Another option for small cell poles- not that pretty- but quick and cheap to deploy.

With small cells, there is an ongoing controversy about the cost of the small cell infrastructure vs. the aesthetic impact of the pole.   There tends to be an inverse relationship between the aesthetic appearance of the pole and the cost- meaning better-looking poles cost more and vice versa.   The issue is that not all small cell installations require a highly aesthetic pole especially those that aren’t in the public view or are in areas where there is no permitting.   In these areas, wireless providers are seeking to build as cheap a small cell pole as possible without consideration of the aesthetics.   

To address those needs, Hemphill (a manufacturer of all types of towers and whom we have to disclose is a long term client of ours on the tower brokerage side) has designed this specific small cell pole they call a “Micro-Site” with this market in mind. Here is how they describe it:  "Micro-Sites are 20', 4" steel tube hinged towers on no dig pre-cast ballast foundations.  Foundations can be placed on a level surface with a skid steer tractor.  Installation is a very quick process.  The tower's hinged base makes antenna maintenance easy and safe." 

Small cell pole
A small cell pole concept from Hemphill

We could see this being used in rural areas, on private property, or in areas where there is no permitting.   We could also envision fleets of these being deployed like COLTs or COWs.  Hemphill will need to come up with a fancy acronym for this.    Here is a photo showing the pole bending over for maintenance purposes.

Photo of small cell with pole and solar
Hemphill's quick deployment small cells with solar panel for power

Here is another photo showing a carrier's test equipment adjacent to the pole.

Questions for SBAC Earnings Call This Afternoon

With SBAC poised to announce earnings this afternoon, and with AMT and CCI’s previous positive reporting for macrocell growth, we thought we would address the questions we have for SBAC, recognizing that some of these won’t be answered. 

  1. Have you received a substantive number of modification applications related to 600MHz from T-Mobile?
  2. What is the breakdown of new collocation applications – rural/suburban/urban?
  3. What impact are you seeing for new macrocell colocation applications in states that have approved statewide small cell legislation favorable to the wireless industry? 
  4. Is there any activity in the six FirstNet states that have opted in?  Will MLAs be amended before all states opt-in? 
  5. Is there churn on Big Four colocation leases older than five years?
  6. Are you seeing tower climbing crew shortages or backlog?
  7. Will FirstNet leases be negotiated proforma or individually? If individually, when will guidance relative to FirstNet be provided?
  8. Are you receiving increased pressure from the wireless service providers on escalators in lease amendment negotiations?
  9. With fewer tower assets being built and sold by smaller tower developers and large carrier portfolios already sold, how does SBA intend to increase or even maintain growth relative to its peers without a significant small cell or an international play?      

And just for fun:

  1. With AT&T and Verizon announcing very low churn and showing strong or record EBITDA margins this past quarter, is it hard not to laugh at them when they ask for rent concessions or escalator concessions for colocations?   

Research In Progress- Sprint vs. T-Mobile Site Overlap

We are currently working on a bespoke research project for a client where we examine the overlap between Sprint and T-Mobile cell sites.  The merger talks seem to have stalled while Softbank talks to Comcast, Charter, Warren Buffett, and anyone who will listen about merging or investing.   Nonetheless, there is still investor interest in understanding the true overlap of Sprint and T-Mobile cell sites including those that are near each other but not on the same tower.   The public tower companies (AMT, CCI, SBAC) have incorrectly tried to portray their exposure to churn by providing the number of towers they have where there is direct same site overlap.  However, in previous mergers, we have seen very clearly that the merged carrier terminates cell sites that can be as much as 1 mile away from another cell site.    If you have any interest in this research, please contact us.

Map with T-Mobile and Sprint cell sites.
Overlap of Sprint and T-Mobile Cell Sites.

5 Themes from WIA Show 2017

Graphic of sign showing two directions for tower companies and wireless carriers
Tower companies this way- wireless carriers this way.
The Wireless Infrastructure Show is the pre-eminent tower show in the US. The WIA who puts on the show consists of both tower companies and wireless carriers although it has mostly been run by the tower companies. The Show is a great show to get a chance to talk to and hear from people in the field building and operating towers and small cells. Here are the themes that we found most intriguing at the show.

1. Wireless Carriers and Tower Companies Have Increasingly Different Objectives

The dichotomy between what we heard at the show public events and what we heard directly from tower companies during the meeting is greater than we can remember. Whether related to how small cells fit in, the focus of municipal legislation, or how small and mid-size tower companies are now fulfilling the role that public tower companies did previously for wireless carriers, there is a growing divide between what were previously cohesive goals.

2. Tower Companies and Wireless Carriers Don't See Eye to Eye on Small Cell Legislation

While the WIA is supposedly an organization that works for both carriers and tower companies, the dissention between the two is most apparent in the interest both groups have in small cell infrastructure. The tower companies are quick (too quick in my opinion) to proclaim that no macro tower has ever been replaced by small cells all while intentionally failing to acknowledge the displaced Capex budgets for small cells and the declining collocation lease-up for new macrocells. The carriers secretly (or not so secretly) are pushing for small cell legislation that doesn't afford the same protections to public tower companies (or DAS companies) as it does to wireless carriers. As a result, the tower companies now have lobbyists and possibly PACs of their own to push for their own objectives but nowhere near as many lobbyists as AT&T and Verizon have retained.

3. There Are Signs of Tower Crew Shortage Already.

We asked this question over and over and received mixed responses. Some smaller tower companies (presumably those with long term relationships with vendors) indicated that they weren't having any issues. However, we heard from more than one contact that there were notable shortages especially on larger jobs. Considering that nominal repacking from the broadcast incentive auction has commenced and that AT&T hasn't yet released the flood gates of FirstNet activity, we will be watching this trend closely to determine how it impacts revenue expectations by the public tower companies and deployment activity by the wireless carriers. After closely examining the location of tower company towers in each of the 10 phases of repacking for a hedge fund client which tend to be backloaded over the next 3-year period, we suspect that the crew shortage will get worse.

4. The Impact (if not the number of towers actually relocated) of "Rip-n-replace" is Greater Than Expected.

Unsurprisingly, this really wasn't discussed at the public level at all- but 8 out of 10 of our private conversations dealt with the possibility that private tower companies are building new towers near existing towers to accommodate one or more wireless carriers relocating from the existing tower to reduce their rent. While we aren't seeing evidence of a substantive number of actual relocations as of yet, we have received an increasing number of inquiries from landowners who have been approached by one of the eight or so private tower companies who are reputed to be actively engaged in relocation efforts.

More importantly, for the first time, we heard specific and actionable efforts by the public tower companies to counter the possible threat, which tends to suggest that they are more concerned about the threat than they publicly acknowledge.

5. The Tower Industry is Optimistic About Modification Activity, but Pessimistic Regarding New Lease-Up Activity.

At least as it pertains to our checks, the tower industry seems outright gleeful about the increase in modification activity expected in the coming years. Between FirstNet, the Incentive Auction, and TMUS activity, towers should see nice revenue growth from modification activity in the next 2-3 years.

Left unsaid (or in some cases directly said) was the low expectations of collocation lease-up activity in the coming future. While FirstNet may result in some limited number of new collocations, it won't be material. Some of our tower company clients indicated that they have been seeing low lease-up while others are seeing more positive lease-up. There does appear to be a correlation between higher lease-up and to the urban/suburban/rural location of the towers. If you are looking for details on which tower companies have the most urban/suburban/rural towers and which tower companies have the fewest competing structures per tower amongst the tower companies, we recently completed an in-depth statistical analysis on this for a hedge fund client. Contact us for more details.

 

 

 

 

Sprint’s not-so-mini Mini-Macro Problem

Photo of Mobilitie Pole
Sprint-Mobilitie Mini-Macro- This One Was Permitted
Sprint’s partner, Mobilitie, allegedly building mini-macros without adequate regulatory approvals

Tickers: S, AMT, CCI, SBAC

Tags: Ken Schmidt, Wireless infrastructure

Background:

Sprint has dramatically underspent competitors over the past few years, arguing that its superior spectrum position, coupled with its densification efforts, allowed it to serve wireless customers at a fifth of the cost of VZ, ATT, and TMUS.

In our previous note “Sprint Behind the Small Cell 8-Ball (10.26.16)”, we surveyed the top 25 cities and found that Sprint was talking a lot about, but not actually deploying, mini-macros at scale. Subsequently, in “Sprint Shows Signs of Life on Small Cells (04.10.17)”, we noted that increased hiring activity by Sprint’s small cells partner Mobilitie indicated near- to intermediate-term construction activity and that we would watch construction efforts to gauge follow-through.  

Recent Checks: Who Cares About Permits

On May 2, 2017, Event-Driven, a wireless industry news site, published a report claiming that Sprint approved the construction of non-permitted sites. The report includes what appears to be an internal memo from Sprint’s Vice President of Network Development to area development managers regarding a trial enabling Mobilitie to “commence construction on new wireless sites without full regulatory compliance…”  See the Memo here.  While the memo appears authentic, we have not received independent confirmation.

Assuming the memo and its content are real, this memo jeopardizes the timing of Sprint’s mini-macro build-out and densification efforts. If Mobilitie is not following zoning and permitting regulations or is not submitting to the FCC for NEPA, SHPO, and Tribal Consultation as may be required for some new structures, this could increase the timeline for construction of new mini-macros by six or more months.

In the memo, Sprint appears to recognize this. Sprint cites that it was building 33 new mini-macros per week, but that during the trial, new builds dropped to six per week. The memo clarifies that, in the future, Sprint will require that Mobilitie follows all regulatory requirements, and concludes that the “reputational risk” to Sprint outweighs the benefits of proceeding with the trial.

Implications:

We see an increased risk to Sprint’s ability to deploy critical wireless infrastructure, and we reiterate the historically low levels of Capex Sprint has spent over the past few years as a risk to its long-term competitive position. Municipalities in which non-permitted construction occurred will scrutinize Sprint’s (and maybe the industry’s) entire infrastructure portfolio, potentially resulting in take-down orders, fines, and possibly litigation. Sprint may find that the “site count” for this permit-less trial is neutral, or even negative after reviews are conducted by local, state, and federal authorities.

Failure by Sprint and/or Mobilitie to get enough sites “on-air” could cascade in unexpected ways. For instance, Sprint may be forced to revise its network densification strategy to a more tower-centric or traditional-small-cell-centric strategy, benefiting the public TowerCos. Sprint may also be forced to rely upon leased fiber or dark fiber, which could change Opex or Capex respectively.

There are M&A implications as well. Now that the FCC quiet period has come to a close, there is a slight increase in reputational risk that could potentially drive an acquirer, or a target, toward a rival.  However, Sprint’s underspend on the Capex side makes their cash flow look more inviting potentially encouraging suitors. 

Zooming out, this memo, authentic or not, could hamstring industrywide efforts to reduce regulations related to small cell siting.  Perceptions that Mobilitie and Sprint (allegedly) deliberately circumvented municipal regulations imperils petitions to the FCC for relief from such regulations, and the industry’s desired characterization as a “utility” could take longer to achieve, slowing broader CapEx deployments.  

This note was originally published on 5/2/17 to our research clients.  If you are interested in getting more timely access to our research or would like to have a discussion on this note, please contact us.

City Says That If Mobilitie can Build a Tower in 2 Days, They Can Also Remove it in 2 Days.

You can't make this stuff up. Mobilitie allegedly erected a new mini-macro tower in Goliad, TX – which we posted about on LinkedIn previously. Subsequent to that, this story regarding Sprint approving a trial for Mobilitie to build mini-macro small cell towers without full regulatory compliance is found by reporters at Event-Driven.

In this case, Mobilitie claimed to the County they had all permits. City officials from Goliad investigate and find that Mobilitie did not build the tower in County limits but in the City. City officials then demand that Mobilitie remove the tower or they will do it for them. Mobilitie claims that they needed 2 weeks to do so- to which the City replied

“your firm constructed the tower over a two-day period, on a weekend. Surely, if you could install the tower in two days, you can dismantle it in the same time period.”

Not only did Mobilitie fail to build the tower outside City limits, they may have even failed to build it straight. As reported in the Goliad Advance-Guard, local homeowner

Harvey also claimed the tower is leaning to the north. Blueprints for the installation require a foundation 31 feet deep into the ground; Harvey who says he has had years of experience mounting poles, says a driller will hit bedrock at the 10-foot level.

County officials claim that this type of overnight tower erection was happening in other areas. See the quote below from the Advance-Guard.

“And it’s not just our community, it’s happening in San Patricio County as well,” City Alderman Nathan Lill told the group. “There’s list of other counties that have had the same issue with this exact same company. They’re building the towers at night and they’re not asking permission from anybody to do it.”

This isn't the only place where Mobilitie has been either fined or forced to remove what is alleged to be an improperly permitted tower- it has occurred in Baltimore, MD, and Denison, TX.

Mysterious Small Cell Pole Erected without Permit- Sounds like Mobilitie

In Penitas, Texas, what appears to be a new small cell pole was erected overnight near a busy thoroughfare.   There is a great news story about this in the video below.  

If you watch the video closely, you will see a small microwave dish at the top which suggests that this is a mini-macro for Sprint, possibly built by Mobilitie.   Six or so months ago, we had heard a rumor that Sprint had ordered a few thousand steel poles but because we couldn't get any other confirmation of this, we didn't go public with that information.   This specific pole looks like it was clearly pre-manufactured and cookie-cutter.  We haven't seen drawings or plan submittals that look like this though anywhere.  

In reviewing the video, it appears that the company installing it has not added panels to the top of the pole but that there are mounts for them.   There is an odd shroud that we surmise may hide additional mounts for other small panels possibly for collocation by other wireless providers.

Another indication that this may be Mobilitie is a post that someone from Mobilitie made on LinkedIn.  (I don't care to call attention to the individual- just the content of the message- he is just doing his job)  

"Went out to the field to kick off our Mobilitie build program. I had an awesome time out in the field again. I miss it from time to time but My office has been very nice to me. Any one in the SE or NE want to be apart of the build program shoot me a message or give me a call. I was able to train a crew and at the same time build 9 sites in 4 days. The money is good even with the rush of the program."

If this pole is Mobilitie's, we expect that this type of news story will occur over and over again in recent months as we wonder whether Mobilitie is attempting to get these poles up and standing prior to the FCC proposed rule-making that will be discussed at the April 20th FCC meeting but not enacted for months.   Our read of the tea leaves is that the FCC will not be granting favorable treatment to 50' and taller poles and will likely require that they meet local zoning requirements.  If this is the case, Mobilitie may be trying to get poles standing in order to avoid potential zoning requirements that may be required in the future for such poles.  We have to wonder whether the entity that constructed this pole submitted and received approval from SHPO/NEPA. The news story says that there was no permit pulled for this pole installation. 

Further potential evidence of this is that Mobilitie posted 170+ jobs across the country just over a week ago- which included construction and network related jobs.  

If our suspicions are correct, there will be many news stories like this in the coming months.  New not-so-small cell poles will be erected "overnight" and municipalities will be left trying to figure out who built them.  

 

 

Comcast Wireless 2.0: This time it could actually work.

Image of cell phone with video playing
Mobile Video by Comcast
Implications for TowerCos and Construction Companies

Tickers: CMCSA, COMM, MTZ, DY, CCI, AMT, SBAC

Tags: Ken Schmidt, Wireless infrastructure

Background:

Analysts have been speculating about the winners of the FCC spectrum auction and the implications of those wins for the better part of a year. With the auction coming to a close and an announcement expected in the coming weeks, we took a look at the implications of Comcast’s (Nasdaq: CMCSA) expected entry into the wireless market.

On 4/6/2017, Comcast announced their Xfinity Wireless plans.  Much has been written on the details of those plans so we will not rehash them here other than to say that Comcast doesn't appear to be building its own network and that the plans are primarily intended to prevent Comcast customers from churning to AT&T or Verizon.   

Timing:

The FCC’s broadcast incentive auction was finalized on March 30, 2017. The FCC is expected to publicly announce the winning bidders sometime in the latter half of April. 

Expectations:

We expect that Comcast bid on and will win spectrum in the auction. CMCSA’s Q3 2016 cash flow statement, which was released publicly on Oct. 26, 2016, includes a $1.8B line item listed as a “deposit”; presumably an auction deposit by CMCSA to the FCC. Some analysts have suggested that CMCSA plans to acquire 30MHz of spectrum on a nationwide basis.  We believe that the more likely scenario is that CMCSA will win at least 10MHz of 600MHz spectrum in areas where CMCSA already has fiber/coax infrastructure, as shown on the map below.   Alternatively, if CMCSA does win nationwide licenses, we believe they will focus any buildout of equipment in just their current markets they serve now, at least until a compelling business case is developed otherwise.   

Map showing the areas of the US where Comcast provides Cable and Broadband Services
Comcast Availability Map
Source: www.cabletv.com/xfinity/availability-map

CMCSA’s Likely Strategy:

If we are correct and CMCSA wins spectrum in existing service areas, Comcast will use this spectrum to provide both mobile and fixed wireless services primarily to augment their cable services and reduce churn from wireless service providers’ forays into OTT video.  We see their plans as an extension of the recently announced Xfinity Wireless strategy.

Buildout Details

We anticipate that CMCSA will utilize a combination of WIFI and unlicensed spectrum to provide indoor and outdoor coverage and capacity, while using 600 MHz licensed spectrum for wide area coverage.   This will enable CMCSA to reduce payments to Verizon under their MVNO relationship and allow them to provide mobile video to customers without incurring per GB charges from Verizon which are reputed to be in the range of $7/GB. 

Competitive Dynamics

CMCSA’s product won’t attempt to compete with either Verizon or AT&T in terms of breadth of coverage. However, its product will be attractive to existing CMCSA cable subscribers who aren’t highly mobile and who don't require 20GB or more of data.  CMCSA's Xfinity Wireless is set at a competitive price point, particularly to existing customers via a “quad” package.

Marginal Positives for Infrastructure Players

Companies like COMM, MTZ, and DY should benefit marginally from increased need for CMCSA fiber and coax to the premise to accommodate additional bandwidth (inside and outside the premise). However, near-term expectations should be tempered as broadcasters have up to 39 months to relinquish the spectrum.

Implications for the TowerCos

The impact on TowerCos should be muted for two reasons.  First, broadcasters have up to 39 months to “repack” and return the spectrum to the winning bidders, so any tower lease revenue from CMCSA won’t materialize immediately. Secondly, we suspect CMCSA will attempt to control OPEX going forward by limiting the number of collocations on public tower company towers and by emphasizing small cells especially those that are attached on-strand to Comcast's existing fiber and coaxial cable runs in public right of ways.   Ironically, if the Wireless Industry Association is successful in pushing the FCC to override local zoning oversight and fee structures for small cells, they could be enabling competitors to their own constituent wireless carrier and TowerCo members. Nevertheless, there could be a small bump to TowerCos once the FCC announces the auction winners and the winners include entities that don’t currently lease tower space. The possibility of another potential customer could increase investor interest in TowerCos.

Risks and Unknowns:

The risks to this note include:

  1. CMCSA could be outbid / fail to acquire spectrum
  2. CMCSA could be acquired by or merge with an entity that owns spectrum already, and therefore would not need to acquire spectrum or build it out
  3. CMCSA’s near-term WiFi-First/MVNO-second wireless strategy could prove to be unsuccessful and/or discontinued, causing CMCSA to divest this spectrum prior to it being made available from the broadcasters.

Important Disclosures

This report is for informational purposes only and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, instrument or investment product. Our research for this report is based on current information obtained from public sources that we consider reliable, but we do not represent that the research or the report is accurate or complete, and it should not be relied on as such. Opinions and estimates expressed herein constitute judgments as of the date appearing on the report and are subject to change without notice.  Any reproduction or other distribution of this material in whole or in part without the prior written consent of Steel in the Air, Inc. is prohibited.  Any projections, forecasts, and estimates contained in this report are necessarily speculative in nature and are based upon certain assumptions. No representations or warranties are made as to the accuracy of such forward-looking statements. It can be expected that some or all of such forward-looking assumptions will not materialize or will vary significantly from actual results.  Steel in the Air, Inc. accepts no responsibility for any loss or damage suffered by any person or entity as a result of any such person or entity's reliance on the information presented. 

Busted! Mobilitie Tries to Install 120′ Poles without Proper Permits AGAIN!

Cartoon image of individual with traffic cone.
Mobilitie Mistakenly Tries to Install Cell Towers Using Traffic Cone Regs
We have to start off by clarifying that this isn't an April's Fools joke- despite the timing and it feeling like one. On the eve of possible FCC review of their petition to the FCC for relief from small cell siting restrictions at the local level, Mobilitie is busted yet again trying to install 120' poles without following the proper local permitting and planning procedure.  You can see the Post-Star story here.  In the first situation, it appears Mobilitie told the fairground official for the fairground where the tower(s) were to be located that they were trying to drill "test holes" and that it was for "the utility company".   Did their contractors just not know any better?  Was Mobilitie just trying to get the structure standing before anyone would notice?  Given this isn't the first time they appear to have tried to erect a pole without a permit, one has to wonder.

At a second location, the Post-Star reported that Mobilitie appears to have erroneously applied for a county highway work permit which is only applicable for temporary infringement of the county right of way.   "Usually it's traffic cones for a driveway resurfacing, officials said."   Mobilitie indicated in response to the article that it was following the correct procedures to get permission for the towers.  One can see how this mistake may have been made- 2' temporary traffic cones are pretty similar to 120' steel poles with 3' wide bases.   (Sorry for the snarkiness, the ridiculousness of this story assuming it is accurate calls for it.)  

 

AT&T Wins FirstNet but TowerCos are the Real Winners

FirstNet Award to AT&T Confirmed: Checks Confirm Amendment Activity before Official Announcement

Tickers: T, AMT, CCI, SBAC

Tags: Ken Schmidt, Wireless Infrastructure

In Examining FirstNet Assumptions 12/9/2016, we reviewed the likelihood that AT&T would win the FirstNet RFP and the impact on TowerCos, Equipment OEMs, and FiberCos. As the time, the FirstNet award was stalled pending litigation over Rivada's claim that it was improperly excluded as a bidder. No timeline for resolution was available even as 2017 models were being fine-tuned across the Street. In our AT&T FirstNet Revisited note from 3/21/2017- we correctly suggested that the award would happen this week- which it did today.

In our previous notes, we pulled forward our expectations for AT&T's deployments of FirstNet-capable equipment by 1-2 quarters. In general, FirstNet site modification work is a positive for the TowerCos, and their 2017 guidance (given on Q4 calls) does not include FirstNet.

 

FirstNet Contract Review:

In review, AT&T gains a long-term contract to utilize 20MHz of 700 MHz spectrum to accompany the up to 5-10MHz of the 700MHz spectrum they already have across approximately two-thirds of the US. Carriers prefer low band spectrum for its ability to penetrate buildings and because it propagates further than the higher bands.

AT&T also gets $6.5B in cash from the Federal government to facilitate the development of the first responder and public safety network. This amount could be less if not all states opt into AT&T's plan, which they are entitled to do, provided they build their own statewide Radio Access Network subject to the provisions of the Act.

Lastly, AT&T also gets a "sticky" market of 3 to 5 million public safety users, which is a market that AT&T has historically underserved.

AT&T has indicated they expect to spend over $40 billion over the next 5 years to build out FirstNet. (We believe that this number includes other non-FirstNet related modifications).

 

Buildout Timeline:

Under the RFP, AT&T is required to develop a public safety network on a certain schedule. Assuming an April 2017 award date, here is how the network will be deployed:

  • October 2017: States Opt-In or Opt-Out
  • April 2018: 20% of coverage to be built out
  • April 2019: 60% of coverage to be built out
  • April
    2020: 80% of coverage to be built out
  • April 2021: 95% of coverage to be built out
  • April 2022: 100% of coverage to be built out

AT&T will be required to develop and obtain approval for suitable devices, applications, and back-end operations and infrastructure to enable FirstNet capabilities. Initially, AT&T can use its network and devices but will eventually need to develop FirstNet-specific devices and infrastructure per the requirements of the RFP. Furthermore, AT&T will need to pay FirstNet at least $5.6B over the 25-year term of the contract with annual fees starting at $80M and escalating from there.

    

Implications for TowerCos

As far back as December, we indicated that TowerCos would benefit from the award, though we cautioned that there are three buckets of sites: some AT&T sites which already have antennas capable of transmitting/receiving in the 700MHz band, where there would modifications that do not justify a rent increase or amendment; some that require antenna change outs and additional remote radio units, and some that require additional antennas and remote radio units.  In the second and third bucket, the TowerCos come out ahead.  In total, we estimate the number of AT&T macrocells that will be touched over 5 years will likely exceed 75% or more of AT&T's total site count.  

Regarding the timing of the amendment activity, our checks show that AT&T was submitting applications for modifications at the end of 2016 that include equipment suitable for FirstNet—months before today's FirstNet announcement.

 

Implications for Landowners and Rooftop Owners

Landowners with AT&T towers on their property, for the most part, won't receive any additional rent due to FirstNet activity.   If AT&T ends up hardening sites by adding generators or backup power, there may be some lease area expansions which could yield additional rent.  Building owners with AT&T rooftop leases may see additional revenue as AT&T needs to modify or expand existing equipment and antennas on the roof.  For those building owners who previously agreed to AT&T's E911 language that they were inserting into their leases that states that AT&T is allowed to make changes to sites if needed for E911 purposes, there may not be the opportunity to charge additional rent for changes even if they exceed the current footprint of the equipment area.

 

Minor Boost for Rip-n-Replace Towers

Ironically, a subset of activities related to FirstNet deployment could cannibalize existing TowerCo revenue. As discussed in our Rip-n-Replace note of 3/22/17 where we discuss the increasing willingness of wireless carriers to relocate equipment from existing towers, the more that AT&T modifies or adds equipment, and particularly in cases where there are changes to the structural loading on an existing tower, the more an adjacent alternative site may make sense.

The more equipment that AT&T needs to add, the greater the structural loading on the tower. The greater the structural loading, the more likely that structural modifications to the tower will be required. The more that structural modifications are needed, the higher the pass-through to AT&T. The higher pass-through, the greater the incentive for AT&T to relocate to a newly built adjacent tower with surplus structural capacity.

 

Want to Know More?

We have strong opinions on who stands to gain from the FirstNet award to AT&T.  Give us a call– we can break down which equipment manufacturers, which construction and engineering companies, and which tower companies are best positioned for upside from FirstNet.