Mobile broadband bodes well for tower leases and new construction.
Although voice coverage continues to fuel growth in the tower sector, WiMAX coverage is gaining momentum as a force that could spell big dollars for tower owners.
Boca Raton, Fla.-based Global Tower Partners (GTP) owns and operates some 2,500 towers and 4,600 rooftop sites in the United States and Puerto Rico. It also has been working with Clearwire for more than two years as the fixed WiMAX provider marches into U.S. markets.
“Clearwire has a jump on the market,” says GTP’s CEO Marc Ganzi. “We view their business model as being very successful. They’ve been pretty reluctant to build towers on their own. Initially, they’re leasing sites.”
Mark DeRussy, analyst at Raymond James, predicts the tower industry will see significant growth from Clearwire this year.
“They’ll (Clearwire) probably deploy about 1,500 sites this year, next year, in excess of 3,000 sites, and it could represent around 15% of total sites deployed next year, which ought to be something like 20,000 new cell sites,” says DeRussy.
RBC Capital Markets Analyst Jonathan Atkin agrees and forecasts substantial new business created by WiMAX.
“Approximately 15,000 sites will be overlaid with WiMAX equipment, and that will trigger at least 4,000 new leases, if not more,” says Atkin. “The economical impact is going to be pretty meaningful considering that when a brand new tenant like Clearwire signs a lease, it’s often worth between $10,000 and $15,000 per year.”
According to Atkin, the greatest demand for tower leasing currently is coming from Clearwire, Leap Wireless, Metro PCS and Sprint Nextel.
“Next year could be a record year for tower owners,” he says.
EQUIPMENT SPIN
Although these WiMAX-based growth projections are good news for tower owners, they fly in the face of claims made by vendors eager to promote WiMAX as the 4G technology of choice. Specifically, WiMAX promoters promised that WiMAX networks would be cheaper for carriers to build as compared to 3G because of WiMAX’s radically improved coverage capability. But according to DeRussy, coverage is a matter of network design.
“The notion that WiMAX networks won’t require as many towers is completely false,” he says. “Can WiMAX go 30 miles point to point? Sure, because it works in a higher frequency than 3G equipment does. But no matter what technology is deployed, high-speed networks require a denser footprint of cell sites than voice networks.”
DeRussy explains that data speed is a function of proximity to the tower: the closer the cell site, the faster the throughput. However, with voice, the distance doesn’t matter as much.
“You get a relatively similar quality of (voice) call whether you’re next to or far away from a cell site,” says DeRussy. “Based on what we’ve seen in Europe, compared to plain vanilla voice applications, it takes twice the number of cell sites to provide robust data coverage. This law of physics, of course, is a good thing for tower operators,” he says.
RIGHT-SIZING GEAR
If vendors over-sold WiMAX’s coverage potential in practical terms, it seems they were correct regarding the new equipment’s smaller size, lower weight and reduced power needs in comparison to traditional cellular gear.
Motorola’s Adolfo Masini, vice president of product management, Wireless Broadband Group, calls the technology behind WiMAX “game-changing.” He says it offers carriers a relatively low-cost means of providing mobile broadband with the bonus of flexible network architecture, enabling new service operators to enter the market quickly.
“As we approached our design, we made sure we looked at different ways of architecting,” explains Masini. “We followed a light-infrastructure design philosophy similar to that which we used as we developed our Canopy line.”
He explains that previous designs focused on the base station and the antenna as separate, modular components that were connected by many cables running between the top of the tower and a cabinet at the bottom. However, newer products combine the antenna and the base station into one unit, cutting down on the cabling. This efficiency saves carriers money since their leases are partly based on their total tower load, including the size and weight of gear, cabling and power needs.
Motorola’s Wireless Access Point (WAP) 400 weighs in at about 180 pounds, according to Masini. He also points out that instead of cooling its WiMAX gear with air conditioning, fans and convection cooling is used, negating the need for a building or cabinet alongside a tower. Additional power savings come in the way of, well, lowered power needs.
“A traditional base site would require something like 2.5 kW to 4 kW, but we seek only a single kilowatt or less,” says Masini. “All of these light-infrastructure designs significantly reduce the total cost of ownership, including installation and ongoing maintenance. The tower-top versus traditional base stations architecture saves carriers about 50% in capex and opex.”
However, DeRussy stresses, “The cost of cellular equipment has come down about 70% over the last 20 years, and carriers are generally paying less rent for space on towers. The offset is that you need more cell sites for data than for traditional voice. So, on the one hand, WiMAX is cheaper, but on the other hand, you need more gear and more cell sites.”
Still, neither GTP’s Ganzi nor analysts Atkin and DeRussy see the reduced size and weight of WiMAX gear as a deterrent to tower revenues.
“This equipment is a breath of fresh air,” says Ganzi. “It’s very attractive to the tower industry because it’s so attractive to our carrier partners. WiMAX buildouts are a real boon for lease-up.”