Cell Tower Builds & Wireless Technology

T-Mobile Sprint Merger Backup Plan?

June 12, 2019 by Ken Schmidt Leave a Comment

One of our municipal clients has a water tower with T-Mobile and Sprint on it. T-Mobile has proposed to add antennas and equipment with Band 41 (Clearwire 2500 MHz spectrum) to T-Mobile’s rad center. See the image below with the antennas that service B41. Because the lease the client has with T-Mobile prevents the addition of new antennas, they are required to get an amendment. T-Mobile is seeking to have the amendment signed prior to the merger confirmation.

For us, it is difficult to price the amendment because the lease does not allow restriction of equipment based upon the specific frequency, but only on the size, weight, and the number of the antennas. Thus, if the merger occurs, we can make it more difficult for T-Mobile to merge the equipment and terminate the Sprint lease, but not impossible. However, if the merger does not occur, if the client signs an amendment that could allow Sprint to terminate their lease regardless of what happens with the merger.
When we inquired with the T-Mobile agent about making the amendment contingent upon the merger happening or not, we were told that T-Mobile’s legal department would never agree to such a limitation.

Is there a backup plan like spectrum sharing?

T-Mobile’s desire to sign the amendment but unwillingness to make it contingent upon the merger makes me wonder whether there is an alternative plan in the works in the event that the merger is not consummated. This could be a spectrum sharing agreement. This isn’t unprecedented- see this article. But in that case, the spectrum to be shared was PCS spectrum (1900 MHz), not Clearwire’s spectrum (2500 MHz). Thus, the existing agreement would need to be revised or a new one entered into.

Sprint has the spectrum but is a dead company walking without additional capex to deploy 5G. Over time, the distinction between those who invest in 5G specifically in densifying their network will prove greater than that with LTE and 4G. T-Mobile desperately needs mid-band spectrum as running 5G on 600 MHz will be sufficient in areas where there isn’t a significant amount of traffic but will limit their overall network performance elsewhere.

So What to Do?

First, off, it is hard to generalize a course of action that works for every site. Each situation will be different and tied to the specific lease language and exhibits. In this case, the easy but ultimately unfruitful answer is to either reject the request altogether or ask that the amendment rent match that which would be lost with a Sprint lease termination. T-Mobile won’t agree to the latter option so the only option we see is waiting until there is further clarification on the merger . The lawsuit filed yesterday by 10 states against the merger may delay the process and certainly makes the merger probability less certain.

We are curious about what others have done or will do in a similar situation. If you have successfully negotiated through this issue, please either leave a comment here or contact us or private message us if you don’t care to take it public.

Remember When Sprint Only Had 12 Employees? I don’t.

June 4, 2019 by Ken Schmidt Leave a Comment

One of the joys of being on this side of the business is the relationships we form with landowners- both leads and clients. This morning, I spoke with a lead who owns some land near Kansas City where Sprint PCS erected one of their first PCS towers. The subject tower has its own storied history- like others moving from Sprint PCS to Pinnacle Towers to Global Signal then to its current owner, Crown Castle.

The lead recalls when he was first contacted by someone from Sprint PCS when they only had 12 employees. The Sprint employee talked of building a network of towers across the country – Sprint planned to spend “over $1 billion” dollars doing it. The landowner was pretty skeptical but signed on anyway. Here’s an old Sprint PCS commercial for your enjoyment.

At that time, he recalls that the only cellular service available was from AT&T. It was expensive- $1.05/minute and it cost $300 to install the bag phone in the car. To use the service, you had to wait until the red light switched to green because the system could only handle a limited number of users simultaneously. It wasn’t that reliable and the landowner welcomed any competition.

Contrast that with today’s cellular systems. Wireless carriers spend $1 billion per quarter or more building out their networks. It’s rare to speak with an actual employee of the company building the tower on the property. Minutes of use cost next to nothing with unlimited plans. Sprint has 30,000 employees. While the cost of the cell phone has gone up ($300 in 1996 is equivalent to just under $500 today), they do so much more. Back in 1996, Sprint’s stock price was at $20.50/share. Today it is just under $7/share.

Care to see our wireless history? It obviously hasn’t been updated in a while (Cricket and MetroPCS are still on it), but you can see Sprint’s history.

One Step Forward, Two Steps Back; Verizon’s Small Cell Agreement with Syracuse

May 27, 2019 by Ken Schmidt Leave a Comment

As a resident of the Syracuse area, I am excited to see Verizon and their interest to bring 5G via 600 small cells to our fair City. However, in their rush to try and become the “first fully 5G city,” the City of Syracuse seems to have bent over backward when entering the agreement with Verizon for small cells throughout the City. Make no mistake, there are benefits to becoming a 5G city, but this agreement no more means Syracuse will be the first fully covered 5G city than it does for other cities where Verizon promised the same thing when pitching similar lease agreements. But at least some of the other cities didn’t enter into such a one-sided agreement. For example, see agreements entered into with Sacramento, San Diego, or San Jose, each of whom receives better terms and conditions than Syracuse did and will have a robust small cell deployment as well.

SYRACUSE COULD NOT PREVENT VERIZON FROM ADDING SMALL CELLS TO ITS RIGHT OF WAYS

It is important to realize that Syracuse really didn’t have much choice of whether to allow Verizon to access the city public right-of-ways and structures due to the FCC’s Third Order regarding small cells. While the City could have negotiated a higher amount for the pole access rights or permit fees, they would have had to demonstrate that their actual costs in reviewing small cell applications and maintaining the right-of-ways were higher than the nominal fees allowed for in the FCC Third Order. As it stands, the City had to reduce its annual fee for small cells from $950/year to the FCC mandated $270/year. Over the next 10 years, that means that the City will receive $1.6M from Verizon instead of $5.4M for the small cells.

BUT THEY COULD HAVE ENTERED A LESS ONE-SIDED AGREEMENT

Our concern isn’t that the City entered an agreement for 5G or that they did it with Verizon. Our objection is with this actual agreement. It seems that the City was so anxious to become a leader in 5G that they ignored the obvious issues with the agreement. Here are our concerns with this agreement:

The City has granted rights to Verizon for upwards of 45 years when it didn’t have to. The city signed a master license agreement is for 20 years, with a very limited right for the City to terminate the agreement. The master agreement details the general rights of the parties and is for 20 years. Then there is a separate pole license for each pole that will be used or installed that runs up to 25 years from the date the pole was installed. Thus, if a pole is installed in year 20, it will be there for another 25 years thereafter. In short, the City is entering a possible 45-year agreement. However, there is no requirement in the FCC Third Order about the minimum number of years a City must sign an agreement for. While Verizon surely prefers a much longer agreement, there are other cities which are entering much shorter 10-year agreements with Verizon. Here we question what benefit, if any, the City gets from a longer license agreement. Verizon retained the right to terminate “at any time for any reason or no reason by written notice to the City,” but the City does not. So, in essence, the City is now committed to this specific agreement legally, regardless of what happens with technology in the future. While there is a limited right to terminate if a court of law or Congress revokes or repeals the Third Order, this is narrowly drafted.
The agreement entered into by the City concedes unnecessary rights to Verizon under contract law. The agreement is substantially the same as other agreements proposed by Verizon to other cities. It attempts to incorporate many of the standards from the FCC Order into the license agreement. The issue here, from a legal perspective, is that these clauses did not need to be in the license agreement. If Verizon felt the city was not adhering to the FCC order or was discriminating against Verizon, Verizon by default has the option of requesting relief from the FCC or filing in federal court for injunction or damages. However, by adding the language in the license agreement, Verizon can now file in state court on a civil claim if Verizon believes that the City is in breach of the agreement. There is absolutely no benefit to the City of Syracuse to including this language in the license agreement.
Other cities have received additional compensation in the form of public safety or IOT monitoring and services, higher fees to help pay for additional staff to review small cells applications. The City of Syracuse received nothing. In fairness, the other cities are bigger and more important to Verizon than Syracuse. Nonetheless, the only concession Verizon appears to have made to the City of Syracuse is the requirement for Verizon to monitor a limited set of small cells for compliance with applicable radio frequency emission standards. There are no actual commitments by Verizon to deploy a certain number of small cells by any date. No requirement to deploy in the poorer areas of the city. No smart city initiatives or commitments to fund research on how 5G can benefit the residents of Syracuse.
The agreement gives the City very limited rights to terminate even if health risks are identified and proven in the scientific community. Syracuse procured limited rights to have Verizon monitor their small cells to confirm they comply with the FCC, ANSI, and OSHA requirements regarding radio frequency emissions. The City, in what appears to be an effort to appease its citizens that small cells are safe, inserted language that requires the testing of the small cells to confirm that they meet the minimum applicable health, safety, and radio frequency regulations. Verizon is required to test up to 5% of all installed poles each year to confirm they comply. Meanwhile, the City is allowed to test any pole themselves for compliance, but they already have this right to test any small cell without the agreement. Conceptually, there could be clear evidence of harm from small cells but no change in the applicable regulations and the City would be powerless to terminate the agreement until the small cells no longer meet the regulations. While we don’t believe that there are health risks from small cells, that doesn’t mean that the issue could not have been addressed better in the license agreement. Alternatively, if the license agreement was shorter in term, the City could have simply terminated at the expiration even if there were no regulations. By agreeing to a long-term license with limited rights to terminate, the City could be legally committed to Verizon small cells in the public right of way even if there is ample evidence of why they should be removed.
By agreeing to such a one-sided agreement, the City has condemned itself to agree to similar agreements with ANY company providing wireless services who want to deploy in the ROW. Under the FCC Order and previous case law regarding the Telecommunications Act of 1996, the City may not discriminate between similar providers of wireless services. By agreeing to the terms with Verizon, the City will have a difficult time agreeing to different terms with other providers regardless of what happens or doesn’t happen with Verizon.

It seems to us that someone was motivated to push this through quickly. Verizon would have entered the agreement without many of the concessions that the City willingly agreed to. Again, while 5G coverage over the City is an admirable goal, this particular agreement is overreaching and could have been drafted better on the City’s behalf. The proliferation of small cells requires careful management by cities. As we have pointed out before, Verizon was on the winning side of the FCC 3^rd Order and cities are on the losing side. This particular agreement though could unnecessarily put Syracuse even further on the losing side. As a resident of the Syracuse area, I applaud the City entering an agreement with Verizon for small cell deployment, just not this particular agreement.

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.

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.

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.

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.

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.

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.