Our Predictions for the Wireless (and Wired) Industries in 2018

Every year, we put together our prognostications for the coming year. This year, we are obviously a little late – primarily because the beginning of the year has been very active for SITA. In the final days of 2017, I drafted a “State of SITA” email to our staff, predicting that 2018 would be the Year of More. And that’s just what we are seeing – more of everything. More proposed new leases – both from carriers and tower companies looking to build new towers. More amendment activity on existing sites as all four carriers are actively pursuing applications for site mods. More lease extension offers and more lease buyout offers with more rent or more money, respectively. More of our clients are seeing substantial offers to acquire their leasehold interests at a premium. So, what does that mean for 2018?


1. 5G Becomes Closer to Reality and Farther from Carrier Fiction.












Anybody else annoyed with 5G hype? Seems like you can’t look at the trade magazines or TV ads or newspapers without seeing an article or ads with one carrier proclaiming why their 5G vision is better than the others. Hint: 5G has the same potential for each carrier. Their visions are different because the carriers don’t have the same spectrum or fiber. With 5G being so encompassing in terms of wired and wireless technologies, it necessarily will be deployed differently for each carrier.

Guess what, each cable company, fiber provider, and wireless internet service provider will have their own distinctive brand of 5G. But the good news is that instead of the vague marketing hype, we are already starting to get more specific but still preliminary information about the 2018 and 2019 strategies early in 2018.

This trend will continue when we start to see actual deployments. As previously stated, we are seeing more applications for site modifications on behalf of our clients. Some of these actually have pre-5G equipment specified, and, as the year goes on, we will see actual 5G equipment being deployed. While it may be pre-standard, it is critical to remember that 5G is an evolution, not a revolution. (Bring on the comments.)


2. Whatever the G, It Still Means More Macrocell Activity.












Every year around this time, we are asked how this year stacks up against the previous year in terms of carrier activity, especially as it pertains to tower companies. Most years, we tend to be optimistic, but this is probably the year we are most optimistic about.For the first time in years, we are seeing actual, repeated, and specific activity by Sprint. Vendors are actually hiring to staff Sprint projects, applications are coming in, and projects that were on hold for years are coming back up.

Landowners are being contacted by Lendlease on behalf of Sprint and by Sprint directly. Mobilitie is actively pursuing small cell applications (the normal way this time). This is on top of AT&T FirstNet activity (2H 2018), T-Mobile rural expansion, and Verizon’s continued steady-eddy development. It’s a good year to be a tower company other than projections #3 and #7 below.


3. And Carriers Are More Willing Than Ever to Consider Alternatives to Existing Towers.













Unfortunately, we will start to an increase in cell tower lease terminations (i.e. churn) in the not so distant future, just as much of the Clearwire, Cricket, MetroPCS, Nextel, US Cellular lease terminations is coming to a close.

Why? Because carriers are less willing to accept high-dollar sites, especially when they have build-to-suit tower companies that are willing to make questionable investment decisions to build new towers next to existing towers. Furthermore, structural capacity issues of existing towers will strain the ability of wireless carriers to make site modifications without substantive structural modifications required to the tower. Rather than put more money into OPT (other people’s towers), the carriers will see the opportunity to build another tower adjacent to the existing tower, thereby limiting their future Opex and pushing Capex to an asset they own.

Still thinking that this won’t happen in scale? What we are seeing day to day suggests otherwise. Fortunately, the terminations may not immediately impact TowerCo revenue, but they will in the future as the underlying leases expire or to the earliest date that they can be terminated. Already, some tower companies like American Tower are starting to tell landowners that they can’t offer terms as good as previously on lease extensions because they have received non-renewal notices from AT&T. (As an aside, we also expect to see more announcements similar to that of Crown Castle’s, where they extended some of their underlying Master Lease Agreements in order to prevent further lease terminations.)


4. Fiber, Fiber, Fiber.

More fiber deployed. More glass ordered. More puffery by some carriers of how they can handle backhaul through agreements with cable companies. More dark fiber than previous years. More fiber redundancy.

The carriers who don’t have fiber will find themselves rushing to deploy it as 5G becomes closer to reality and customer expectations are measured against wireless carriers that have dense fiber. Having 5G-capable wireless transmission equipment won’t mean much if the end user can’t use 5G because of too many users and too little fronthaul/backhaul. Already, Verizon has hinted that 2018 Capex will be skewed more toward fiber than 2017. AT&T announced in March that they anticipate that fiber deployment will accelerate, which was partially due to the 2019 deadline for deployment to 12.5 million homes as a result of an agreement with the FCC during the DirecTV acquisition.Expect the same from other carriers. We had this same projection in our 2017 projections, and we expect this year to be even better.


5. Edge Computing Relies on Fiber – and Small Cells.












Not familiar with edge computing? To quote Wikipedia, edge computing “is a method of optimizing cloud computing systems by performing data processing at the edge of the network, near the source of the data. This reduces the communications bandwidth needed between sensors and the central datacenter by performing analytics and knowledge generation at or near the source of the data.This approach requires leveraging resources that may not be continuously connected to a network such as laptops, smartphones, tablets, and sensors.” In other words, it puts computing resources closer to the end user.

What is required for edge computing? The oversimplified answer is that three things are needed: fiber, power, and a secure location for equipment. Guess who has all three of these in spades: wireless providers, cable companies, fiber entities, and tower companies. Expect to see a flurry of announcements about edge computing in 2018, with intensity ultimately rivaling that of 5G announcements. But, like 5G, these will still be more hype than reality, at least for another year or two.


6. But the Road to Deploying Small Cells Isn’t Settled Yet!












After a series of victories last year in statewide legislation, the carriers and tower companies suffered a setback in the vetoing of similar legislation in California. Industry favorable legislation will be introduced again in CA and perhaps passed if the wireless industry is willing to back down the totality of their demands. However, cities are starting to see what good small cell deployment looks like and what bad small cells deployment looks like.

More information is available about small cells that are more positively received or just not noticed, and those installations that, on their face, are objectionable. Some short-sighted companies (not just one that starts with “M”) have deployed some really bad small cells/macros/mini-macros on utility poles and on new poles in the Right of Way (ROW). (See the City of Santa Rosa vs Verizon – which suggests that just because you have the right to install something ridiculous doesn’t mean that you should.)

Cities are becoming more intelligent and will start to demand attractive small cells. I suspect that we will see more intelligent and organized opposition to statewide legislation while simultaneously seeing the wireless industry increase the pressure through lobbying and contributions to state legislators. We will also see some state legislators cave to pressure from their constituents when the above-mentioned short-sighted companies install ugly small cells in front of people’s homes and businesses. We are already seeing municipalities draft contracts that protect their interests better, even in states with small cell legislation. Don’t get me wrong, I suspect that the industry still comes out ahead at the state and federal level overall, but we will see municipalities be innovative as well in how they maintain their ROWs.


7. All of This Activity Requires More Capable Workers, Which the Industry Simply Doesn’t Have.

The only thing that will hinder the Year of More is not enough qualified tower crews. In our regular discussions with industry vets, the same topic comes up: where can we find tower crews to do the work?

With AT&T’s FirstNet commencing in earnest, T-Mobile’s continued 600MHz build, Sprint’s tri-band overlays and new macros/small cells, and Verizon’s steady macro and small cell deployment, there simply aren’t enough tower crews to go around. Expect to see announcements in earnings calls about why rollouts aren’t happening as planned due to labor shortages.

The irony is that the wireless carriers helped cause this labor shortage by driving the price down so effectively that many tower construction companies found other non-wireless work rather than accept sub-standard terms.


8. 2018 Will be the Year for Landowners to Secure Their Cell Tower Lease Revenue.

2017 was the first year where we started advising our clients that securing their cell tower lease revenue was more important than maximizing it. The wireless service provider toolbox has more tools in it than ever before to relocate/terminate high-dollar sites. That’s not to say that the carriers won’t continue to pay top dollar for unique locations, just that some locations that were previously unique are no longer unique.

That means that smart landowners/building owners will endeavor to understand the risks to their cell site/cell tower lease, especially if the lease rate being paid for the cell site is significantly higher than average. Depending on the location and the availability of other options (small cells, new build-to-suit towers, cell splitting), you may find that it is better to sell the lease or accept some small concessions in order to gain long-term security in your lease.


The year of 2018 offers a wide range of opportunities and uncertainties. Devil is in the details, and it's all about how you play your cards. If you're a wireless sector investor and want to talk through our projections and how they might impact the wireless stocks, we can be engaged for short discussions or more in-depth analysis of the sector.  If you are looking for real-time data about what is actually happening at the collocation lease level or with equipment modifications- we have it in spades.  
If you are a landowner or an existing client of Steel in the Air, please get in touch to schedule a free consultation to discuss your needs and if/how we can help. You can reach me on LinkedIn with a message or contact us here.


What’s Happened So Far in Wireless in 2017?

As we look back over the first half of 2017, there has been much non-activity on the merger front. Many people (myself included) expected greater merger and acquisition activity but other than a few fiber related transactions, nothing material has transpired. Sprint and T-Mobile are still separate companies, and DISH has not merged with or been acquired by anyone. So here are the most important stories or events of the year on a carrier by carrier and tower company by tower company basis so far.


1. AT&T is awarded FirstNet, but benefits still haven’t flowed down to tower companies, original equipment manufacturers, and landowners. There has been much discussion, but there haven’t been any substantive modification or new build activity as a result by AT&T. In short, we are all just waiting for the project to start in earnest. However, when it starts, it will start not with a whimper…


2. In the more of the same category, Verizon is refocusing its efforts on reducing leasing costs. So far, we have seen Verizon choosing not to join the very public and vocal opposition to traditional tower leasing models as AT&T, T-Mobile, and Sprint. However, they have hired Accenture to help them use standard renegotiation efforts like those from Md7 or Blackdot to try to renegotiate leases. What Verizon has done very effectively is push for 2% annual escalation or less in their new leases. The benefit of this change may be tempered though by their site acquisition agent’s willingness to increase the base lease rate to adjust for the reduction in escalation. We also see increased activity by Verizon to build their towers next to existing public tower company towers to avoid collocating on those towers.


3. While this is not that much of a surprise, T-Mobile has been killing it, and their network performance is increasing. Churn is historically low, cost of services is low, subscriber growth is high, and they have started building out 600MHz. Wouldn’t want to be one of the other wireless carriers trying to compete with the T-Mobile marketing juggernaut- T-Mobile gets away with snarky while when their competitors try it, it comes across as desperate (Sprint) or stodgy (AT&T and Verizon). We already see increased activity from T-Mobile modifications and new towers, and they are not even really started yet.


4. Sprint deserves kudos for their turnaround especially on their cost cutting having demonstrated profitability for the first quarter in the last 13 or so. Of course, they may have had more to cut than the other wireless carriers. Sprint also deserves accolades for their stream of quarterly earnings calls where they try to explain how they can continue to underspend their competitors quarter after quarter, year after year, with new technological innovations like HPUE, MagicBox, Spark, and Mini-macros. (Hint- they cannot as evidenced by Sprint’s Capex increase last quarter of over 100% from the previous quarter. Expect to see similar or higher Capex in this quarter from Sprint and perhaps even higher in the last quarter of the year). Equally enjoyable is the timing of all of the leaks related to potential mergers and acquisitions of Sprint that somehow happen to occur just before a bad earnings report or after a bad news story comes out. (Not saying that Sprint leaked the stories, just pointing out the odd but consistent timing). The good news with Sprint is that it is never boring. I do have to commend Sprint on their Double the Price pop-up stunt- snarky worked in this case.


5. All four carriers have gone Unlimited. Following T-Mobile’s lead, the other wireless carriers each have moved to unlimited plans. As a result, overall wireless service revenue has declined. This “race to the bottom” appears to have stabilized. Before you feel too bad for the wireless carriers, remember that each of them generated over 25% EBITDA (profit) margins this past quarter from wireless and Verizon has one of its best quarters ever regarding profit margin. If revenue is declining, how can profit margin be increasing, you might ask? The wireless carriers have been squeezing contractors and vendors to reduce their operating expenditures all while increasing the efficiency of their wireless networks. Despite attractive profit margins, expect further cost cutting and a renewed emphasis on negotiating better leases with landowners and tower companies as shown in the articles on our blog below.


6. Crown Castle has had an active year purchasing fiber, announcing the acquisition of both Wilcon and Lightower Fiber Networks and completing the acquisition of FPL Fibernet. Crown sees a vision of a small cell world where fiber is critical to being able to persuade wireless carriers to place their small cell infrastructure on Crown fiber and poles. We would agree with them but would temper expectations slightly due to the next point below and due to efforts by wireless carriers to deploy their own fiber networks.


7. The wireless carriers collectively have been successful at convincing eleven states to pass bills that limit local review of proposed small cells, prohibit the forced collocation on existing poles, and reduce the lease rate that cities can charge for attachment rights to existing poles or to the public right of way. Some of the most populous states (Florida, Texas) have these bills in effect or about to go into effect. We hear of increased litigation already filed or planned to oppose these statutes, so expect more controversy on this legislation in coming months. Conceivably, these statutes will reduce the number of small cells leased on private property and could in isolated situations allow for termination of existing macrocells. In the eleven states that have passed such legislation, expect to see small cells and new poles popping up across urban areas in the very near future.


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.

Scandinavian Vacation Slideshow (Of Cell Sites and Towers)

My wife and I visited Denmark, Sweden, and Norway while attending a friend's wedding in Denmark.   While there, I took a good amount of photos of cell sites in the three countries as we walked or biked in each of the countries.  While my wife is a professional photographer and carried her DSLR with her, I took all of these with an iPhone much to her dismay.  To her credit though, she pointed out rooftop sites and towers that I didn't see even though I know it bored her to death. If you watch to the end, I included some observations on wireless infrastructure in Scandinavia.   Wireless was cheap, plenty of MVNOs, and data speeds were generally above 25MB/s up and down.   

Small Cells Aren’t Like a Pizza Box

Pizza Box Small Cells
Number of Pizza Boxes that Fit in 6 Cubic Feet or 28 Cubic Feet


The wireless industry has been pushing the fiction that small cells are the size of a pizza box.   Here is a quote in a Wireless Week article– 

"Americans will benefit tremendously from innovations like 5G and the Internet of Things, which require more small cell facilities – often the size of a pizza box – to build a denser network," CTIA's assistant vice president of regulatory affairs Scott Bergmann said. "Today’s action by the FCC recognizes the minimal impact of these facilities, but there is more work to be done. We must streamline infrastructure policies at all levels of government so that wireless providers can rapidly deliver the next generation of products and services to consumers.”  (emphasis added)

Furthermore, as reported by Wireless Estimator here,  "In the CTIA presentation, the trade group said that networks can now be extended on (sic) common structures like street lights and utility poles and that there will be 300,000 “pizza box-sized small cells needed in [the] next 3-4 years.”


While some small cells are the size of a pizza box- many aren't.   The industry clearly doesn't think so either despite their public pronouncement otherwise.   In the newly proposed state legislation in 20+ states, there is language that allows the wireless industry to install up to 6 cubic feet of antennas and up to 28 cubic feet of equipment on each pole.  For example, see this language from the recently passed Virginia statute.   

"Small cell facility" means a wireless facility that meets both of the following qualifications: (i) each antenna is located inside an enclosure of no more than six cubic feet in volume, or in the case of an antenna that has exposed elements, the antenna and all of its exposed elements could fit within an imaginary enclosure of no more than six cubic feet; and (ii) all other wireless equipment associated with the facility is cumulatively no more than 28 cubic feet in volume, or facilities comprised of such higher limits as established by the Federal Communication Commission. The following types of associated equipment are not included in the calculation of equipment volume: electric meter, concealment, telecommunications demarcation boxes, ground-based enclosures, back-up power systems, grounding equipment, power transfer switches, cut-off switches, and vertical cable runs for the connection of power and other services."

In other words, the industry likes to present to municipalities that small cells are the size of a singular pizza box because it makes a compelling story.   However, the want to give their members the right to install substantially larger equipment than would fit in a single pizza box.   

Please feel free to use this image without attribution.   Also, for another good representation of what 28 cubic feet represents- see http://wireless.blog.law/2017/04/22/california-sb-649-big-lie-small-cells/.


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


Tags: Ken Schmidt, Wireless infrastructure


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.   


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. 


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.)  


Six Sectors for T-Mobile

First 6-sector cell site we have seen from T-Mobile.   Most cell sites have 3-sectors.   The additional sectors are added for capacity- note the LTE and AWS/PCS designations.  

6 Sector T-Mobile Site
A screen clip from a construction drawing of a six sector cell site from T-Mobile.

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.