What are “Small Cells” and Why Should I Care?

In our last newsletter, we discussed various types of cell sites that could impact cell site leases in urban areas.   We discussed macrocells, microcells, picocells, and femtocells.  The key distinction between each of these is the area that they service: the list above goes from larger coverage area to smaller coverage area.    When most people are thinking of cell sites, they are thinking of towers and rooftop sites which are considered macrocells in that they cover large areas.

However, the carriers have found that while macrocells are great for wide area coverage for voice services, they are not as efficient for data services.   They have found that the closer they can get the antenna to the device trying to connect to it, the less interference there is and the better the connection for data services.  With the pending surge of data hungry applications and devices (tablets, smartphones, etc.), the industry pundits expect the amount of data flowing through these networks to increase exponentially over the next few years.  Thus, these same pundits are forecasting exponential growth in the deployment of “small cells” or microcells, picocells, and femtocells.

These types of small cells are already in use.   An example is Distributed Antenna Systems or DAS.  DAS are systems of antenna infrastructure where the antennas are typically placed on the top of utility poles or other outdoor structures or throughout a building (examples include sports arenas, large office buildings, or even underground public transit systems).  There are many DAS networks already deployed.  For instance, the City of Charlotte, NC has one deployed in its downtown area.   New Orleans has a DAS network along Bourbon Street in the French Quarter.   In both of these cases the networks were deployed as an alternative to traditional macrocells because of difficult zoning regulations that would otherwise prohibit the placement of towers or visible rooftop sites.

In the future though, it is Steel in the Air’s belief that small cells will see a significant increase in deployment but not in traditional DAS networks where strings of nodes are deployed in one fell sweep.  Instead, the carriers will start to deploy individual small cells on rooftops or the sides of buildings, on the top of street lights and utility poles.   We have first-hand knowledge of this.  A municipal client of ours was presented with a proposal to lease their utility poles by a wireless carrier.   The carrier implied that they wanted a large number of poles, but upon further investigation, we found that the carrier simply wanted to pick those poles in a piecemeal fashion that would help them fill in their coverage gaps.    The selected sites weren’t going to be used as part of one system but simply as fill-in sites to augment this carrier’s network.

How does this impact property or tower owners?

For some, there will be no impact.  In rural and less dense suburban areas, there won’t be a material impact.  The carriers will still need wide area of coverage that only tall towers can provide.

For some landlords, there may be a negative impact.  In dense suburban and urban areas, the carriers now have additional options to provide better service.   This means that the carriers will have more flexibility to deploy their network and avoid problematic rooftop and ground lessors who are difficult to deal with or charge high rent.  Locations that were previously “must have” properties for the carriers won’t necessarily be “must have” anymore.  The carriers will look at their most costly leases and attempt to relocate them if they can justify the cost of relocation in future savings.

For some landowners, there will be a positive impact.   Building owners in urban and dense suburban areas with structures that weren’t needed by the carriers before will be approached to lease the side or rooftop of their buildings for small cells.    Municipalities with street lights, utility poles, and traffic signals will receive additional income from the deployment of small cells on their infrastructure.

At this point, we don’t recommend that most landowner or structure owners do anything other than be conscious that small cells will have a large impact on the siting of wireless infrastructure.   Don’t renegotiate your leases at this time when approached by the lease optimization companies claiming that small cells will make your lease obsolete.   At the same time, don’t start counting on future revenue for your building from small cells.    Don’t worry about marketing your site- small cells are still in their infancy without any sizeable deployments yet other than DAS networks.   For landowners or tower owners with unique sites that are coming up for expiration, contact us and we will help you determine the appropriate course of action for your specific site.   For municipalities and large corporate landowners, do not sign master lease agreements or site management agreements with the carriers or tower companies that give them control or access to your properties for small cells at pre-determined rates.