The telecom industry is seeking to deploy tens of thousands of antenna systems to support next-generation 5G wireless broadband systems, which are expected to deliver low-latency connections for the Internet of Things, artificial intelligence and autonomous vehicles.
There will be more high-power macrocells deployed on telecom towers, which have been the focus of many deployment controversies. But the key players in enabling 5G will likely be low-power antennas known as small cells and DAS (distributed antenna systems), which can be mounted on utility poles, buildings and street furniture.
The coming surge in small cell and DAS deployments at the edge of the network has implications for data centers and cloud computing. New technologies will generate oceans of data, especially if autonomous cars gain widespread adoption. That data will be stored in data centers, driving demand for more colocation and cloud computing capacity.
The arrival of this demand will be determined by the timing of the network buildout to deliver all that data. We’re also seeing more participation in the data center industry from companies with holdings in small cells and other wireless infrastructure.
‘A Battle of Inches’ on Utility Poles
There are several challenges facing large-scale antenna deployments for 5G. In office buildings, the focus on connectivity is shifting the economics of wireless infrastructure, prompting calls for cost-sharing between carriers, landlords, and tenants. On the consumer side, companies deploying small cells must negotiate agreements with local municipalities, a complicated and lengthy process, slowed by red tape and resistance from residents.
“We’re fighting a battle of inches on utility poles and streetscapes,” said Josh Broder, the CEO of telecom infrastructure firm Tilson Construction, at the recent Northeast DAS NYC Summit. “In a tower context, the landlords are real estate companies. In this case, they’re municipalities who have other uses for these assets.”
Amid concerns that 5G deployment will be slowed by delays in antenna deployments, the telecom industry is seeking legislative relief. The issue has already made it to the White House, where President Donald Trump expressed support for policies to speed antenna deployments. This debate is already being played out in states and cities around the country.
A Key Enabler for Hyper-Dense 5G Networks
Small cells and DAS are expected to play key roles in boosting network density, allowing wireless systems to support more users and faster speeds. “Small cells” is an umbrella term for several types of low-power antennas (including femtocells, picocells and microcells) that are typically dedicated to a single carrier. DAS systems have additional management functions that allow them to support more than one service provider.
To support 5G, these antennas are designed to transmit in the part of the spectrum between microwaves and infrared waves. This spectrum is less crowded than lower frequencies used by mobile phones, but there are tradeoffs. At higher frequencies, signals are not as strong and experience interference from walls and trees. The solution is to set up smaller antennas everywhere – on light posts, telephone polls, traffic lights, rooftops, and throughout the interiors of buildings.
“Small cells will become an integral part of mobile networks as operators make the move toward hyper-dense networks with 5G services,” said Kyung Mun, Senior Analyst at Mobile Experts, an analyst firm focused on mobile infrastructure.
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The global small cell market, including indoor and outdoor small cells, grew 26 percent year-over-year in 2016, to $1.5 billion, according to research firm IHS Market. That revenue may triple by 2021, according to Mobile Experts.
The Data Center Angle
The rising profile of small cells is a factor in consolidation in both the telecom and data center sectors. America’s largest tower landlord, Crown Castle, recently said it will acquire Lightower Fiber Network. The $7 billion deal will allow Crown Castle to deploy small cell antennas along Lightower’s fiber network, which is concentrated in Northeast markets that will need additional wireless density.
“We are seeing small cell demand accelerate,” said Jay Brown, President and CEO of Crown Castle. “We believe the long-term opportunity could match towers in size and return. Our conviction around the size and attractiveness of the small cell opportunity has grown over time.”
Small cells also figure in the business plans of several emerging consolidators in the data center industry, especially Digital Bridge, which has gone on a shopping spree for service providers (including DataBank, Vantage Data Centers and C7 Data Centers) and facilities. Digital Bridge owns a portfolio of cell towers, as well as ExteNet Systems, which builds wireless networks for carriers that integrate fiber and antenna systems.
‘Infrastructures Will Start to Merge’
Digital Bridge CEO Marc Ganzi said the company’s data center holdings could provide infrastructure to support ExteNet’s small cell and DAS networks in major cities. One example is San Francisco, where ExteNet partnered with the city to install hundreds of small antennas to improve wireless coverage ahead of the 2016 Super Bowl. Ganzi said Vantage Data Centers could house infrastructure to support ExteNet’s continued growth, either at its Silicon Valley facilities or by creating edge facilities. He sees similar opportunities for DataBank in Chicago, where ExteNet also is working with the Chicago Transit Authority to deploy a small cell network .
“The combination of fiber and towers and (data center) nodes works together,” said Ganzi. “Our belief is that these network infrastructures will start to merge.”Digital Bridge CEO Marc Ganzi: Our belief is that these network infrastructures will start to merge.Click To Tweet
Digital Bridge isn’t alone in this belief. Stonepeak Infrastructure Partners, which teamed with Digital Bridge on the ExteNet acqusition, recently acquired Cologix, a regional data center provider. The blending of wireless and data center infrastructure was also seen in AT&T’s plan to build an edge computing network by adding capabilities to its tower and small cell sites.
Expanding Business Models for Antennas
Analysts says fiber connectivity will position small cells and DAS as gateways to additional services and revenue, which are critical to offsetting installation costs. 5G is not just about better phone coverage, notes Colby Synesael, Managing Director and Senior Research Analyst at Cowen & Co., who has been closely tracking the technology. Faster wireless will enable new services, along with the opportunity to monetize up-front infrastructure investment with recurring revenue over time.
“Fiber has business models that go beyond wireless,” said Synesael, who said new income streams are critical for 5G antenna deployments. “You’re going to create small cells with fiber that can be used for other businesses. More revenue per small cell will mean lower cost.”
Small cells and DAS systems can be installed on rooftops to boost coverage in neighborhoods. They are also commonly used indoors, to provide adequate cell coverage to crowds at stadiums and conference facilities.
“Until now, DAS has been a one-trick pony in supporting mobile phones,” said Dave Sampat, Regional Manager for Network Planning at AT&T. “As we support more things and transform more businesses, that value changes. It’s now a utility, and an expectation for your customers and tenants. There are huge investments being made, and we have to make money on getting RF into these larger venues like airports or stadium. Now we want the owners to pay for the RF source. Capital is limited and our budget is shifting.”
Office Landlords Prep for Next-Gen Connectivity
Deploying all these new antennas will be expensive, and the economics will influence where additional small cells and DAS are deployed, at least initially.. A key battleground is office buildings, where the quality of Internet connectivity is becoming a key differentiator for landlords.
“What was once viewed as an amenity has become a requirement,” said Nick Stello, the SVP of Information Technology at Vornado Realty Trust, a real estate investment trust (REIT) that operates 19 million square feet of corporate office buildings. “The business side of Vornado can appreciate what wireless brings to a building. When a tenant pays rent, they see wireless as a utility and don’t want to pay extra.”
Cost-sharing is a more workable approach going forward, said Jim Whalen, Chief Information Officer at Boston Properties, a REIT operating 47 million square feet of premium office space.
“I think all three parties (owner, tenant, carrier) have to participate in the model,” said Whalen. “We need to creatively come to the table together, and I don’t think that’s occurring. It’s an opportunity.”
It may take some time for the model to be widely adopted. “(Vornado and Boston) recognized that their tenants would need these services and saw it as the fourth utility,” said Bill DelGrego, Vice President for ExteNet. “We still have a lot of real estate owners that say ‘I’m not paying for anything.’ The education has to happen.
“We’ve been hearing from the carriers about how we have to come up with creative ways to pay for these things,” DelGrego added. “We put a lot of fiber in a lot of buildings. If you want the DAS in your building, think about services you can bundle and provide a single source of value.”
Battling Foliage, Residents and Red Tape
It’s not just offices: Americans want fast wireless everywhere. Wireless antennas everywhere? Not so much. That disconnect will need to be addressed in coming years to improve wireless coverage in neighborhoods and public areas. Wireless carriers hope to deploy thousands of outdoor small cell and DAS systems.
The outdoor DAS (ODAS) and small cell market requires designing for low-height antennas, which often have limited coverage, according to Dominic Villecco, President of wireless engineering firm V-Comm. Antenna siting must account for “clutter” that can interfere with signal, including foliage. Research is important, as trees and foliage aren’t really handles in databases and mapping tools. There’s also seasonal foliage density, which differs in regions with more evergreens.
“The key here is to that we’ve got low antenna heights and have to work closely with the real estate,” said Villecco.
When installing new poles or adding equipment to existing ones, providers must consider the impact on views of the landscape, especially in beach communities or parks. Otherwise you’re asking for resistance from residents.
“We need to be sensitive to where we put these poles,” said Broder, the CEO of Tilson. “It’s really important to partner with communities in being good stewards of these locations.”
Most cities and larger towns have staff that work with telecom providers on small cell deployments, but in smaller towns the decision maker may be an individual engineer.
“One of the challenges is that these facilities are busy – physically busy – and their owners are busy doing other things,” said Broder.
There are many considerations in working with municipalities on antenna deployment. “You’ve got to get local approval,” said Leslie Snyder, Managing Partner of Snyder & Snyder, which specializes in telecom land use law. “The poles we’re picking are typically electrical or telephone poles. The ideal RF design and pole design is often not the ideal zoning design. Pole placements are very critical. Meeting with entities early can save you a lot of time and money.”
The NIMBY Factor
This combination often means a lengthy extended approval process, which can be extended by community concerns. There are many instances of communities organizing to resist macro cell towers. Small cells and DAS systems involve smaller antennas, placed closer to the ground. But these antennas still present aesthetic issues for residents, both with new installations and the expansion of existing sites.
“Neighbors may have trouble with nodes that have been there for years,” said Snyder. One response has been camouflaging antennas with faux foliage to make them look like trees (a task which is easier with cacti than evergreens).
A newer strategy is to embed antennas in sidewalks so they appear to be manhole covers. Wireless antenna maker Kathrein says the design was “developed to help operators deploy additional cell sites in places where site acquisition is difficult due to zoning issues.”
In some cases there are disputes over leasing fees, which can vary widely from town to town.
Antennas Drive Policy Disputes
The coming boom in small cells has prompted a policy initiative by wireless providers. Telecom industry associations and lobbyists are backing state-level measures to streamline the process for approvals for small cell and DAS antennas. These bills seek to set ranges for leasing fees, and limit municipalities’ ability to conduct discretionary reviews to coastal areas and historic districts.
Some of these measures have won easy approval. In June, Minnesota Gov. Mark Drayton signed a law standardizing the approval process for small cells, clearing the way for AT&T to invest “tens of millions” in infrastructure upgrades ahead of Super Bowl LII, which will be held in Minneapolis in February 2018.
It’s been a tougher go in Calfornia, where state bill SB49 has met resistance from advocates for municipalities and consumers, who argue that local governments must retain authority to push back on proposed deployments and negotiate the best agreements for residents.
In a July 22 meeting with telecom executives at the White House, President Trump expressed support for streamlined regulations. “We’re going to give you the competitive advantage that you need,” he told the executives, including the CEOs of AT&T and Sprint.
FCC Chairman Ajit Pai also supports standards for municipal antenna deployments. “The FCC is working on modernizing the rules for that kind of infrastructure,” Pai wrote. “We shouldn’t apply burdensome rules designed for 100-foot towers to small cells the size of a pizza box. If America is to lead the world in 5G, we need to modernize our regulations so that infrastructure can be deployed promptly and at scale.”
Harvard Law School professor Susan Crawford, a frequent critic of the telecom industry, argues that the deployment of 5G infrastructure provides an opportunity for municipalities to prioritize better broadband for their constituents, rather than faster antenna deployments for the telecom industry.
“What’s really going on is that some carriers (mostly AT&T) are aiming to ensure that single carriers can control entire ‘small cell’ pole systems in individual cities,” Crawford writes, adding that carriers are seeking to “distract all of us by suggesting that preempting local authority over wireless installations will lead to increased investment in genuinely high-bandwidth systems generally and, in particular, in rural areas.
“There is no rush,” Crawford added. “5G deployment is years away. We need to take a breath and slow the onslaught of deregulatory legislation in this area. We have time to get this right.”