T-Mobile Sued for Alleged Unauthorized Attachment to High Tension Electric Tower

Utility pole cell tower

A few times a year, we are contacted by someone that believes that a wireless company attached equipment to an electric tower (not a small wood utility pole) on their property but that isn't getting compensation for it.  We just came across this news story where T-Mobile has a cell site attached to a utility pole and the landowners are not receiving any rent for the access to their property.  They are suing T-Mobile alleging that T-Mobile does not have the legal right to use the pole.  In the mid-2000's, there were a number of lawsuits, some class action, on this same issue.   In some, the landowners won and in others, the wireless carrier won.  

The key to whether a landowner should be compensated is based upon the language in the underlying utility easement for the electric towers.  The more specific the language is regarding what the easement is for, the better it is for the landowner.    If the easement language includes the right to provide telecommunication services or communication services, in many cases, that means that the utility company is within its rights to grant access to the wireless company without paying rent or getting landowner consent.   If the easement is specifically for the transmission of power, the wireless carrier may need your approval to be on the property which may mean additional rent.  

If you believe that the wireless carrier who has equipment on one of the electric towers on your property is improperly doing so, go to the clerk of court for your county or city and ask to see a copy of the utility easement across your property.   They are normally very helpful.   Get a copy and reach out to us.  While we cannot provide a legal interpretation of the easement language, we can advise whether you should spend the time and money to visit a local attorney.   If the attorney believes you should be compensated, we can help determine the appropriate amount for the lease or consent.   

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.

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.

Steel in the Air – Wireless Predictions for 2017

2017 Start button

As we have done in years past, we look ahead to 2017 and share our forecasts for the coming year. All things considered, 2016 was a mediocre year for the industry. 2017 looks to be all about repositioning – meaning that while we don’t expect growth in CapEx, we do anticipate industry development in some areas and contraction in others. With that said, here goes:

1.  AT&T gets serious about small cells. Again.

For those of you who don’t recall, AT&T previously had an Antenna Solutions Group focused on both Distributed Antenna Systems (DAS) and small cell deployments. While most of the emphasis was on DAS, there were a decent number of small cell deployments, although nowhere near the 40,000 small cells AT&T led the industry to believe they were going to deploy. We believe that AT&T will end up increasing its capital expenditures on small cells this year at the expense of building new macrocells. However, that doesn’t mean that AT&T will stop investing in macrocells altogether – see the next point.

2.  AT&T wins the FirstNet RFP and starts to deploy both FirstNet and AWS-3 spectrum via site modifications to existing macrocells.

Per our previous notes, we (and others) anticipate that AT&T wins the FirstNet contract. As we have pointed out before, if AT&T has done 700MHz modifications at a site previously, the old antennas may be able to accommodate the additional FirstNet 700MHz spectrum, but that doesn’t mean they can accommodate AWS-3 frequencies. The AWS-3 spectrum is in the 1700MHz and 2100MHz ranges, and we are just starting to see modification requests from AT&T that cover the full range of the spectrum in both 700MHz and 1700-2100MHz bands. We anticipate that this continues. Note that this doesn’t mean that AT&T will pay more rent for all modifications.

3.  Verizon gets slightly more serious about small cells. Again.

In 2016, it seemed that Verizon had slowed down its deployment of small cells as compared to 2015. While we don’t have access to the number of small cells they deployed via Crown Castle, we do know that the municipalities that have retained us experienced a downtick in the number of new small cell applications. We suspect that Verizon has revised its strategy on small cells after discovering what does and didn’t work through trial and error in 2016. Previously extensive efforts by Verizon to enter master lease agreements with municipalities will pay dividends in 2017 as Verizon will experience quicker speed to market than other wireless carriers who haven’t negotiated such agreements in bulk.

4.  T-Mobile will focus on adding capacity to their network no matter how costly.

In 2016 T-Mobile negotiated and presumably signed a significantly increased number of leases to add equipment to existing DAS systems across the US. Furthermore, we have heard (but haven’t yet confirmed) that T-Mobile is entering collocation agreements on rural towers to avoid roaming agreements with rural carriers. Our experiences with rural tower-owning clients seem to confirm this – but we don’t know whether their leases are representative of what is happening with all tower companies. We surmise that T-Mobile doesn’t want to spend cash building its DAS networks or new towers, which is why they may be willing to agree to higher than average lease rates. We also assume that T-Mobile needs desperately to add capacity and to do it quickly – which supports why they would be willing to jump on current DAS systems and collocate on existing towers.

5. Sprint will continue to spend historically low levels of CapEx and somehow still convince market analysts that its spectrum holdings give it the flexibility to significantly limit spending on its network.

When Sprint announces its 3Q2016 fiscal year results in January, they will again surprise with lower than expected CapEx. Reduced lowered CapEx from Sprint could very well continue into the middle of 2017 based upon the limited activity we are seeing from Sprint now. Tower companies have already rightfully stopped projecting any income from Sprint in 2017 with the expectation that if it comes, we can all just be grateful. Despite these harbingers, market analysts will still continue to rate Sprint a Buy primarily due to the potential for a merger with T-Mobile which seems to be increasing slightly in probability every day. If Sprint seriously believes this merger will take place, they would be wise not to invest CapEx.

6. More fiber companies will be acquired and the values paid per route mile (especially metro fiber) will continue to increase.

We know that this isn’t that much of a reach regarding a prediction, but it is an important one nonetheless. 2016 saw several fiber acquisitions: Zayo/Electric Lightwave, Windstream/Earthlink, CenturyLink/Level3, and Crown Castle/Fibernet to name a few. Notably, both Zayo and Crown Castle are actively positioning themselves to be “the” small cell metro fiber providers. These companies know that fiber is the backbone of any 5G/small cell/fixed wireless network and that controlling costs of the fiber is paramount to the wireless carrier’s ability to keep pricing of wireless plans low.

7.   Speaking of fiber, landowners will receive more requests than ever before for new fiber routed across their property.

We are just starting to see requests from Verizon and other carriers to bring in “redundant” fiber from different cross-property routes from existing wireless lease utility easements. Our research shows that with the advent of small cells, and C-RAN particularly, companies like Verizon need redundancy and are willing to pay for a second utility easement across the property so that an aloof contractor cannot cut both fiber cables at a singular location. Unfortunately for large incumbent fiber providers, this fiber won’t be lit fiber.

8. 2017 will be the year of cell site hardening.

With FirstNet likely being awarded to AT&T, and the FCC’s recent order requiring wireless carriers to disclose the percentage of their sites that are out of commission during emergencies, we anticipate that carriers will begin improving power backup systems at individual sites. Cell site hardening will translate to more on-site generators, which means lease expansions and increased rent to landowners and tower companies. Sprint and T-Mobile will need to play catch up to AT&T and Verizon, both of whom have previously begun site hardening agendas.

9.  Wireless carriers are doing more than just talking about what they consider to be a lopsided relationship with the tower companies, and clear and demonstrable proof of this will emerge in 2017.

To date, tower companies have largely ignored inquiries and very public comments from the carriers about “expensive and unsustainable” collocation rents and modification requests. Despite some slight downward pressure on tower company stocks and analysts’ questions at industry events, the tower companies haven’t yet felt any real pressure from this carrier positioning. However, we believe strongly that the wireless carriers aren’t sitting idly by but are instead actively seeking to relocate some of their more expensive sites. Whether these efforts are selective and focused primarily on “scaring” the tower companies, or they represent actual and significant savings on operating expenditures going forward, we don’t know. Either way, we believe that there will be clear proof of the extent of these efforts in 2017 and that this will negatively impact the tower companies.

10. The carriers will not deploy any real 5G in 2017.

Despite claims to the contrary by Verizon and others about their 5G-like systems, they aren’t mobile, and they aren’t 5G. Mobile 5G specifications aren’t expected until 2020, and even pre-specification systems won’t meet the eventual 5G standards. 5G preparation will continue in earnest in 2017, to include robust fiber deployment and small cell site acquisition. None of this will prevent the carriers from saying they are deploying 5G. (Stay tuned on this topic- we anticipate doing a workshop for financial and tower company clients in NYC and Boston in February to address the common questions and concerns we have been hearing from analysts and reporters regarding 5G).

It is unlikely that these projections will be 100% correct – and if I had to pick one projection where we are more likely to be wrong (and where we hope we are wrong) – it #5, that Sprint won’t be deploying CapEx this year in any sizeable amount. The tower companies have fared well over the past year, considering the lack of any real, sizeable revenue growth from one of the “Big Four” wireless carriers.

If you disagree with any of our projections, we’d love to hear why. If you want further information about how we arrived at the predictions or wish to discuss the likely winners and losers, we welcome the opportunity to set up a private (paid) consultation to discuss our beliefs further. We have no confidentiality agreements in place with the companies listed above – and to the extent that we do have confidential information about them, we won’t disclose it.

5G and LTE-U Test Markets for Each Wireless Carrier

We were curious what markets we would start seeing modifications requests come in for new antennas on existing cell towers for 5G and LTE-U installations.   These trials in most cases will require new antennas with new frequency bands.   So we created the map that you can see below- or see the online version of the 5G and LTE-U Test Market map. [Read more…]

Crown Castle (CCI) Small Cell Initiatives and Reporting

Crown Castle DAS Node
Picture of Crown Castle DAS Node from FCC Presentation by Crown

So as a clear indication that Wall Street is very focused on small cell initiatives by the public tower companies, Crown Castle
started reporting their small cell financials separately from their tower financials in the Q1 2016 quarterly earnings and call.   They must have been receiving a significant number of questions from the analysts because the earnings call presentation is carefully crafted to show a rosy picture even though Crown hasn’t been completely transparent on their small cell financials.

SOME VISIBILITY- BUT QUESTIONS STILL REMAIN

In general, we are excited to see them Crown add this reporting, as we have been suggesting to the various analysts that retain us that it is difficult to measure how successful their small cell efforts are without this breakdown. Unfortunately, Crown still isn’t distinguishing between small cells and DAS in the breakdown preferring to treat all DAS nodes and small cells as if they are the same and have similar financial attributes.  Interestingly, an analyst from Bank of America specifically asked this same question in the Q&A without getting a substantive answer.

What we do know from the earnings call is that Crown’s small cell business still amounts to approximately 12% of their consolidated site rental revenue similar to what it was in late 2015.  Crown indicates that new small cell builds amount to 75% of their small cell systems’ incremental revenue – while 25% is additional collocation on existing fiber routes/DAS networks. They suggest that they have 16,500 miles of fiber, but don’t disclose how many miles are actually used for small cell nodes or DAS.   CCI says they are focused on the top 25 markets which isn’t surprising given the location of Sunesys fiber in these same cities. This suggests a few obvious questions for CCI that were partially addressed in this call and should be expanded upon in future calls:

1.  How do they expect to grow once those 25 markets are complete?

2.  Now that the world is fully aware of the value of dark fiber and surplus capacity, is it reasonable to expect another fiber company acquisition?

3.  How many nodes are in top 25 markets or Central Business Districts (CBD) as opposed to non urban core areas? [Read more…]

T-Mobile’s Rampant Success

Just thought this was worth sharing- a great article on T-Mobile’s Tremendous Success in the last quarter of 2015.  Also of interest is that Sprint seems to be churning its good established customers while adding new customers presumably at 1/2 of the rate of the other wireless service providers.  That can’t be a sustainable business model.

Wireless Adds and Drops
T-Mobile’s rampant success comes at the expense of other carriers- not from new additions.

Is T-Mobile intentionally “throttling data” or just feeding the beast?

YouTube spokesperson said today that T-Mobile’s new BingeOn video streaming service, which it offers to subscribers for free, is interfering with and reducing the quality of YouTube video traffic.

According to The Internet Association, an Internet advocacy group, “T-Mobile’s new ‘streaming optimization’ program appears to involve throttling of all video traffic, across all data plans, regardless of network congestion.” T-Mobile justifies its new offering by stating that BingeOn uses 1/3 the amount of data, and thus is overall beneficial to congested networks. [Read more…]

Comparison of Large Tower Company and Wireless Carrier Tower Deals

We compiled a comparison of the three most recent wireless carrier tower company deals.   It is important to note that these numbers aren’t exact. For example, the Tower Cash Flow for Verizon/American Tower are projections from the first year of operation. On the AT&T/Crown transaction, the number of towers is rounded off.   Lastly, some like the Verizon/AMT transaction don’t include the net present value of the options to acquire these towers in the future. [Read more…]

Why Google’s MVNO “Nova” is just what the Wireless Industry Needs

Google has signed a deal with Sprint’s CEO Masayoshi Son, and is in negotiations with T-Mobile, to launch a Mobile Virtual Network Operator (MVNO) service using Sprint and T-Mobile wireless networks. Google has stated that its new wireless service, known as “Nova”, will be “experimental” and that the end-goal is to provide best-case seamless connectivity to consumers. According to the Wall Street Journal, an unnamed source stated that Google has been working on the project for over a year, perhaps in hope that the FCC would have looked more kindly on a Sprint/ T-Mobile merger. [Read more…]