New Technology - Understanding the Hype
As a landowner in the wireless industry, you may be aware of several advancements in technology recently that have claimed to threaten the need for cell towers. Most notable was Alcatel-Lucent's lightRadio, which claimed that a Rubik's cube-sized device would likely be the demise of cell towers. (for more on this, see our blog post lightRadio and the “End of Cell Towers”). To put it simply, we're just not there yet. These claims are usually based on wild speculation at worst and uninformed journalism at best. Most recently, spray-on antenna technology was announced on Google's “Solve for X” forum. Like most of these types of announcements, the technology behind the idea is not explained sufficiently (or at all, really). We strongly urge you not to panic if you hear of the next downfall of the cell tower in the media. However, there are several types of technology which are already being used to reduce the need for towers in areas where there are already tall structures, such as large cities. While this won't decrease the need for towers in rural areas, we believe the trend in the next 10 years will lean towards new technology in order to reduce the need for new towers. Existing towers will likely not be affected by the new technologies for the foreseeable future. Towers are still the best and most cost-effective way to get coverage and capacity to its users. But because of the public's outcry against towers (which led to strict zoning ordinances governing tower placement), the carriers will explore other means of getting coverage to its users, but only when building a new tower is out of the question. The wireless technologies we consider having ongoing commercial success and staying power are:
- Macrocell: This is the traditional technology as seen on traditional cell towers. The radius for a typical site is 1.75-2 miles, with ranges up to 4-5 miles if the antennas are located on a very tall guyed tower. Macrocells use a high-power cellular base station. Macrocells are located on towers, rooftops, and other existing structures. This is usually the preference for carriers in areas where the user density is low. In these typically suburban or rural environments, they will only move on to the less powerful technology if there are circumstances inhibiting the use of a macrocell.
- Microcell: Microcells use less power and their range of coverage is smaller. These sites are usually used in densely populated urban areas, where traditional coverage cannot be implemented. These sites can also be added to enhance network capacity in areas with very dense phone usage, such as college campuses, sporting events, malls, hotels, airports, and within buildings where there is no other way to get coverage. In areas where zoning restrictions limit the deployment of macrocells, the coverage you could get from one traditional macrocell site can be broken down into multiple microcells in a given area. Because of the multiple equipment sites, operation costs may be higher than traditional sites.
- Picocell: Picocells are similar to microcells in purpose: to provide coverage to a smaller area not able to be serviced by traditional coverage. Picocells are usually used to extend coverage to indoor areas where outdoor signals do not adequately reach, or to add network capacity to densely used areas. Picocells have a smaller radius of coverage, so their main use is inside buildings - or more recently, in airplanes. As with microcells, there need to be multiple cells connected through a base station. With the ever-increasing need for data on smartphones, Microcells and Picocells have seen a significant increase in use in the past several years.
- Femtocell: Even smaller than a picocell is a femtocell. These are used mainly for the home or small business. It connects to the internet through DSL or cable, and can typically support up to 16 active phones in a small area.
So what does this all mean to you? It depends upon the type of lease you have.
Landowners leasing land to tower companies or carriers
In general, most landowners with towers will not need to worry about these technologies reducing the need for those existing towers, especially in rural areas. What will likely happen is that the technologies above will be used together in order to provide seamless coverage and augment the capacity of the network in densely populated areas. However, if you have a ground lease with a substantially higher lease rate in areas with other multi-story structures, you may find that the carriers will implement these technologies to remove their dependence upon your site and eventually terminate it.
Building owners leasing rooftop space to wireless carriers
The carriers will use these technologies to increase their capacity in urban and suburban areas. Individual microcells will be used to specifically “point” coverage in a historically harder-to-reach area. In rare cases, the carriers will be able to avoid costly or difficult rooftops by deploying other small sites to fill in the coverage and capacity issues. We expect that those building owners who are unreasonable when it comes to requests for extending their leases may find that the carriers attempt to work around them. We have already seen instances where the carriers terminated obsolete sites where the building owner erroneously believed that because they had the tallest building in the area, they were immune to termination risk.
For most existing tower owners, there won't be much change to the existing leases. Alternative technologies might decrease the need for new leases. Over the last 6 years, we have seen a decline in the number of new macrocells being deployed (not taking into consideration those sites built by MetroPCS and Leap Wireless after the AWS Auction build-outs and the Clearwire initial deployment). To the extent that a tower owner has a high rent collocation lease with a carrier, that carrier will have more options with these technologies in order to avoid high-dollar sites. In some cases, the carrier will have no option but to stay. In others, they will look at the return-on-investment for the relocation, and if the owner is unreasonable, will terminate their site after deploying to other alternative sites.
If you have a high-dollar lease and want help in gauging whether your negotiation position is too aggressive (or too weak), we have the experience and the data to help you make an informed decision. Please contact us - we will review your situation at no cost and will let you know whether we think you should retain our services. We would then provide you a specific quote for services.