American Tower is looking to diversify its offerings into four different areas extending beyond its core tower business, which generates 97 percent of its revenue, said Ed Knapp, chief technology officer of American Tower. Spencer Kurn, an analyst with New Street Research, interviewed Knapp during the BCG and New Street Research 5G Virtual Conference Nov. 17. Knapp said the new areas include power, fiber transport, edge compute centers and shared networks.
Power to the Tower
For power at the cell site, Knapp said the company is looking at sustainability, renewables and shared power. American Tower is performing advanced work in Africa leading to less use of power from an unreliable grid and more use of lithium-ion battery storage and power obtained from solar energy.
“We’re seeing — obviously AFFO growth and margin benefits from investing in power and being able to see that capital investment perform reasonably well today,” Knapp said. “Now, we would like to transform that model extend it to other markets. We’re still early days in being able to look at how do you do that in a reliable grid environment, but that could be significant.”
American Tower is considering transport in two differing ways. One is connecting towers, small cells and edge data centers. The other is in fiber to the home or fiber to the neighborhood, probably in Latin America.
“So those things are really also changing the landscape of how one can put in infrastructure that’s open neutral host and create new value and new business models and then further more that will be used to support small cells and fiber to the tower expansions as we’ve done in those markets today,” Knapp said.
It should be noted that American Tower’s previous position on its small cell business was BYOF — bring your own fiber.
American Tower’s interest in deploying edge compute next to metropolitan areas is already well known. American Tower Edge Data Centers current reside on the metro edge in Atlanta, Georgia; Boulder and Denver, Colorado; and Austin, Texas. However, Knapp projects the need will be on the order of hundreds or thousands of locations to push the cloud to the edge with 100-kilowatt to 250-kilowatt data centers at tower sites.
With edge compute to the tower, Knapp said, wireless network carriers are destined to move their packet cores to the regional level to migrate processing and applications closer to the edge to support the low-latency applications, and towers are well-suited to host the edge data centers.
“Our towers are best positioned to support that as aggregation points naturally for edge processing and also on-prem,” Knapp said. “If you look at venues and other types of in-building systems, those are also opportunities for low-latency application processing.”
“You could think of every tower as having essentially some local processing to pull out data like, for example, on a rural highway, if you want low-latency processing for truck platooning or other automotive applications,” Knapp said. “You can envision almost every site having some form of compute based on the transport architecture and whether it is efficient to send data back to some other location.”
To meet latency goals in the single-digit milliseconds for future applications in augmented and virtual reality and autonomous vehicles, compute must be pushed out to the tower edge, according to Knapp, and American Tower is well positioned to serve that need.
“We have zoning and permitting already set up so we can move really quickly in deploying compute, so we have a really fast time to market,” Knapp said. “We have a low cost point, and we can offer networking and space and power because we already have power at the site, and there’s already fiber providers.”
Neutral-host Shared Networks
For 5G to penetrate more buildings from the inside, Knapp proposed that carriers would want use neutral-host shared networks. An example of indoor networks becoming network-as-a-service opportunities includes the Citizens Broadband Radio Service. However, American Tower doesn’t currently see a market for a neutral wireless host in the United States.
“So, unless the U.S. market changes, it may not be attractive, but in other markets where folks are more open to sharing, it does become an opportunity,” he said. “We’re looking at really two things: Can we get the return on invested capital that is extending from our tower environment to other adjacencies and is AFFO [adjusted funds from operations] growth going to be part of that, because you’re looking at things like maintenance capex and a lot of other SG&A [selling, general & administrative expense] requirements.”
Quotations courtesy Seeking Alpha.