Wireless OTT Will Provide Boost for Towers: Vertical Bridge Execs

January 24, 2017

Q and A

By J. Sharpe Smith

Senior Editor, AGL’s eDigest

AGL Media Group’s J. Sharpe Smith toured the headquarters of Vertical Bridge, in Boca Raton, Florida and discussed the important issues facing the wireless infrastructure industry with Alex Gellman, CEO and co-founder, and Bernard Borghei, senior VP, operations and co-founder.

What new opportunities do you envision for wireless infrastructure?

Gellman

Gellman: Verizon and AT&T are very rapidly moving to use 5G to deploy low-latency, high-definition personalized video Over The Top (OTT). That’s new. They weren’t talking about that last year. That’s a big shift of video to wireless. They did their bench testing and realized that 5G can provide the speed and low-latency to deliver video over a skinny bundle into homes without a truck roll. It’s so much cheaper and so much better for them as a business model.

So there will be pre-5G roll out of fixed point-to-multipoint delivery of Internet and Video, which will pick up at the end of this year, but will happen mostly in 2018-2019. It will be a bridge to the traditional 5G mobility model, which is set for 2020.

Borghei: We are excited to see what AT&T does with OTT, setting the platform for 5G delivery of video content. We view OTT as an opportunity for our broadcast towers to provide space for anyone that wants to provide fixed wireless services. Verizon should continue getting its arms around its content strategy concerning its acquisition of Aol and Yahoo.

What other events do you expect to affect the wireless infrastructure industry in 2017?

Borghei

Borghei: It is going to be a transformational year from the megamerger standpoint. The AT&T/Time Warner deal will go through with the new administration. There will be attempts to acquire T-Mobile, which, if successful, would be huge for the industry. Not necessarily negative. We are not nervous about it. As Alex says, a marketplace with four carriers and only two spending money is not as good as a market with three healthy carriers spending money.

Overall, 2017 should be a gradual improvement in leasing over 2016, which saw stronger growth over the second half. Additionally, there are deadlines coming up for DISH to do something with its spectrum.

Gellman: The long term wireless infrastructure demand outlook is good. Even though organic growth has been muted, tower stocks held up because 5G is coming. You are going to need to amend the existing sites, roll out new frequencies and densify the network. All of that is good for towers.

What kind of impact do small cells have on your bottom line?

Gellman: In the area of densification, the carrier spend, which has been pretty muted in the last few years, is coming. We are hitting our projections coming out of the gate but they are pretty modest projections. Over time you will see it grow. So far, small cell buying has been geographically driven based on traffic and traffic projections. The carriers are looking for bulk answers: a single company to give them, for example, 300 small cells in Chicago. That does not lend itself to the sites that we have. As the carriers get more specific on the location of their hotspots and they get comfortable with billboards, they will call us if they have a traffic problem in a certain intersection.

Gellman: Shockingly, small cell site deployment is still driven by RF propagation analysis. There is going to be a shift by the carriers where they do their capital deployment based on traffic, more than RF. It is about the location of the high school. What do your sites look like when school lets out? That’s the peak. I guarantee you they need small cells all around those high schools. Where is the Instagram and Facebook traffic? That’s where the carriers are moving. That’s where our billboards come in. We have a pretty good pipeline, but it should increase by an order of magnitude in the next 12 to 18 months.

How will network virtualization affect Vertical Bridge?

Gellman: Where Digital Bridge and Vertical Bridge are focused is on the physical layer of the network. When people talk about network virtualization, that is really the software and the computerization of the network, but there still needs to be a physical layer to get to the cloud. You need antennas, towers, radios, fiber and data centers. That is what Vertical Bridge focuses on, the physical layer of the network. When AT&T talks about virtualization, I think it is terrific. The more efficient the carriers are, the healthier they are, the better.

Outside of your towers, you now have 40,000 assets that you market for wireless facilities, including rooftops and billboards. What need does this fill for your customers?

Borghei : The densification of the heterogeneous networks will drive the need for different types of assets: urban, suburban and rural. When you have indoor solutions handing off to small cells that hand off to macrocells, that’s where having different types of assets complementing our macrocell network is always going to be key for us. Densification is going to take place on all of these different morphologies. The various types of assets we have accumulated in buildings, rooftops, utility attachments and macrocells –– all are part of a turnkey real estate solution.

Borghei: I take it personally when people call us a tower company. We are no longer a tower company. We are a real estate solution provider. We have all these different types of assets to meet the demands of today’s advanced technology leading into 5G and beyond.

Gellman: We bought a lot of suburban towers with a lot of real estate. If C-RAN is to be located at specific sites, we look at marketing the land under our sites for a C-RAN hub.