Wireless Telecom Blog

Our Q1 2019 Wireless Update Top 10 Takeaways

May 14, 2019 by Ken Schmidt Leave a Comment

A few weeks ago we visited a large investment bank to present our Q1 2019 Wireless Update findings to a group of investors and attended some private meetings. Here is a short recap of our top 10 findings.

Applications for new towers has been rising slightly.
Of applications to the FCC for new structures, nearly 70% were from mid-size tower companies or from large carriers.

3. Of the applications from mid-size tower companies, a large percentage are for build-to-relo (BTR) towers. BTR towers are purposely built near existing towers with the intention of pilfering tenants from the existing tower.
4.Of all applications, over 40% are for BTR towers.

5. Tillman Infrastructure was the most active of all mid-size tower companies by a large margin, not surprisingly given that they focus on BTR towers.
6. Of the applications for BTR towers, 80% are within ½ mile of $AMT or $SBAC towers.

7. Submitting an application doesn’t mean the tower will be built though- as less than 33% of applications are currently shown as built.
8. Texas was the most active state for applications.

9. Of the carriers, $T was the most active in terms of new tower applications.
10. Guess who wasn’t? $AMT, $CCI, $SBAC, $S, $TMUS

Care to learn more? We can be retained to provide bespoke research on topics specific to the tower industry. Contact us if you want to talk about what we can do to help you understand the tower industry better than your peers.

Will T-Mobile/Sprint’s Merger Plan for 5G Home Broadband Work without Significantly Higher Capex?

April 8, 2019 by Ken Schmidt Leave a Comment

The 3/6/19 FCC Filing by T-Mobile attempts to recharacterize how the merger “benefits” the consumer by expanding fixed or nomadic wireless broadband service. The filing suggests that T-Mobile will utilize the combined assets of the two companies to provide an alternative to home wired broadband in LTE in the near term and 5G in the future. This is a laudable goal; however, T-Mobile’s filing lacks a significant number of concrete details.

There are no shortage of claims about how wide and how fast the service will be, but barely any concrete details about how they technically intend to pull it off other than a single expert’s statement that the they reviewed the proposed concept and feels that T-Mobile and Sprint’s network is up to the task without detriment to the underlying wireless subscribers. However, there are no numbers or documentation supporting these conclusions in the filing.

The FCC has stopped the review period pending comments for 30 days. With T-Mobile providing nominal actual evidence of their claims, how can the average (or even intelligent) commenter question or comment the purported network’s benefits? It seems like this filing is an attempt to appeal to government officials who favor reducing the Digital Divide but may not know enough to question whether T-Mobile/Sprint’s merger will or will not significantly reduce the divide.

There is no doubt that adding Sprint’s 2.5Ghz spectrum to T-Mobile’s 600, PCS, AWS spectrum will enable additional capacity while expanding coverage. However, 2.5 GHz requires three to three-and-a-half cell sites to cover the same area as 600MHz. Conceptually, the 600MHz will be used for wide area coverage and 2.5 GHz for capacity. The issue is that T-Mobile’s rural cell sites weren’t designed for 2.5GHz, and Sprint virtually stopped building new rural sites years ago. While 600MHz will be suitable for LTE-A and other technologies, it also handles less capacity than 2.5GHz. Thus, our questions:

What type of service will T-Mobile be able to support with its existing macrocell network?
Will the higher speeds and capacity be reserved only for those users living within the 2.5GHz coverage areas (With or without HPUE)?
Will the combined network support the additional burden of wireless broadband to the home? Or will it require a substantial amount of new macrocells in unserved and underserved areas to support broadband to the home, which, as T-Mobile claims, will be provided above and beyond what they have already agreed to provide to wireless consumers?
While T-Mobile is promising not to impact their current service levels to existing wireless subscribers, will the addition of home broadband limit future service upgrades to wireless consumers? (Put another way, is T-Mobile trading future wireless expansion and improvement for better home broadband service?)
How many people will use the service? And what caps will there be on the service? AT&T’s 5G service is limited to 15GB/month in urban areas, and their 4G LTE-based fixed wireless broadband in rural areas is capped at 215GB. However, they only provide it in specific areas.
What assurances will T-Mobile be willing to give to the end user? With the number of users inversely impacting available capacity, will there be guaranteed uptime and speeds? Or will this be like satellite broadband, where it is either significantly more expensive to use in the day or just outright too slow?
What good is the promise of rural broadband if only so many people can sign up for it and only if close enough to a macrocell? I would agree that something is better than nothing- but is this factor alone enough to justify approval of an otherwise anti-competitive merger?
To further complicate the issue, how will rural sites be capable of handling the required backhaul to support service that is used at home and is four to five times faster than what T-Mobile currently provides under LTE? Even if we assume that ¾ of T-Mobile sites are connected to fiber, the majority that aren’t connected are assumedly in rural areas- i.e. the areas where the digital divide is most prevalent. Will the existing backhaul be enough? If not, will new fiber or microwave backhaul be needed?
If they approve the merger, will the FCC mandate conditions on coverage, speed, caps, and availability? Will they limit future rate increases to prevent T-Mobile from setting arbitrary low rates now but ultimately increase the rates in areas where they have no competitors?
If the FCC and Department of Justice allow the merger and place conditions on the combined company to meet minimal levels of service to consumers for fixed or nomadic broadband, will that reduce the 35,000 duplicative sites that T-Mobile claims they will be able to decommission (or increase the 10,000 new sites they say will be built) if the merger is approved?

The filing seems to raise more questions than it answers. While having additional broadband providers available to consumers is an admirable goal, especially in underserved areas, the filing seems short on details and technical specifications that would allow independent commenters to be able to evaluate the merits of T-Mobile’s claims.

Winners and Losers of the FCC Small Cell Order

January 25, 2019 by Ken Schmidt Leave a Comment

On January 14, 2019, the FCC’s Declaratory Ruling and Third Report and Order went into effect and significantly reduced the rights of state and local public entities regarding their control of the placement of small cell or small wireless facilities. It limited their ability to charge wireless service providers for access to municipally owned poles in the public rights of way. It also restricted what municipalities can and cannot require access to the public right of way (PROW).

WINNERS:

AT&T and Verizon. You have to hand it to these two companies – the sheer amount of money they have paid out for lobbying and studies at the state level and the national level is dizzying. It was effective and well-orchestrated. At the end of the day, the municipalities didn’t have a chance – they were unprepared, uncoordinated in their response, and didn’t realize the consequences of their inaction until too late in the process. AT&T’s lobbying efforts dwarfed those of the municipalities at every level. Furthermore, AT&T and Verizon successfully scared (bribed?) the FCC and state legislators into believing that a vote against this 5G Order or statewide legislation is paramount to a vote against national security and against rural broadband. Even for legislators who knew that they would never see any small cells in their represented areas and would have voted against the legislation couldn’t else they be seen as voting against broadband to underserved areas.

As a result, AT&T and Verizon now have virtually limitless access to public ROWs at rates 1/6th to 1/8th of what they were agreeing to an arm’s length negotiations in those same states prior to state legislation. While other wireless carriers will share in these benefits, make no mistake, the Order will construe greater benefits to AT&T and Verizon by nature of their significant existing fiber holdings and larger CapEx budgets toward small cells. While Sprint/T-Mobile and other smaller carriers will also see some benefit, their lack of significant owned fiber holdings and limited CapEx will push them toward leasing other companies’ fiber/pole infrastructure. Furthermore, both companies are distracted otherwise with the possible merger. In addition, because the state legislation prohibits the charging of franchise fees, AT&T and Verizon will now be able to offer wireline-like services without having to pay the same fees as their wireline competitors.

Crown Castle. Crown Castle’s strategy of acquiring large fiber providers in the top 25 markets looks even better now. With reduced restrictions on the placement of small cells and new poles in ROWs, Crown Castle’s available fiber assets will be easier to access by wireless service providers. We specifically note that Crown Castle has fiber in areas in which it has historically been more difficult or costly to gain access to the ROW, like New York City and San Francisco. These also happen to be areas with pent-up demand due to spectrum deficiencies by some wireless carriers. However, the same benefits that Crown Castle will receive in terms of direct access to fiber will be shared by other competitors and by the wireless carriers with their own fiber holdings. Historically, Crown Castle has created a value-add proposition for itself by procuring agreements with cities for access to PROW that reduces the time to deployment. That value-add proposition is eroded somewhat by this Order, as the carrier’s themselves can deploy small cells and fiber much easier in what were previously difficult areas to deploy without a significant time delay. Furthermore, if a wireless carrier doesn’t like the terms being offered by Crown Castle either before they deploy or after they deploy small cells on Crown Castle fiber, there isn’t the same barrier to entry that there has been historical with macrocell towers. The fiber/small cell model just isn’t as sticky as macrocell towers, and we have already talked to private companies that are preparing to enter the space now that the regulatory burden is clearly defined and limited.

OEMs and Service Companies. While the jury is still out on whether the Order spurs significantly greater cumulative wireless CapEx, we do expect that it will cause reallocation of CapEx from macrocells to small cells across all the Big Four carriers. Some of the top cities in terms of spectrum limitations for the wireless carriers are also in states that have not previously approved small cell legislation. Now that the Order is final expect to see some adjustment of overall Capex to those OEMs who are farthest along and have the size to meet the carrier needs in the outdoor small cell realm (Samsung, Nokia, Ericsson) and those who provide the nuts and bolts that enable fiber connectivity like CommScope. However, both Verizon and Crown Castle suggested in earnings calls towards the end of last year that they did not expect to see meaningful increases in small cell activity- instead suggesting that they were already running at capacity.

Attorneys. With the first round of lawsuits challenging the order filed and more on the way, attorneys on both sides will be well fed for the coming years. Furthermore, we anticipate that some cities will be sued as the wireless carriers look to gain access to difficult areas and push the interpretation of the Order.

LOSERS:

Cities. There is no way of sugar-coating it. Cities lost big. Not only did they lose the additional income from small cells on city-owned infrastructure, but they also lost the ability to dictate requirements for how and where small cells are deployed. They have no means of ensuring that all citizens benefit from 5G. They have limited control over the placement of new poles and can’t require the shared use of the infrastructure. They get all of the burden of small cells without any reciprocal benefit other than vague promises that 5G will generate what industry speculatively claims will be hundreds of billions of dollars of economic benefits. The severity of the problem for cities is further increased by the sheer volume of small cell applications. Only large cities currently have the manpower and the expertise to review small cell applications in bulk. Smaller cities and towns do not have it and will need to add staff or retain outside help. As Arthur Scott of the National Association of Counties put it, “(the Order) forces local governments to make a decision between rubber-stamping applications or facing crippling litigation with these providers in court.” Applicants could submit hundreds or even thousands of applications simultaneously, all subject to the shot clock.

Public/Private Partnerships. If you look at some of the agreements that were negotiated between wireless carriers and municipalities before the Order that include some type of partnership, the only way these came about was due to the cities being able to bargain with wireless carriers by extending pole top rights in exchange for services, including IoT and Smart City services. For example, see the agreements worked out between the City of San Jose and Verizon and AT&T. The new Order prohibits cities from negotiating for these types of arrangements. There is a good reason for this – each of the wireless providers envisions being able to force the sale of these types of services to the cities instead of having to provide them in exchange for pole access. In this environment, Smart City means that the carriers were smarter than the cities.

Citizens. The FCC seems to believe that any investment in 5G warrants near total disregard for local authority. By placing the burden of small cell deployment on cities while simultaneously removing the right for cities to charge or negotiate anything remotely approximating fair market value for use of their ROWs or poles, taxpayers will have to pay the delta between the actual cost of providing access to the ROWs and municipally owned poles and that which the FCC deems fair. Furthermore, they will get taxed further when an AT&T or a Verizon effectively charge the cities for access to these same 5G networks for IoT or other public safety-related purposes. Furthermore, citizens in less profitable areas will not receive 5G services on a timely basis or, in some cases, at all. One study conducted by an investor analyst found that 90% of the small cells being deployed to date are in dense urban areas, with most being in areas with a significantly higher-than-average income. Despite FCC supposition that this Order will spur development of small cells in rural and underserved areas, cities have lost any leverage they have in encouraging or regulating where and how small cells are deployed. While the industry has generated unsupported suppositions that this Order will generate $2 billion that will now go towards small cells, there isn’t any evidence that this will flow to rural areas or underserved areas. Just as corporate tax breaks spurred record stock buybacks instead of in infrastructure investment, raises for employees, or R&D, carriers will either pad their earnings with lower small cell costs or invest faster in the areas where the return on investment is quickest. (As an FYI, $2B is slightly more than what Sprint will spend in wireless CapEx in the past quarter alone. It is a drop in the bucket.)

I think that Blair Levin, (previously with the FCC) said it best:

“Third, the FCC’s draft order is based on a fallacy that no credible investor would adopt and no credible economist endorse: that reducing or eliminating costs for small cell mounting on public property in lucrative areas of the country (thus reducing carriers’ operating costs), will lead to increased capital expenditures in less lucrative areas– thus supposedly making investment more attractive in rural areas.”

Furthermore, those citizens who are lucky/unlucky enough to have a new small cell pole placed in their front or back yard will have to deal with the construction, the ongoing maintenance, and the appearance of a new pole without receiving a substantial benefit from it unless they are subscribed to that carrier.

Indoor DAS. We will readily admit we are going out on a limb on this one, but we expect to see even more pull back from new deployments of traditional indoor DAS as carriers find that access and costs related to capacity deployments are easier and cheaper respectively outdoors. There has already been a shift from carrier funded/leased indoor DAS to building owner funded indoor DAS because the carriers just aren’t willing to spend money to reach anything other than the largest venues or those with enterprise customers.

Tower Companies. While Crown Castle will stand to gain from the deployment of small cells due to their fiber holdings and small cell initiatives, all public tower companies will end up losing some current and some future macrocells that would have otherwise gone on public company-owned towers. We continue to hear of wireless carriers actively comparing the total cost of ownership (TCO) for coverage and capacity solutions, including small cells, DAS, in-building, and traditional macrocells, and selecting the best solution that meets their objectives in the cheapest overall way. Wireless carriers are no longer beholden to tower companies for capacity solutions. Assuming that the FCC Order stays in place, they can just as easily add multiple small cells and avoid costly macrocells or move off existing primarily capacity-oriented macro towers in urban and suburban areas. Make no mistake, there are many locations where macrocells are and will continue to be the best or cheapest option. However, the barrier to entry of competing solutions is definitely lower now than it was prior to the FCC Order. There has been a clear trend of wireless carriers doing whatever they can to avoid new macrocell co-locations on public tower company towers – look for that trend to continue.

What Makes Cell Towers Competitive?

January 8, 2019 by Ken Schmidt 1 Comment

Recently, Fierce Wireless ran an article about AT&T’s threat to public tower companies about how “successful” their tower development project with Tillman Infrastructure has been. The article cites a Morgan Stanley report which claims that “On a national basis in a 0.5-mile radius, ~65% of towers have no competitor and just ~15% have more than one competitor. Within a 1-mile radius, ~45% of sites nationally have no competitor and just ~35% have more than one competitor.”

A tower is considered competing when it fulfils the same coverage or capacity goals or both as another nearby tower. Because coverage and capacity goals can vary widely depending upon the terrain, population density and distribution, time of day, difficulty of zoning, and proximity of other existing sites, there is no uniform distance where a tower would be considered as competing with another tower. We regularly assist our tower company clients with evaluating prospective acquisitions to determine how many competing towers are present across the portfolio of target towers. A tower is considered competing if it falls within the same search area or search ring as another tower. It’s not hard to see that the AMT and CCI towers in the photo above are competitive.

However, when looking at large numbers of towers, it isn’t feasible to look at each set of towers and we must make assumptions. As a rule of thumb, we tend to use the following distances for urban, suburban, and rural areas- ¼, ½, and 1 mile. In other words, if a tower is located within ¼ mile of another tower in an urban area, it could compete for the same prospective tenant. Of course, there are situations where that distance could be less or greater. For ease of analysis though, we utilize these distances.

For example, we previously completed an analysis of our proprietary tower data for a large hedge fund. Specifically, we examined each of the public tower companies’ tower datasets and compared to our own tower data. We looked separately at each large public tower company’s exposure to competitive towers in urban, suburban, and rural areas based upon multiple radii. We chose to use urban/suburban/rural designations instead of BTAs. While BTAs are used by the public tower companies as a proxy for urban/suburban/rural, we find that is misleading as BTAs can include urban and suburban and sometimes rural sub-areas in the same BTA.

We also examined each public tower company portfolio individually so that we could see which company was better positioned for rural expansion, urban infill and densification, and suburban expansion and densification. We also looked to see on average how many competing towers each tower company’s urban, suburban and rural towers had within a distance where a wireless carrier could choose one or the other tower.

We found that on average the public tower companies have .2 competing towers for each of their towers within ¼ mile, .4 competing towers within ½ mile, and just over 1 competing tower within 1 mile on a nationwide basis.

Please note that this doesn’t directly contradict Morgan Stanley’s findings as our methodology looks at average number of competing towers per tower while theirs appears to look at the number of towers with any competing towers within a given distance.

Interestingly, the public tower companies have different levels of exposure to competing towers depending upon whether their towers are in urban/suburban/rural areas with some tower companies having more exposure in rural areas and less in urban areas and vice versa. When you examine how each tower company acquired or built their towers, this stands to reason. SBA chose to acquire towers from other tower companies while Crown Castle and American Tower acquired large chunks of their portfolios from wireless carriers and tower companies.

The tower companies have differing exposure to competing towers depending upon where and how they acquired their towers.

Another point of interest is that there are more competing towers within the assumed “competitive” radii than there were 10 years ago across urban, suburban, and rural towers although this is more pronounced in urban areas as should be expected. We examined the number of competing towers in 2007, 2011, and 2017, and found that the number of competing towers had increased between 25% and 50% between 2007 and 2017. This despite more difficult zoning regulations in many areas that would prevent new towers near existing towers.

Our next near-term project will be using this previous analysis to evaluate how many new towers have been proposed or built near existing tower company towers to date- not just by Tillman but by other build-to-relocate (or BTR) developers as well. If you recall from previous articles, some wireless carriers have simply told any tower company that would listen where they would like to move off an existing tower, with the first tower company to have a tower standing being the one they would lease from.

If you are interested in discussing or purchasing any of our findings, please contact us.

Verizon’s Adds Insult to Injury to Cities After Successful Lobbying the FCC to Reduce City Small Cell Fees

December 11, 2018 by Ken Schmidt Leave a Comment

So here it comes – after Verizon, AT&T, and others successfully spent tens of millions on lobbying the FCC and state and federal legislators to provide nearly free access to city public rights of way and infrastructure, Verizon is now using the fact that they were successful in getting the FCC to make the order to further pressure cities to reduce their lease rates on macrocell leases that the cities have with the carriers. And they are doing this prior to the Order going into effect next month. Apparently, their victory in getting nearly free access to ROWs from the FCC without ANY reciprocal burden of providing service to the underserved or less profitable areas wasn’t enough for Verizon.

Here is Verizon’s agent’s latest request to a city client to one of our municipal clients who has several leases with Verizon and other wireless carriers for difficult to replace macrocell sites on City land/towers/etc. Please note that this verbiage is unadulterated other than removal of the name of the City and removal of the rent guarantee amount.

I hope you’re well and Happy Friday!!!

I am the authorized agent for Verizon and they would like to renegotiate the current lease as the attachment attests to.

I’d like to start with saying that Verizon enjoys and treasures the current relationship which is why Verizon would like to renegotiate lease terms and continue a long term (sic) relationship instead of exercising any termination rights they have.

Again, Verizon would like to renegotiate lease terms instead of exercising any termination rights they have. Verizon enjoys and treasures the current relationship and we hope you do too. But timing wise, we need to resolve this soon.

With The (sic) City being the landlord, Verizon understands the reluctance of negotiating or accepting different terms. At the same time, Verizon believes if you understand their point of view, then it makes these tough decisions easier to agree to.

Verizon’s intent is to reduce rent and look into the flexibility to make changes to meet network demand. Why does Verizon want to do this? Legislation and technology have changed.

First, small cell technology and 5G is the future and Verizon’s goal is to update their network accordingly. You can get a quick synopsis of small cell technology here:

https://www.youtube.com/watch?v=0oqITdNQfsg&t=4s – Verizon’s Small Cell video.

https://www.youtube.com/watch?v=YvDuyoXEXJQ – 90 minute installation of a small cell in 30 seconds.

Small cells and 5G has made the older larger towers and antennas expendable especially since the carriers have teamed up with the FCC, state and local governments to stream line the implementation of this new network.You can verify here:

https://www.fcc.gov/5G

https://www.nytimes.com/2018/09/26/business/5g-technology-fcc-rules.html

https://www.bloomberg.com/news/articles/2018-09-26/fcc-seeking-more-5g-deployment-limits-fees-as-new-york-objects – Confirming lower fees for new small cell antennas.

https://www.cnet.com/news/fcc-limits-fees-for-5g-deployment/ – Confirming lower fees for new small cell antennas.

This has all happened within the last couple of months, even though it’s been in the works for years. If you notice, the dates for these articles are 09/26/2018. The FCC just approved this and all the major carriers are moving forward.

The advantage of Verizon partnering up with the FCC, state and local governments is that the fees for putting up the new antennas are much lower than what private land owners charge for the current soon to be outdated towers and antennas. This is why Verizon would like to renegotiate.Verizon is comparing what is more economical in the long term. Verizon is calculating the difference between your rent compared to what it would cost to update the surrounding areas with small cells using the public right of ways.

The FCC has capped the fees and rent to keep them under $1000 per year and average $500. That’s a huge difference from what is currently being paid on the current lease.

Plus Verizon will be submitting a lot of permits for the installation of 5G in your city. So in fact, the city will be making more than the sum of this lease. We are asking for this reduction as a courtesy since we are going to be partners on the next generation network in your city and Verizon sees potential in this site as is with upgrades. Especially with all the work that went into completing this site and lease in the first place.Verizon appreciates your efforts.

In Verizon’s estimation, they feel we can maintain a long term relationship at the current site with the terms I have attached. As a token of good faith, Verizon is willing to guarantee rent for 60 months or 5 years ($xxx,000).This way you can budget with the confidence that the rent money is coming for the next 5 years.

I hope what I have described makes sense and you see Verizon’s point of view. Again, Verizon would like to renegotiate lease terms instead of exercising any termination rights they have.Verizon enjoys and treasures the current relationship and hopes to maintain it for the long term and we hope you do too.

Please respond or call with any questions. I’ll follow up in a few days as well since Verizon needs to resolve this by the end of December and year so their engineers know to include your site or not in the construction of the new 5G network in 2019.

Please forward the email to the decision makers or board since I am the last attempt to solidify a long term agreement.

If the city has no intention of wanting to be a landlord to Verizon, please have them put that in writing or respond to this email so we can have it in writing and inform Verizon.That way Verizon knows exactly where things stand and can plan accordingly.

If the city has a counter, let me know as Verizon will entertain it. I know they’re (sic) offer is low so make sure you counter. No guarantee it gets accepted, but they will review it and move towards an agreement. They want to keep the new rent under a specific number which I’m not previewed to (sic) but I can submit counters.

Out of 90,000 current 4G sites, less than 5,000 sites have been flagged for potential involvement in the new 5G network and this site is one of them. Especially with all the work that went into completing this site and lease in the first place.Verizon appreciates your efforts.

Verizon hopes the city wants to be involved in this relationship long term.

I find the following sections interesting:

Out of 90,000 current 4G sites, less than 5,000 sites have been flagged for potential involvement in the new 5G network and this site is one of them.

Verizon will be submitting a lot of permits for the installation of 5G in your city. So in fact, the city will be making more than the sum of this lease.

As a token of good faith, Verizon is willing to guarantee rent for 60 months or 5 years ($xxx,000). This way you can budget with the confidence that the rent money is coming for the next 5 years.

First, Verizon doesn’t have 90,000 macrocells – so they are including small cells in this count. Secondly, I strongly doubt that Verizon has only flagged 5,000 sites for potential involvement in the “new 5G” network.Third, a 5 year “guarantee” in this business is virtually worthless. Ironically, Verizon already pays the least of the wireless leases this city has in place at this location.

If you have been contacted by Verizon (or their agent Md7) feel free to reach out to us – we can let you know whether there is anything to be concerned with which in most cases, there isn’t. We can help review the proposal and your current lease and let you know if any concessions are worth considering. Please read this article about Md7 first – and then contact us if you need more help.

Merry Christmas – Your Property Tax Just Went up $14,000 due to your Rooftop Cell Sites

December 4, 2018 by Ken Schmidt Leave a Comment

A client of ours reached out to us yesterday with the following request:

“The City of Philadelphia is undergoing a total reassessment of commercial properties. Until 2017 we have not been charged, as a component of our property taxes, for the cell sites on our roof. (There are reasons for this which are not relevant to the question I have for you). Let me say that all of our leases have a clause that says the cell companies are responsible for any real estate taxes pertinent to their installation. Also if we have a increase in taxes they would be responsible for that as well. The City is assessing our Cell Installations at approximately $280,000 each. The three (rooftop sites) now account for approximately $14,000/year in real estate taxes.

My question is; how do we deal with the cell companies? Should we do this on our own, should we hire an attorney, or are there companies such as yours that are more capable of handling cell companies and getting our reimbursement for increased real estate taxes?

Our concern is that the cell companies are difficult to deal with and if we try to handle this without professional assistance we are not going to get anywhere with our efforts.”

While this admittedly click bait title was intended to draw your attention, the story nonetheless is real. You may not know this – but Pennsylvania taxes cell towers and cell sites as real property. Pennsylvania is in the minority of states that do so – and that include cell towers by statute.

§ 8811. Subjects of local taxation.

(a) Subjects of taxation enumerated.– Except as provided in subsection (b), all subjects and property made taxable by the laws of this Commonwealth for county, city, borough, town, township and school district purposes shall, as provided in this chapter, be valued and assessed at the annual rates, including all:

(1) Real estate, namely:

(viii) telecommunication towers that have become affixed to land.

One of the nuances for PA is that the basis for the taxation is that courts have deemed towers to be closer to real property – they are bolted to a concrete pad, require a crane to remove them, and are intended to be permanent (and not be moved/reused elsewhere). I question how this type of interpretation applies to rooftop cell site leases where the equipment is not permanent, is attached to the building, and can be reused elsewhere. (Interestingly enough other states have found the opposite) Furthermore, where in the world did the City come up with a valuation of the cell sites at a rate of $280,000 each? Assuming this is based upon equipment, it would seem that the value should be variable depending upon the tenant as the equipment costs vary depending upon the carrier and specific equipment at each location. If based upon some type of income, where did they arrive at $280K? If any of you have experience with PA taxes, I would be interested to know more about how they justify this amount for a rooftop cell site. I would also be interested in knowing if there are no personal property taxes for rooftop cell sites as a result of high real property taxes.

Fortunately for this client, this isn’t really their issue. The leases have strong language that provides that the tenant (wireless carrier) is required to reimburse them for taxes. Proper notice and follow up is required but ultimately, it will be up to the tenants to contest or pay the assessment on the towers. This just goes to show how important it is to have language in your lease that requires the tenant to pay for any taxes (real or personal) that are attributable to the improvements or use of the site as a wireless facility.

DISH’s NB-IOT Network Plans- More than Just a License Saver Design?

November 8, 2018 by Ken Schmidt Leave a Comment

As pointed out by Inside Towers, construction drawings for a DISH NB-IOT installation are available here. We reviewed the drawings carefully and have some observations.

What is DISH installing?

DISH appears to be using one 3' satellite dish for backhaul purposes. The drawings include a designation that a second location must be available on the platform.

DISH is using Ericsson equipment with battery backup.

DISH's equipment and lease area is 5' 3" x 7' 0".

DISH is installing 3 larger tri-band panel antennas made by Comba along with 8 remote radio units. The antennas are being installed as high as possible on this particular 225' tower which makes sense for an NB-IOT installation.

This particular installation is on an SBA tower- we have heard that SBA is getting a sizeable portion of the initial round of DISH installations. We will confirm that later as more requests come in.

What does this mean for tower owners, investors, and landowners?

For tower owners, any new company adding collocations to existing towers is welcome. The collocation amounts to additional revenue, although expectations are tempered because of the lower number of DISH sites that will be deployed initially in an effort to keep their FCC frequency licenses. Private tower owners won't stand to benefit as much as public tower owners- primarily because it appears that DISH is focusing on deploying sites quickly which is best done by a master lease agreement with public tower companies. Because NB-IOT doesn't require the same degree of location specificity as traditional cellular, DISH has more flexibility in terms of optimizing cost and speed as opposed to location. The real question left outstanding is when and if DISH intends to install a full-blown network- which we won't likely know for some time.

For Landowners, unless your ground lease is with a public tower company and it has a revenue share component in it, you won't likely see any additional rent. Some building owners in urban areas may see some limited interest especially on taller buildings.

For Investors, while this is slightly positive to the public tower companies, the initial number of sites isn't significant enough to get excited about. There isn't likely a significant upgrade path for these sites, so amendment activity in the future may be limited. For DISH, it is too early to tell what this means. The site design is indicative that DISH has plans to operate an actual network, but whether DISH actually deploys enough sites to have a robust NB-IOT network remains to be seen.

Why Did My Crown Castle Lease Revenue Share Payments Go Up or Down?

October 22, 2018 by Ken Schmidt Leave a Comment

A number of our clients have ground leases with Crown Castle that contain revenue sharing clauses. They contacted us recently to ask why their lease payments went down or up. Typically, the rent payment adjustments are being made because of what Crown Castle is referring to as adjustments in their master lease agreements with their wireless tenants.

What Is a Master Lease Agreement?

For those of you not familiar with a master lease agreement or MLA, it is an agreement between Crown Castle and a wireless company like AT&T or Verizon where the overall conditions and terms are addressed for all future leases between the two companies. The MLA typically contains the length of the agreement and normal boilerplate language that will be inserted in all the tower company/wireless company agreements. Then, as the carrier needs to lease a new site, a site lease amendment or site license agreement (SLA) is generated that has site-specific details. In some cases, the MLA will contain the specific lease rates for all sites to be leased. In other cases, each SLA will have a specific lease rate.

What Is a Ground Lease Revenue Share Payment?

This matters to landowners who have leases with a revenue share because the landowner typically receives a percentage of the revenue being paid by the wireless carrier to Crown Castle. For example, if the landowner has a revenue share clause of 20%, they will receive 20% of whatever Crown Castle is being paid by the wireless companies on the tower. The revenue share normally does not apply to the anchor tenant and only applies to wireless carriers who sublease space on the tower after the first anchor tenant. If AT&T pays Crown Castle $2000/mo, the landowner would get $400/mo. However, if Crown Castle and AT&T negotiate a new agreement at $1500/mo., the landowner's "share" would decrease to $300/mo. That is why they call it a revenue share.

In most cases, the rent that Crown Castle receives increases and, therefore, so does the share of the rent being paid to the landowner. However, in October 2018, landowners have been receiving notices indicating that the rent being paid to Crown Castle has decreased. How much? It varies. You might be asking yourself why Crown Castle would be agreeing to lower rent? Are they trying to avoid the revenue share requirement? Perhaps, but there are other reasons why Crown Castle would be interested in reducing the rent they receive.

Why Would Crown Castle Agree to Lower Rent?

First, it is quite possible that Crown Castle is seeking to level out their rents for a specific wireless carrier across all their towers. Some rents might go down, but some might go up. Rents that go down help Crown Castle make it less justifiable for that wireless carrier to relocate to another tower being built by a Crown Castle competitor. (See our previous article on how AT&T and Verizon are desperate to strike back at the tower companies) Secondly, Crown Castle may also have gained other concessions like higher escalation to their lease with the carrier or an agreement by the carrier not to terminate their sublease agreements for a fixed amount of time. Third, it is likely that Crown Castle carefully studied their revenue share obligations before agreeing to a revised amount to see whether they were net negative or positive in terms of income due to the adjustment. Lastly, and this may be specific to only Crown Castle, this could be part of an integrated master lease agreement for macrocells (towers) and small cells where collectively the overall income to Crown Castle increased.

Some landowners have lost income as a result of the sublease rent adjustment. Some will gain. It appears, though, that Crown Castle is retroactively applying the revenue share adjustment for past months. This is likely because the master lease agreement amendments were completed earlier this year and Crown Castle is now just getting to the point of adjusting the revenue share payments. To catch up with their overpayment or underpayment over the last five to seven months, they are adjusting the current revenue share accordingly. This can result in significant swings. One landowner we know of received a NEGATIVE five-figure revenue share, which essentially means that Crown Castle is asking for tens of thousands of dollars back because of alleged overpayments over the last five to seven months.

What Can I Do About It?

Unfortunately, Crown Castle hasn't been too transparent about the changes or how they arrived at the revised revenue share amounts. If you have received an adjustment to the revenue share calculation in your check, we recommend that you ask Crown Castle for a business summary affidavit (BSA). If your lease requires that Crown Castle share copies of the sublease agreements they have in place with their tenants, ask for those instead. Don't be afraid to ask for a specific accounting of how Crown Castle calculated the changes in rent. We aren't suggesting that Crown Castle is intentionally trying to cheat you, just that we have found mistakes previously in their revenue share calculations that were both positive and negative to the landowner.

If you have lost revenue and aren't sure what to make of it, please reach out to us. We can review your rent statement from the last three to six months and see why your rent went up or down. We can compare it to what our other clients are receiving due to their revenue share clause from that same carrier. If we think the calculations look correct, we will tell you that and won't charge you anything. If we think there is something wrong with the calculations, we can then talk further about helping you work through sending a formal notice to Crown Castle of the discrepancy.

AT&T Wants to Buy Your Tower! (Well, Not Really)

September 28, 2018 by Ken Schmidt 6 Comments

A client of ours owns more than a few cell towers that have AT&T as a collocation tenant. They recently received this letter, yet another in a long line of letters that threaten the tower owner with some dire consequence if they don't renegotiate or sell their tower to AT&T.

In this case, the threat is somewhat comical. "The sale of your tower to certain parties may result in AT&T sending a non-renewal notice regarding our lease." How is that a threat? If a tower owner has already sold the tower to a third party, why would they care whether AT&T sends a non-renewal notice? Perhaps AT&T's thought is that if the seller needs to get an estoppel from AT&T regarding its lease to present to the buyer, that AT&T's can thwart the sale of the tower by instead sending a notice of non-renewal?

In our experience, most buyers don't really care whether a notice of non-renewal is sent, provided that there is enough term remaining before they can choose not to renew or if the tower is located in an area with zoning regulations that prohibit construction of new towers near existing towers.

The other comical part is that AT&T (through its' financial supplier) is asking for lease information about each tower so that the financial supplier can process the information and make an offer. Of course, AT&T then also has information about other subleases that the tower owner has on your tower which can be used against the tower owner in future lease negotiations.

If you are inclined to sell your tower, reach out to us and we can give you a free back of the napkin estimate of the value of the tower. We won't use your information against you and we won't threaten you with sending laughable notice's of non-renewal in order to get you to sell. If you aren't interested in selling but feel like you need some help in addressing these threats from AT&T, please call us to discuss your situation further.

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

August 15, 2018 by Ken Schmidt 2 Comments

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 when 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.