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.