Horvath Communications, which has owned and developed cell tower sites throughout the country since 1996, is diversifying into neutral host networks. Last year, 20-year telecom veteran Alex Novak was hired by the South Bend, Indiana-based firm to head up the new division, identifying and securing venues for neutral-host site development. So far, more than a dozen neutral host networks are either built or under development.
Horvath is one of the first of the mid-size tower companies to make the leap into neutral host DAS and small cells. Larger companies, such as Digital Bridge, American Tower, InSite Wireless Group and Crown Castle International, have all reached beyond their tower cores. More recently, Phoenix Tower International did so through its purchase of Syscom Telecom, and SBA Communications has announced its entrance into DAS, Wi-Fi and CBRS, as well as Data Centers.
“We continue to build towers. That is still a strong part of what we do, but as more carrier budgets are geared toward the small cells and DAS, we thought we would use our carrier relationships and Alex’s real estate contacts to get involved in this portion of the industry,” said Jackie Horvath, president. “It is a divergence from towers, but it uses the same tower model. We are building a neutral host structure, where we rent space to the carriers or the enterprise.”
The Neutral Host Networks division includes DAS and small cells, and it has opened up an entirely new customer base for Horvath: the enterprise. Companies in multiple verticals have a need that they are looking to fill: in-building connectivity. The division is targeting properties that are a half million square feet and below, although it is currently consulting on a property with a million square feet. The Neutral Host Networks division is backed by partnerships with OEMs, including SOLiD, JMA Wireless, Zinwave, and engineering firms, such as Wireless Information Networks and Pierson Wireless.
“We have positioned ourselves to be the provider of DAS for the middleprize, which comprises the majority of the square footage across the country,” Novak said. “We have all the tools in the tool box to provide the customer with the right solution. We pull from each one of our partnerships on projects when it makes sense.”
Meeting the Financing Challenge
In-building wireless projects have traditionally met with resistance from enterprises that did not want to take on the capital expense of the network. Horvath’s model is to put up the capital for the entire project and then propose a lease agreement, changing it from a capex to an opex model.
“We use our relationships with carriers to try to get them to donate their signal source, if it is an active DAS,” Novak said. “There is a sweet spot somewhere in the middle between the carrier paying for all of the network and the building owner paying for the DAS. We aim to find it.”
Making Financial Sense
A good deal of Novak’s job so far has been educating enterprises on why carriers cannot be expected to provide coverage in all the buildings or on all campuses, and how filling that need with their own neutral host system makes sense from a financial viewpoint.
“When you look at the universe of real estate, multi-tenant office buildings, large apartment complexes and smaller hotels, it is too large for the carriers to fund,” Novak said. “We are educating the real estate industry on what these systems are and how they are going to add to the value of their property. And, although it is an expense, how it is going to be a positive for their bottom line, in terms of tenant attraction and retention.”
Horvath has Penetrated Several Verticals
So far, the Neutral Host Networks division has projects that are concentrated multiple verticals, including entertainment/theme park, hospitality, municipal/public right of way, university campus, office building and master-planned community.
“We are in the hospitality and office building segments and looking to get into healthcare and multi-family dwellings,” Novak said. “We have a good portfolio of theme parks. And we just won an RFP to provide smart poles for the city of Lexington, Kentucky.”
With high competition in the real estate market, more properties are looking for an edge through connectivity. In today’s New York Times, an article said, “To stay competitive, developers and landlords are being driven to add telecommunications infrastructure, video screens and, yes, glass that tints itself automatically. Developers and landlords that offer advancements in office space may be able to command premium rents.”
Novak agreed, “More and more, tenants are concerned with how their devices are going to perform in a space. Whether it is a multi-family dwelling where tenants have cut the cord or office space where top notch connectivity gives a building an edge over real estate with poor coverage, it is going to be a big market segment in the future. Hospitality is also going to be a big segment.”