As of December 31, 2017 and December 31, 2016, there was $10.7 million and $5.5 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment. The Company recorded the assets purchased and the present value of the note obligation utilizing an imputed interest rate. The resulting discounts totaling $0.4 million and $0.3 million as of December 31, 2017 and December 31, 2016, respectively, under the note obligations are being amortized over the note term using the effective interest rate method.