August 25, 2016 —
For a couple of years now I have been advocating that the macro cell tower industry is set to decline. I have even been ridiculed by some with a heavy investment in this space. But I am not the only one, and others who feel likewise are analysts and research players – until now. This is the first time I have seen it from a carrier. And this carrier is one of the top players in the biz – AT&T.
Tom Keathley SVP of AT&T’s wireless network architecture and design now seems to think so, as well. He has indicated that AT&T has formed an internal task force to develop alternatives to the traditional cell tower space-rental business model. Keathley said tower companies’ current business practices “may not be sustainable.”
And he isn’t the only one from that segment. T-Mobile’s SVP of technology, Dave Mayo, recently offered similar oratory at the Wireless Infrastructure Association conference. He said that the infrastructure segment is ripe for disruption as the industry moves toward 5G. Mayo said that the current model “is too complicated, it’s not sustainable.” Mayo indicates that there needs to be “industrialization” of the infrastructure market.
One of the big issues is that the costs are simply becoming too high. The current model is built on costs per megabyte, but the future is going to be cost per gigabyte, and current tower models cannot scale to that. Complaints about tower rental fees and contracts have risen so much in recent months that tower company executives are constantly addressing investor queries about the issue.
But that is the most visible issue. A bigger issue is that the future is going to be made up of a number of alternative networks. And with 5G, and the Internet of Anything, new frequencies up in the mmwave spectrum cannot be supported by macrocells. And, not just networks, technologies as well. A while back Qualcomm had said it has a chip that will fit into mobile devices and has all the capabilities of a cell tower, effectively making any such device a portable cell tower. Now, of course, mobile devices will never have the power, flexibility, and capacity of a tower, but these new networks may not need that if there are enough devices on the networks and the power needs are low enough.
Consider that future networks — 5G, IoX, HetNets, etc — will move much of the communications to higher frequencies – from 5 GHz to as high as 120 GHz, as of now. And, it is likely that, a bit further in the evolution, even higher frequencies will be used. And, then there is the edge, where as much as 70 percent of all communications will be, according to some experts. None of this can be handled by the current cell tower model.
How this will all shake out is still a bit uncertain, and the tower business model isn’t going anywhere soon. But there are cracks showing up. We will just have to wait to see what chunks fall off.
April 26, 2016 — T-Mobile’s Allan Tantillo proposed and Vertical Bridge’s Mike Belski agreed that the current system of tower rent escalators and other amendment-related price increases will need to change in the future, during a panel at the Inaugural Wireless West Conference (WWC), held last week, in Anaheim.
WWC was presented by five state wireless associations, representing California, Arizona, Nevada, Colorado and the Northwest. AGL Media Group assisted with programming and the moderating of the panels at the two-day conference.
During the panel, “The New Economics of Wireless Infrastructure,” which was moderated by Pat Troxell-Tant, Solution Seven, industry experts agreed that the state of the wireless infrastructure industry is healthy, but it will have to adjust to the carriers’ dramatically changing economics.
The cost of spectrum is one of the factors that have changed the economics of wireless infrastructure, according Clayton Funk, managing director, MVP Capital. The AWS-3 auction brought a whopping $45 billion in bids in 2015, and this year the 600 MHz Broadcast Incentive Auction is estimated to bring either $25 billion to $30 billion, according to JP Morgan, or $60 billion to $80 billion, according to Kagan Media Appraisals.
“Because it has gotten so expensive to buy spectrum, the carriers have to become more creative in making their spectrum use more efficient, such as network densification and MIMO,” Funk said.
Other factors in carrier economics are infrastructure build out costs, which globally between 3G and 4G were $700 billion, and falling revenue growth.
“The model of spending significant capex dollars and not getting the same return on their investment doesn’t work,” Funk said. “Whatever 5G becomes, carriers will need to make it more profitable.”
As new technologies roll out, carriers will look for ways to use spectrum more efficiently, according to Tantillo, but carriers’ cost cutting will also extend to current macrocell infrastructure as their economic model shifts. As the carriers attempt to drive down the costs, especially in tower rent, tower companies will need to reevaluate their prices if they want the carriers’ business, he said.
“It is incumbent upon those tower operators that are seeing their business threatened to adapt to new ways to do business and to find more efficient ways to serve us,” he said. “We want to go on to those old macrosites, but maybe their model needs to change. Maybe that can’t come and say, ‘Every time you add a TMA [tower mounted amplifier] on a tower it is a $150 a month increase in your rent.’”
Tantillo believes that competition among the tower companies will drive down the prices for rent and escalators, as well as amendments.
“Who wants to keep my lease? Can I put it out to auction?” he asked. “There are some very aggressive tower companies out there that are looking to be fantastic partners with us.”
Tantillo wasn’t talking chump change, either. He spoke of offers to cut leases from $3,000 to $1,500 a month and to lower escalators from 3.5 percent to 2 percent.
“They are saying, ‘give us your list of sites, and we will make it worth your while,’” he said. “We will work with you today so that when the lease expires, we will be ready for you to go on to our site and we will lower the cost curve for you.”
Mike Belski, senior vice president of leasing and marketing, Vertical Bridge, acknowledged that some leases had become unsustainable after escalating for an extended period of time, and he pledged to work with the carriers to develop a new business model.
“So the challenge for us is the paradigm shift. We have to think about leasing differently. We never thought we would add so much equipment to these towers. Vertical Bridge wants to be a part of the solution and not part of the problem,” he said.
Carriers will aggressively take advantage of opportunities to lower their tower costs and tower companies will feel direct pressure, Tantillo said.
“The challenge to the major tower companies that have most of the tower portfolios is, do you want to lose $3,000 and possibly future business or give me a deal that makes me want to stay there,” he said. “Tower companies are going to be faced with some pressure to bring their cost structures in line.”
T-Mobile’s Allan Tantillo raised eyebrows and rankled some industry insiders last year when he pronounced DAS was dead.
The senior director, national site development, gave more details of the carrier’s vision of the future of DAS during his keynote last week’s Network Infrastructure Forum at IWCE 2016. In sum, the economic model of DAS must evolve to fit into the push into enterprises and smaller entertainment venues, according to Tantillo.
“We are looking to change and revolutionize the economic model of DAS,” Tantillo said. “Our venue and special events team is working actively to change the model in new venues and new types of arenas.”
T-Mobile calls its new initiative “Bring Your Own RF,” and it leans heavily on the enterprise to supply the in-building infrastructure, while the carrier merely brings the RF source. “We have had tremendous success getting some very large developers across the country to understand they need to provide the infrastructure for use, so we can just bring our RF base stations to connect to their systems. It changes the economic model,” Tantillo said.
In some places, like casinos, the DAS model will evolve more slowly and will be remain dominated by the current business model, according to Tantillo. But T-Mobile’s new economic model is starting to gain footing in other enterprises, he asserted.
“This economic model frees us up to grow more rapidly, because it helps alleviate the capital burden, so that millions and millions of dollars can be shifted to landlords to help bear the burden of the infrastructure that they need, just like they pay for plumbing and electricity and Ethernet in their offices,” he said.
One member of the audience, Farzin Yazdani, CEO, Fast DAS, an RF Engineering and integration company, was impressed with Tantillo’s presentation and the carrier’s approach to enterprises.
“T-Mobile has a lot of the middle-prise [mid-sized enterprise] figured out,” Yazdani said. “They understand that the venues will drive the funding of the infrastructure, but they still need to provide them with a signal source.”
However, Yazdani disagreed with Tantillo on the relative health of DAS, saying he didn’t see it dying anytime soon.
“There is no more elegant way to penetrate signals into a building than with a neutral host system that combines everything and shoots it out to one antenna,” he said.
Other carriers have not figured out how to penetrate the mid-sized enterprises without the expense, which has slowed down the DAS market, according to Yazdani. Even with enterprise funding, Yazdani still sees a play for third party involvement.
“In a hybrid-funding model, the enterprise provides the lion’s share of the funding, and if there is an RoI model for a collocation of services or a capex/opex split with the carriers, we will provide the gap funding to build a compliant DAS,” he said. “If the carrier gives us a small cell and pays for the backhaul, we can build a neutral-host DAS and put it into the point of interface. The other carriers will follow suit [and collocate], if T-Mobile builds out a certain venue or office building.”
Speaking of small cells, Tantillo admitted that his company is behind the other carriers in small cell deployment in “some regards,” but he questioned whether the competition was actually deploying small cells, or just smaller macros.
“While we are not in the open with our strategy, we are actively working on our small cell strategy,” Tantillo said. “We are working with lots of different companies that are helping us. When you see us finally get through our trials and put together our methodology we will make as much of a splash as we rapidly deploy small cells in the marketplace.”
March 24, 2016 — The wireless industry needs to change small cell deployment tactics and adopt a collaborative approach with zoning authorities or it will ruin its relationships with local municipalities, Allan Tantillo, senior director, national site development, T-Mobile, said in his keynote address at IWCE’s Network Infrastructure Form, Wednesday, in Las Vegas.
“What is important is that we really need to focus on the education and outreach to those that are impacted by our deployments, particularly in the small cell world,” Tantillo said.
Tantillo liken the current small cell deployment environment to the macrocell deployments of the late 1990s when the FCC issued spectrum for multiple carriers. The first two carriers aggressively filed applications with local jurisdictions without local support their cell site deployments, which cause political problems for later cell site proposals from other carriers.
“As a result, the other carriers were faced with moratoriums, and hostile municipalities and neighborhood associations. It made it much more difficult for the rest of us to overcome,” he said. “We are headed toward a similar thing in the small cell world. We have a couple who are charging ahead with their mini-macros. They are really not true small cells. They are using that gap and they are going to create a problem.”
T-Mobile has been able to accomplish its goals by taking a collaborative approach to working with broadcasters in the 700 MHz spectrum. It also is working closely with municipalities and utilities, sharing its wireless deployment plans. T-Mobile has developed a website, www.howmobileworks.com, and a small cell video to help the industry educate the municipalities, small cells, macrocell deployment issues and situations where temporary cell sites are required for special events.
“Our educational outreach and development materials and training help set the standard for what we are trying to do – to help others understand our strategy,” Tantillo said. “What we have found in the site development world is when people are educated they are much more likely work together with us to find reasonable solutions that work for both parties.”
March 8, 2016 — Matthew Bailey, recognized international IoT expert, and T-Mobile’s Allan Tantillo will present the keynotes for IWCE’s Network Infrastructure Forum, where the industry’s wired and wireless players will gather to examine communications technology infrastructure. IWCE’s Network Infrastructure Forum is scheduled to take place March 22-24, 2016 at the Las Vegas Convention Center in Las Vegas, NV.
Bailey will deliver his address “Smart Cities: Where Will the Future of Wireless Infrastructure Take Us?” The devices that attach to today’s wireless networks only scratch the surface on how tomorrow’s Smart Cities, Smart Cars and the IoT will take advantage of small cells, Wi-Fi, DAS and macrocells. This presentation offers a view into the wireless future. Bailey is a trusted expert, educator and advisor to governments, investors, businesses and research organizations on IoT, emerging wireless technologies, standards and the opportunity for economic growth and global impact.
Tantillo will discuss “Site Development Strategy: Catching Your Competition Is Just the Start.” He will share T-Mobile’s success and best practices that are setting the stage for even more victories. The presentation will touch on successful spectrum acquisitions, a corporate culture that knocks down barriers and a nationwide site development strategy that will go beyond catching the competition. With nearly 20 years of industry experience, Tantillo has worked on the development of wireless networks. Today, Tantillo is responsible for major vendor relations (MLAs and others), lease administration, property management, DAS/small cell deployment, compliance and public education/outreach.