Wireless Telecom Blog

Small Cell Leasing For Municipal Electric Utilities and Coops After State Small Cell Legislation

August 15, 2018 by Ken Schmidt Leave a Comment

A few weeks ago I gave a presentation to the Florida Municipal Electric Association, that I reworked here to make it a bit broader and applicable for the majority of cases in the United States.

It is primarily about small cells and considerations that private landowners/exempt public landowners should have when considering small cell leases. Prior to State Small Cell Legislation, it was a bit of the wild west. Wireless service providers or their infrastructure companies were trying to claim that they were utilities, with some going so far as erecting poles overnight without permits. Municipalities and counties were all over the board in their approaches to small cells.

You can find the entire slideshow here. To get a taste of the presentation see the short video and comments below.

Really large pizza boxes

The industry pushed small cell state legislation by making ridiculous and misleading claims like this- that small cells are the size of a “pizza box” all while pushing legislation that allowed them to put 6 cubic feet of equipment on the top of the pole and 28 cubic feet at the base. That’s a lot of pizza boxes.

What happens whet 4-6 wireless companies deploy small cells separately

This graphic shows what happens when multiple companies each seek to deploy their own poles at 200’ apart. While the wireless companies try to paint a very pretty picture of the distance that their small cells can cover, they very carefully omit to share that small cells (especially fixed wireless) are sensitive to line of sight issues and other degradation of signal from foliage and buildings and even weather. To resolve these issues, they overbuild the numbers of sites to address these issues and capacity issues as well.

To see our upper-level recommendations regarding evaluating small cell leasing for public utilities and coops in the wake of state small cell legislation please see the presentation in its entirety.
If you are interested in learning more about these and other recommendations, please don’t hesitate to contact us.

American Tower’s Aggressive Response to Build-To-Relo Towers

June 11, 2018 by Ken Schmidt Leave a Comment

Previously, we wrote about Tillman Infrastructure, a tower company that has expanded significantly to build towers near existing towers to encourage wireless carriers to move from the existing tower to the new tower, all in an effort to reduce lease rates. For over a year now, tower companies have publicly discounted the impact of these “build-to-relo” tower companies as non-threatening. However, in the clearest confirmation yet that the public tower companies are worried about the build-to-relo tower companies, we are starting to see concentrated efforts by American Tower to combat these new tower company threats.

Recently, we noticed that American Tower was calling its landowners to convince them to call American Tower if they noticed a new tower being proposed or constructed near the tower owned by American Tower on their property. We questioned how effective this would be, as we suspect most of the relocation towers are being built in areas where there is no zoning, so the landowners wouldn’t know about it until a new tower was actually being built, at which point it would be too late.

We were recently shown a copy of a letter that American Tower sent its vendors in the last week that indicates American Tower believes the practice of building towers in close proximity to existing towers is “unnecessary, short-sighted, and reckless.” American Tower further suggests that this practice “harms existing landlords, needlessly clutters otherwise peaceful neighborhoods (ask the neighbors of any existing American Tower about needless clutter), wastes precious resources, and does nothing to improve the coverage, capacity, or quality of today’s stressed wireless networks.” In a further appeal to governmental entities, American Tower further states that “it could even delay the badly needed deployment of next-generation wireless technologies.” American Tower fails to state the real reason they object to these efforts – that it removes AT&T or Verizon or T-Mobile, or more than one, from an existing American Tower site, thereby significantly reducing revenue and reducing same tower operating margin even more.

American Tower then indicates in the letter that its vendors must sign an amendment to their Master Contractor Agreement with American Tower that states the vendor will not “participate in the development of any new towers that are within a half mile of an existing ATC site.” Failure to sign the amendment by June 15, 2018 will result “in an immediate change in your vendor approval status, up to and including removal of the ability to be hired for work directly by ATC and the ability to access any ATC site on behalf of others.” (Bold emphasis added by us) In short, if you don’t sign, you can’t work for us and you can’t visit our sites while doing work for anyone else.

We have to question whether there wasn’t a less heavy-handed method of addressing the problem that didn’t alienate contractors and force them to consider whether they really care to work for American Tower at all. First, the universal half mile restriction is unreasonable. It is completely possible that a wireless carrier would want to build a tower within a ½ mile of an American Tower site for reasons that have nothing to do with relocation. Furthermore, the language of the amendment includes all American Tower sites including managed sites, which means a vendor would not be able to participate in the development of any tower near sites that American Tower manages, which includes thousands of vacant rooftops that have no wireless carriers using them. Secondly, the decision by American Tower to bar vendors that don’t sign from accessing American Tower sites on behalf of other parties seems vindictive and ultimately divisive. While American Tower suggests in the letter that they try to act in an “ethical and professional manner in each of the 16 countries where we operate,” we question whether this restriction is more vindictive than professional. Are they also going to restrict companies that aren’t their vendors from accessing American Tower sites if they find they worked on competing towers? Would this extend to all vendors?

While we understand that reasonable people can disagree on the need for the amendment to the Master Contractor Agreement given the circumstances, we have to believe there was a better way to handle this matter. The short time frame for response given and the threatening tone of the letter suggests a disdain for all contractors who do work for American Tower, regardless of their intentions or involvement in actual relocation. This letter seems focused on penalizing all contractors and exacting revenge on the carriers who are considering relocation. This letter also completely fails to acknowledge American Tower’s own role in this matter in their unwillingness to negotiate lease amendments with AT&T and Verizon that would encourage them to stay on the towers as opposed to resorting to moving their equipment to adjacent towers.

We agree that tower companies need to protect their assets and that building new towers near existing towers doesn’t make a lot of sense, but this particular approach seems rash and not fully baked. It alienates contractors and ultimately won’t have that much of an impact on the build-to-relo tower companies. Fortunately, there is no shortage of work these days for contractors, so we wouldn’t be surprised if some of them just choose not to sign this agreement. One has to wonder what will happen after the first time American Tower rejects contractors that are hired by a carrier to perform modification work on that carrier’s site at an ATC tower.

Lendlease’s New Renegotiation Efforts on Sprint Rooftop Sites

May 25, 2018 by Ken Schmidt 3 Comments

If you have followed our musings over the years, you know that we don’t like the lease renegotiation industry. In the past we have observed some companies (not Lendlease, Tower Alliance, or Softbank/Sprint) use high-pressure tactics, sometimes outright misrepresentations, and downright aggressive salespeople to convince landowners to agree to terms that are not advantageous to the landowner. These tactics can tarnish the landowner/carrier relationship in our opinion. Some renegotiation is necessary, especially on overly high leases; however, the lease renegotiation industry often targets all leases, not just those that should be reduced – all in the vein of needing to reduce costs and to generate a fee for the lease optimization company. Again, we don’t object to the renegotiation efforts themselves, but we do strongly believe that the tactics used can be shady and manipulative. Recently, we have become aware of some letters and requests that Lendlease (or their agents, Tower Alliance) are using with building owners with Sprint leases that we believe are not advantageous for the landowner/building owner.

First a little background. In late 2017, Lendlease (a global infrastructure company that has formed a tower company) and Softbank (majority owner of Sprint) formed a joint venture to acquire 8,000 cell sites from Sprint across the US. We believe that these acquired sites are mostly rooftops. We suspected at the time that this was a financing transaction that Sprint entered into because it knew that if a Sprint/T-Mobile merger came to pass, Sprint might end up terminating a good number of those leases. We suspect that Lendlease/Softbank paid a reduced value for the leases as compared to what the market was paying, probably because both parties knew of the potential risk from a T-Mobile/Sprint transaction. You might ask why Lendlease/Softbank would buy these leases if there was potential risk? There are three reasons:

1. They know how long Sprint is likely to continue using those leases or have negotiated a guaranteed term.

2. They intend to try to “remarket” the Sprint lease space to other carriers if and when Sprint terminates.

3. Lendlease sees the potential to renegotiate with building owners to expand the Sprint lease area and, even if Sprint doesn’t terminate, still lease space to other carriers.

Fast forward to today and building owners whose Sprint leases were acquired by the Softbank/Lendlease joint venture are being contacted by third parties like Tower Alliance to “renegotiate” their leases. Tower Alliance (hired by Lendlease to renegotiate on the JV’s behalf) shares industry articles like “A merged Sprint/T-Mobile will shutter 25,000 towers, and Crown Castle with suffer most” and “Sprint and T-Mobile to Merge, in Bid to Remake Wireless Market”. The email our client received contains these articles and includes the following justification:

It was a pleasure speaking with you this morning. The intent of my telephone call and this follow up email is to inform you of the project currently underway in the US by the Sprint/Lendlease Joint Venture as described in the press release and Letters of Authorizations. Sprint is assessing all of its rooftop network real estate in order to assure maximum cost efficiency. It has relocated many sites that are not efficient. The site as referenced above currently remains one of a group of sites identified as a cost efficiency target in the Sprint/Lendlease Joint Venture. In addition, I have attached some press releases speculating on the outcome of the announcement regarding the possible merger of Sprint/T-Mobile for informational purposes only. My goal is to have an amended and restated lease executed once we have negotiated the most favorable terms for the mutual benefit of both Landlord and Tenant.

Before we go on to the “ask” from Lendlease and why we recommend that building owners don’t consider it seriously, we have to question the statement, “It (Sprint) has relocated many sites that are not efficient.” Unless they are referring to lease decommissions from the Clearwire/Nextel portfolios, we are unaware of any sites that have been relocated by Sprint due to cost efficiency. Perhaps there are some, but we haven’t seen them. At any rate, we highly doubt many is more than 50.

Tower Alliance on behalf of Lendlease then asks for a number of concessions from the building owner on the new lease, which we have listed below along with our thoughts on why such changes are ultimately really bad for the building owner.

What happens if the landowner doesn’t agree to these really bad terms? Tower Alliance suggests that “if we aren’t able to come to a new agreement, the tenant will be forced to evaluate alternative site locations.” Note that they don’t say they will terminate the agreement – there has been litigation previously between landowners and another carrier that clearly prevent carriers from saying they will terminate if they don’t get their desired terms. However, the language is carefully worded to imply that termination is a risk. In reality, by not signing, in most cases, the landowner will be in exactly the same position both now and in the future. Sprint is either going to terminate or not. Another replacement carrier will either be interested in your rooftop or not. This deal doesn’t change either of those eventualities for most landowners. There will be a small subset of high-dollar Sprint rooftop leases where Lendlease may end up terminating and moving to a new rooftop. But for most landowners, this proposal from Lendlease is not a good deal and is one we would advise against. If Sprint and T-Mobile don’t merge, there is even less of a reason to agree to these terms. Fundamentally, we don’t like this type of renegotiation effort and will strongly counsel our clients against agreeing to these terms.

Got a Sprint lease and feel anguish over what to do? Contact us and we will be happy to discuss your situation and identify whether we can provide any value to you in your decision-making process.

20 Things Leaseholders Must Know About the T-Mobile/Sprint Merger!

May 16, 2018 by Ken Schmidt Leave a Comment

Recently T-Mobile and Sprint announced a merger that will make them the second largest wireless carrier in the US. For more details, please see this article we posted the previous Monday on LinkedIn regarding the impact of the T-Mobile/Sprint merger on the public tower companies. Already we have received numerous emails and calls regarding what landowners should expect regarding their Sprint or T-Mobile leases.

Here is what you should know:

1. The merger still has to be approved by the Department of Justice and the FCC.

2. DOJ and FCC approval probability are less than 50% but may improve if the combined company is willing to divest spectrum or markets.

3. Assuming the merger is approved, the combined company will be terminating 35,000 cell sites out of 110,000 combined.

4. This will occur over multiple years.

5. But, it is highly doubtful that any terminations will occur within 18 months.

6. Sprint sites are definitely more likely to be decommissioned then T-Mobile sites.

7. If you have both Sprint and T-Mobile on the same location, there is a strong likelihood that one of them won’t be there in 5 years.

8. If Sprint and T-Mobile are on separate structures near each other, there is a strong likelihood that one of them won’t be there in 5 years.

9. There will be a small percentage of occasions where it makes more sense for the company to keep a Sprint site over a T-Mobile site.

10. There will be even a smaller percentage of occasions where both sites will be kept.

11. If you received a lease buyout offer regarding a T-Mobile or Sprint lease or a tower company lease where T-Mobile and Sprint are sub-tenants, you may see the offer pulled back or reduced.

12. If you have already signed an agreement to sell a T-Mobile or Sprint lease, don’t be surprised if the buyer looks to renegotiate the terms or chooses not to close.

13. The combined company has said that it will be “business as usual” while they try to get approval for the merger, but we think there will be some changes. Such as:

14. If you recently signed a lease with Sprint or T-Mobile which hasn’t commenced, they may choose not to go forward with the lease.

15. If you have been approached by either company for a new lease, they may go quiet for some time while they try to figure out what they need or don’t need in the combined network.

16. For some proposed equipment modifications on existing sites, there may be a delay while the combined company examines what equipment they need or don’t need at each of their sites.

17. Leaseholders should definitely not rush to renegotiate their leases even though there will likely be a lot of marketing directed at them suggesting that time is of the essence.

18. After past mergers, the market typically takes some time to adjust, meaning that valuations are thrown out the windows but will ultimately rationalize.

19. Despite this volatility, you are unlikely to get less in the future for your lease either in renegotiation or a buyout than you will the day or week after a merger is announced.

20. In other words, you have time to make an informed decision about your cell site lease assets.

Steel in the Air, Inc. is available to discuss your situation and help you understand the ramifications to your cell site leases as needed. Please contact us if you have any questions.

Impact of Proposed T-Mobile/Sprint Merger On Public Tower Companies in US

May 16, 2018 by Ken Schmidt Leave a Comment

Before the announcement by Sprint and T-Mobile of their merger, Reuters ran a story that suggested that a T-Mobile/Sprint deal “may cast shadow over tower companies”. The article points out that one of the major synergies of the Sprint/T-Mobile merger is “decommissioning cell sites”. No surprise here so far other than why the author of this article uses the word “may” in the title- there is no scenario where the tower companies are better off because of the merger than without it. So how is this a terrible not good very bad day for tower companies?

1. Lease Terminations Where Both Sprint/T-Mobile are on Same Tower.

As the article points out – there is ~5% of the revenue from the tower companies where they exist on the same tower. American Tower put out a press release explaining that on towers where both Sprint and T-Mobile have cell sites, their leases represents 4% and 3% of AMT’s consolidated property revenue respectively.

It’s just a matter of time (after the 3-4 years non-cancellable term), but most of the 4% of Sprint related revenue where both carriers are on the same tower will be gone.

However, what the American Tower press release fails to address is the following:

2. Lease Terminations Where Both are on Nearby Towers or Structures.

You may not recall but both Sprint and T-Mobile sold towers to multiple tower companies. (Sprint/Nextel sold to SBAC, CCI, AMT, T-Mobile sold to CCI and AMT and was the anchor on many of the build to suit towers purchased by SBAC). So, looking at same company towers ignores nearby cell sites on towers by other tower companies and even worse, those macrocells on non-tower company structures like buildings, water towers, and billboard. The numbers in the Sprint/T-Mobile presentation are simple enough – the combined company will emerge after a few years with 85,000 macrocells and 50,000 small cells. They indicate that 35,000 sites will be terminated which almost likely be Sprint sites and many of which are not on towers where T-Mobile is as well but on other towers nearby.

3. Fewer New Tower Collocations from Combined Companies.

The tower companies and some analysts love to point out how after the AT&T and Cingular merger or the Sprint and Nextel merger that the combined company ultimately deployed more macrocells than were ultimately terminated. Even assuming that factually this is correct (it’s not for all mergers) there are two significant fallacies in this argument.

First, it presumes that still even more sites wouldn’t have been built if the combined companies had stayed separate.

Fallacy #2 is that the period after these mergers was the onset of 4G and the first round of LTE buildouts, both of which caused a significant amount of cell splitting and infill. That simply won’t be the case this time around. The merger announcement clearly demonstrates that T-Mobile and Sprint are indicating that they intend to decompress (the opposite of densify) their network from 110K current macros to 85K over a few years period. This means 25K fewer macros after accounting for 10K new macros and 35K decommissioned macros. Surely this is less than would have been added by both companies separately. Furthermore, we suspect that the MLAs with the tower companies will mean that many of the new macros will just be replacements of some of the 35K decommissioned macros- yielding slightly less terminated sites for towercos- but also fewer truly additive new colos over time.

As an interesting aside – this also impacts tower companies that are building towers near existing public tower company towers in order to encourage carriers to move off the public tower company tower. With one less potential tenant on ALL towers, what was a slim margin business model becomes even slimmer.

4. Less Upcoming Modification Amendment Activity on Existing Towers.

For the first time in a while, both T-Mobile and Sprint are actively modifying existing cell sites by adding new antennas or replacing existing antennas. These new antennas are significantly larger than the existing antennas due to incorporating MIMO or multiple carrier aggregation. This modification revenue (and guidance related to it) will be reduced. We suspect that Sprint won’t be willing to completely stop its modification activity while waiting for regulatory approval, but there will be adjustment and prioritization. They won’t sink money into the 35K sites that are likely to go away. There may be a delay while the two companies try to rationalize their deployment efforts and determine what technology choices best work for the combined company.

To make matters worse, not only do the tower companies lose some of the current already slated (and included in guidance) modification activity, but also any future amendment activity on top of that from any new collocations and any of the terminated sites. SBAC and AMT can’t be happy with the timing of this announcement- one and two days respectively before they announce their earnings. Should be interesting to see how they make lemonade out of these lemons.

5. Fewer Small Cells.

This won’t significantly impact AMT or SBAC, but it will impact CCI. While the combined company will be larger in terms of pops, we won’t remotely see the same number of small cells from the combined company as we will from each of them separately. During the investor call on the merger, they directly indicated this. Furthermore, with AT&T and Verizon more than capable of going it alone on the small cell front due to the substantial fiber holdings, Sprint and T-Mobile both seemed primed to use a third party small cell developer like CCI because both lack any substantial fiber of their own. CCI keeps comparing small cells today to towers in the early days.

One HUGE difference now?

A post T-Mobile/Sprint merger environment has 3 active participants, whereas the late 1990s- early 2000’s tower environment had 6-7 active participants in most markets. (Don’t even get me started on the Facebook like argument that TMO/Sprint seems to be preparing to argue that 5G has 6-7 active participants). There fundamentally cannot be the same upside in a three-carrier market especially when the third carrier just announced that they intend to primarily use macros and superior spectrum to densify their network for 5G.

Personally, I don’t believe that T-Mobile/Sprint will be able to support true 5G use cases with 50,000 small cells, but this merger if consummated definitely causes greater concern over the returns from small cells. Fortunately for CCI, they already announced earnings, so it may be a while before we get any substantive guidance from them. Nonetheless, the ROI for their fiber acquisitions just got a bit longer.

Want to Know More?

All in all, yesterday wasn’t a very good day to be a tower company. Want to know more? Contact us to schedule a paid expert engagement with Ken Schmidt.

Opinion: Stories of small cell application agreements failure between carriers and cities are too often part of the wireless lobby efforts (in the media) to maintain profit margins.

April 11, 2018 by Ken Schmidt 2 Comments

This type of fluff pieces provide no actual statistical data on how most cities treat applications for small cells instead relies upon anecdotal examples from isolated cities. There is no statistical information about how many municipalities “are acting as if they’re 100-foot towers”. No study or other reference proving this oft-stated dictum from the carriers and their lobbyists.

Where the author chooses to cite an actual city with high lease rates for small cells, he fails to acknowledge that the cited lease rates for Newport Beach are historic data from old DAS agreements. Furthermore, he ignores that the wireless providers in CA still have the right to utilize Joint Pole Authority poles from utilities at lower rates. This type of piece suggests that the municipalities alone are restricting the deployment of 5G- and fails to acknowledge that there are actual utility poles available to the wireless carriers that are available at federally prescribed rate schedules. This article also ignores the fact that many times the wireless carriers prefer to install new poles in the ROW because it is cheaper for them not to have to do a structural analysis on an existing pole despite the added impact on residents aesthetically and to the city from a public safety and operational standpoint.

5G isn’t imperiled because of municipalities- its imperiled by wireless carriers desire to maintain 40-50% margins and their concern that such margins may erode without public welfare. It is imperiled by the unwillingness of utilities like the very companies asking for relief to share their poles- either existing ones or new ones. I don’t doubt there are difficult municipalities and those that may be overreaching- but using unsupported platitudes to justify a fluff opinion piece like this is a disservice to the discussion. But then again, that seems to be the wireless industries playbook. Point to the bad actors without providing any substantive data on how many good actors there are.

Weird Revenue Sharing Clause

April 11, 2018 by Ken Schmidt 2 Comments

One of our clients received a proposal from a tower company that included a revenue share clause. Generally, revenue shares are not proposed by wireless carriers and even less so by tower companies. However, because our client is a governmental entity, I assume the tower company figured it would be better to put a revenue share out for discussion instead of waiting for it to be added.

However, this particular revenue share being proposed is a bit odd. For tenants added in the first 5 years of the lease, the landowner will get $150/mo. per tenant. For tenants added after year 5, the rate drops to $75/mo. For tenants other than AT&T, Verizon, Sprint, or T-Mobile, the rate is $50/mo. no matter when they are added.

There are a number of issues with this proposed revenue share language. First, we generally advise landowners not to accept fixed-rate revenue shares; instead, they should look for a % of revenue. A revenue share is intended to give the landowner participation in the revenue and often comes with a lower base lease rate to accommodate the future upside. A fixed revenue share though does not tie the landowner’s upside to that of the tower company- instead, it limits it no matter how much the tower company is getting for the lease. Furthermore, the reduction here from $150/mo. to $75/mo. after year 5 is ridiculous and serves no benefit other than to take advantage of lesser informed landowners. Even worse is the $50/mo. for any other tenant – which could include tenants that will pay more than traditional cellular tenants and would exclude future entities that enter the business regardless of how much they pay. From the tower company standpoint, having a fixed rate revenue share is much simpler from an accounting standpoint and much more profitable.

This particular proposal won’t be accepted by the landowner- who will and can counter with a % based revenue share given the fact that they own pretty much everything around this location. However, in other situations, the landowner may have to accept these types of terms especially if there are other readily available options. The key of course if trying to figure out whether your property is unique or not. If you need help, please contact the experts at Steel in the Air.

For those of you in the industry- have you seen other revenue share proposals that are innovative or outright ridiculous?

The main points non-technical reporters get wrong about 5G

March 29, 2018 by Ken Schmidt 1 Comment

I find it fascinating how non-technical reporters (for example An Investor's Primer: 5G, the Internet of Things, and Augmented/Virtual Reality and 5G Wireless Will Redraw the Wireless Industry Map: Who Stands to Lose?) try to simplify 5G and explain it in nearly binary fashion.

So let’s get a few things straight:

1. Stop calling it a “race”.
It isn’t a sprint nor is it a marathon. The better analogy is that 5G is like the Olympics. There will be many winners in many different events and some losers. Some events will end up getting added; some will go away due to lack of popularity. But trying to simplify 5G as if it is just a single race demonstrates a lack of understanding of the complexity and sophistication of the 5G protocols.

2. 5G at its core isn’t sexy- so stop trying to make it so.
The wireless industry likes to make 5G exciting and futuristic by glorifying things like self-driving cars and wireless virtual reality and remote surgery. While these types of applications may (operative word is may) end up being part of the 5G ecosystem, they are a nominal part of 5G. The business case for 5G is in improved network reliability and cheaper delivery of services. All of the glamorous applications will require significant densification- which many experts still question as economically justifiable anywhere other than urban areas.

3. The average consumer won’t see the benefit from 5G in any significant fashion until 2021 at the earliest.
It doesn’t matter when each carrier says they will have some cities online or test markets active. 5G use will be constrained by handset availability and business development even in these test markets.

I don't mean to be disrespectful to the work of non-technical reporters, but rather to clarify certain topics related to 5G that I've seen the media get wrong.
How about you? Have you come across hyped or technically incorrect 5G commentaries or articles? What did they claim?

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

March 20, 2018 by Ken Schmidt Leave a Comment

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.

Are Three Towers Really Necessary?

December 8, 2017 by Ken Schmidt Leave a Comment

Zoning Board Questions Whether They Should Be Forced to Allow Three Towers Within 300' of Each Other

First- start by reading this news article about how the Cape Elizabeth, ME planners are dealing with a request from Tower Specialists to build a new tower near an existing Crown Castle tower that has already been slated to be torn down and replaced with a new tower on the adjacent property. In the image below, the site to the right is the existing Crown Castle tower which the article indicates will be torn down in 2019. The location to the left is the new Crown Castle tower.

Why would Crown Castle tear down an existing tower and build a new one next door?

Because they couldn't come to agreeable terms with the existing landowner to extend their ground lease on the existing property. We are contacted regularly by landowners for proposed Crown Castle leases and the first thing we look at is whether there is an existing Crown Castle tower near the proposed location to see whether this is occurring. Most of the time we find that there are existing towers nearby. In some cases, Crown is moving the tower because the existing owner is seeking too high of a lease rate for an extension of the lease or because they are no longer willing to lease their land for a tower. In other cases, the existing tower needs substantial structure modifications to accommodate additional equipment and it is cheaper over time from a Capex and Opex standpoint to build a new tower. And in rare cases, we believe Crown Castle will build a new tower out of spite because they don't like the landowner.

To make this even more interesting, if you look at the image below, you will see that there is a second tower on the same property. The Crown Castle tower appears to have 3-4 wireless carriers collocated on it, while the other tower has 1-2. Apparently there are 6 towers on the subject property including some smaller ones not visible in the photos.

So, I Get Why Crown Castle Is Building a Tower, But Why Is a Third One Proposed?

Good question. We heard directly from the property owner who is also a tower developer. He shared with us that he did tell Crown that the family wasn't going to renew the lease. He proposed the new tower after Crown submitted to relocate the existing tower on the adjacent property.

The property owner in the article suggests that the carriers all want to be at 180' (even though only one carrier was at that height previously on the existing tower). The Town Board has required him to come back with detailed RF propagation maps that show that the carriers all have to have 180' as justification for a third tower here. While I am sure that the property owner can find a radio frequency engineer that will provide maps that purport to show a difference – there really isn't a significant one between 170' and 180' especially since those carriers who are lower than 180' on the existing tower already built the nearby cell sites in their network to match up with the coverage from this tower and vice versa.

How Do Landowners Know if They Are Pushing Too Hard?

Unfortunately, signing a backup lease with an adjacent property owner is now standard operating procedure for tower companies when negotiating an extension of an existing tower lease. The tower companies will take the term sheet they negotiate and show it to the stubborn landowner as demonstration of their willingness to move the tower. For landowners who are approached for a new lease, we advise they consider the possibility that they will spend time negotiating and finalizing a lease and money on hiring an attorney or a consultant or both to review the lease while not getting anything in return. For landowners who have an existing tower on their property, the "equation" for whether you are asking for too much is a difficult one because it depends upon the following variables:

1. Cost to relocate the tower

2. Probable lease rate on alternative site location

3. Probability of success of getting zoning and other regulatory approvals

4. Ownership of the tower (does the tower company own the tower or does the carrier)

5. Number and identify of carriers on the existing tower

6. Time remaining until expiration

7. How much you are asking for

8. How difficult you have been to negotiate with in the past

Whether you have been approached for a new cell tower lease near an existing tower or you have an existing tower lease where you are negotiating for an extension, we can help. Give us a call to discuss further or contact us here.