SITA Forecasts for 2014

In looking forward to 2014, I thought it might be helpful (and fun) to publish our top ten forecasts for the coming year.

1. Wireless Spending Continues to Increase. Carriers spent $25.3 billion in 2011 and $30.1 billion in 2012.  CTIA expects that the carriers will increase their spending to $34 or $35 billion going forward for each of the next 3-5 years.  All other anecdotal data we’ve seen confirms this.  (Fun Fact 1: The $30.1 billion for 2012 equated to $94/subscriber.  Fun Fact 2:  There are currently more wireless subscriber connections in the United States than there are people!)
2. Cell Site Growth is on the Rise.  Despite the increased capital budgets, the last few years have found the carriers focused on upgrading their existing sites with LTE modifications.  Future efforts will include adding new sites in between existing sites – a process called densification.  One tower company executive stated that the carriers have built their data networks “a mile wide but only an inch deep.” Not coincidentally, data traffic from wireless devices (smartphones, tablets, and laptops) doubled in 2012 and is expected to have doubled again in 2013.  CTIA estimates that a further seven-fold increase will occur in the next 4 years.  Verizon came out publicly this past year acknowledging that in some major markets its LTE networks were already starting to slow down due to heavy usage.  We’ve heard from various industry vendors that they are staring down significant increases in workloads in new sites, which is good news for tower builders, as well as any military service persons who are involved in the Warriors4Wireless initiative.
3. Neither 2013 nor 2014 are the Year of the Small Cell.   Despite pundits’ proclamations that 2013 would be the year of the small cell, it definitely was not.  We saw only a handful of inquiries from landowners regarding small cell requests from carriers.  We expect that number to increase, however we believe that carriers are finding that leasing space for small cells from landowners is difficult with the exception of large public owners or utilities.  (Not to say that leasing from municipal or large corporate owners is easy, just that it is more cost-effective to deal with one entity and one master lease agreement covering 10-100 small cells than it is to deal with one lease at a time.)  However, small cells will increasingly be used as the RF source for in building solutions over stand alone repeater deployments and for DAS applications, which have previously been supported by macro cells.
4. AT&T and Verizon Will Continue to Lead Infrastructure Deployment while Sprint and T-Mobile Offer Better Plans.  With Sprint and T-Mobile focused on the value side of the wireless market, AT&T and Verizon will need to distinguish their service offerings to keep customers happy.  Sprint continues to push its unlimited data plans, which, when coupled with their vast spectrum holdings, will put pressure on AT&T and Verizon to increase data limits.  T-Mobile continues to devise wireless plans that are more consumer-friendly, making it easier for subscribers to switch over.  Both Sprint and T-Mobile are seeing a surge in subscribers, which will require AT&T and Verizon to distinguish their networks  by building more sites (macrocells and small cells) and providing denser networks.  All of this is good for the consumer, cell site landowners, and for the tower industry, although before you get too happy, see #7.
5. Distributed Antenna Systems (DAS) to be Deployed in More Venues.  So far, the rush to deploy DAS has been focused towards large public buildings like arenas, hospitals, and hotels.  This year, more and more commercial venues and public building owners will be approached to add DAS, especially by AT&T and Verizon, who want to get deals with landowners before they’re approached by neutral host providers directly.  Venues themselves are beginning to demand in-building systems, often at rates three times faster than what carriers are able to satisfy.   Venues that create superior investment opportunities will be serviced by the carriers first, thus generating the competitive benefits of offering ubiquitous wireless service to the venue’s guests.  Furthermore, as location becomes the new meta-data, the vast majority of subscribers will give apps they like to use full access to the information held on their devices.  Other “devices” that are engineered to respond with activities based upon location of the primary device will be expected to perform seamlessly. Not to mention, the pent up need for group and crowd analytics, which will generate a layer of data traffic where crowd behavior is monitored so as to be more efficiently or competitively managed and serviced.  Large enclosed public spaces will try to become Location Capable, which will further increase the demand for indoor infrastructure and increased data traffic to smaller venues.  As a result look for small cell fed DAS deployments into buildings as small as 150,000 sf.
6. Lease Buyout Purchase Offer Amounts will Decrease.   Lease buyout companies are currently paying more than ever for wireless leases.  Yet, despite all of the favorable trends in wireless, they won’t continue to do so.  Significant competition has already caused one or more of the lease buyout companies to focus their efforts overseas.  We suspect that at some point during 2014, lease buyout companies will begin to reign in their purchase offer amounts.
7. Leaseholders will be inundated with Offers to Extend their Leases. Many of our clients have expressed that rarely a week goes by without receiving a phone call or letter from some party interested in extending or buying their lease.  Don’t expect this to change any time soon, especially now that the industry is discovering that the low hanging fruit has been pulled and the pie they are competing for is shrinking.  So, do expect to hear, “Happy 2am in the morning to you, Mr. Landowner.  Have I got a deal for you, and it is much better than the other five deals that you were already offered this week!”
8. Sprint and T-Mobile will Attempt to Merge.   While this isn’t much of a reach for a projection given the substantial amount of news this topic draws weekly, it will be a material event that will distract both companies for the 9-18 month process of trying to get approval from the Department of Justice and the FCC.  Furthermore, it could have a deflating impact on tower and lease sales prices, even for those that aren’t tied to Sprint or T-Mobile.   Best case for leaseholders and tower owners is that I am wrong, and they don’t try to merge.  Perhaps DISH Networks buys T-Mobile instead.  Worst case scenario is that the FCC and DOJ do decide that a joined Sprint/T-Mobile will be better equipped to compete with AT&T and Verizon.  Not sure how they would come to that conclusion, or why, but if they do, it will be to everyone’s disadvantage.
9. The “Internet of Things” takes Modest but Important Steps Forward.  For those of you who are unaware, the “Internet of Things” refers to the concept that everything around us will soon be connected wirelessly.   Gartner projects that there will be 26 billion devices connected to the Internet of Things by 2020.   These devices will be able to seamlessly communicate with one another.  Your coffee maker will know when to start when you hit the snooze button on your alarm clock.  Your car will start when you walk out the door.   You might wonder why this projection is being added to our projections for the cell tower industry for 2014.  Primarily, it is because initially many of these connections will be made over small private and unlicensed networks – think Bluetooth and WIFI.   However, as people become more comfortable with the functionality and ease these automated connections bring, they will seek to expand their accessibility, which means they will require a constant and reliable connection, one that, at the current time, can only be provided by the widespread cellular/PCS/LTE networks. Think of the Amazon Kindle, which comes prepackaged with its data service paid for as part of the purchase price of the device.  If only a small number of the 26 billion devices expected by Gartner to be in use in 2020 were to rely upon pre-paid wireless data plans, the industry would still require many more sites and/or better technology to handle the increased data traffic.  This year at the Consumer Electronic Show (CES) in Vegas showed a significant increase in the number of “wearables”.  Wearables are devices that are set up to network with your smart phone and provide data from sensors.  If only a small number of the 26 billion devices rely upon paid wireless data plans, the industry will need more sites or better technology or both to handle the increased data traffic. These items are just precursors to the Internet of Things, especially those that are constantly connected via WIFI first, and then LTE second.
10. Steel in the Air Continues to Provide Fair, Efficient, and Unbiased Guidance to our Clients.  Candidly, this is the easiest of our projections.  Now that we are in our 11^th year, we have no intentions of doing anything other than providing the same service we always have.  If you find that you need assistance in 2014, please don’t hesitate to contact us.