Mosesso: What will the role of wireless be in the future?
Brown: The way we use our devices today, pulling down information either for work or entertainment, is going to change. With reductions in latency, what we will see over the next couple of decades is a meaningful amount of traffic moving to machine-to-machine communications in industrial settings in every vertical market. It will be used to reduce costs and increase savings. I am not aware of a single industry that is not working on wireless applications.
Mosesso: What are the opportunities for infrastructure providers like Crown Castle?
Brown: Towers are going to continue to play a role in the next generation of wireless deployments. They are the most cost-effective, efficient way for any company to deploy wireless spectrum. Even nontraditional owners of spectrum and deployers of wireless networks are likely to first use towers as the backbone of their network. Fiber-connected small cells will increasingly be used to improve coverage as well as the density of the network.
Mosesso: What are your thoughts on the effect of recent and upcoming auctions?
Brown: What is encouraging is that the cost of the spectrum bought at auction in the higher bands has come down dramatically, which means there will be more capital available to go toward the deployment of those technologies. The additional spectrum that is being provided by the FCC, both licensed and unlicensed, is really good for our industry and incredibly encouraging.
Mosesso: Most of the spectrum that is coming to market is in the higher frequency ranges. What does that mean for leasing across towers and small cells?
Brown: Even in the higher spectrum bands, towers are going to be used. Maybe less, however, than they were used, historically, nationwide. But in targeted areas, higher spectrum bands will be used on towers as a portion of the carrier’s network. It is more likely that those higher bands will be used on small cells in urban settings and dense suburban areas. Over time, small cells will have a greater diversity of spectrum bands than you see on macro sites, if you consider the whole portfolio of assets.
Mosesso: How do you respond when people outside of our industry will say that the coming of 5G will lead to a massive spike in capital spending?
Brown: I am quick to discourage people from thinking that way about our industry. In reality, the operators are likely to manage their cash flows and balance sheets appropriately and think about capital investment as a long runway of investment in their networks. They have done that for a number of years. A lot of the volatility of spending by wireless carriers has largely evaporated over the last five years. The level of spending has become relatively steady.
I believe over the next couple of decades we will see consistent investment in infrastructure as we deploy 5G.
Mosesso: You have said that Crown Castle will deploy 10,000 to 15,000 small cells in 2019. What is driving this significant acceleration?
Brown: Five years ago, we had almost no small cells — 1,000 to 2,000. Today, we have almost 30,000 of them that we have deployed in the top 30 U.S. markets. Another 35,000 small cells will be under construction in the next 18 to 24 months.
The deployment of small cells will require a massive increase in the amount of spending. That ramp is going to continue to accelerate. With the pipeline that carriers today say they are going to need in the coming years, that ramp is going to continue to accelerate. What is this going to look like in 20 years? Every industry estimate I have read says that each wireless carrier is going to have at least 1 million small cells.
Mosesso: What is one way in which the deployment of small cells differs from macrotowers?
Brown: While there are companies that are willing to build one to two to ten towers for a carrier, small cell deployments are a very different business. When we are building small cells in Southern California for example, we may get 4,000 to 6,000 small cells in one order, because they have to be deployed in scale using fiber-optic cable. There is less opportunity for smaller companies to come in and do a few small cells, because the carriers are looking to cover a much larger geography at one time.