AT&T Rethinks Tower Lease Model, Weighs Cost Per Megabyte

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UPDATE: AT&T wants to lower costs on its wireless platform, in addition to experimenting with ways to build a more economical mobile network. Small cells and better agreements with macro site owners are key, according to Rethink Research.

Small cells will be critical to the carrier’s strategy as it moves into higher frequency bands, AT&T President Technology Operations Bill Smith told the Pacific Crest tech research forum last week.

Small cells work well with the propagation characteristics of some of the 5G bands. “[A]s we design and engineer and manage the capacity of our network, we should see where a small cell is most cost effective solution. And if it is, let’s use a small cell.”

Agreeing with that approach was his colleague, AT&T SVP for Wireless Infrastructure Tom Keathley, speaking at the Cowen Communications Infrastructure Summit recently. “If you’re trying to solve an issue that’s in a dense, urban area, and you can’t get a macro in, and if you can place a small cell in the right location, one small cell can be far more economic than a large cell site.” 

He’s open to neutral host infrastructure to save money, characterizing neutral host small cells as a “nascent” technology that will grow over time. About 30,000 small cell nodes are in operation in the U.S., according to MoffettNathanson estimates, with Crown Castle operating 12,000 live nodes at the end of 2015.

Inside Towers reported AT&T has an internal task force looking at alternatives to the traditional tower lease model, noting that current practices may not be sustainable over the long-term. Keathley said at a recent conference: “The fundamentals are cost per megabyte, and we’ve got to get to a place where we can sustain cost per megabyte, moving into cost per gigabyte.”

AT&T might consider relocating to nearby, cheaper towers, according to Keathley. The carrier has reportedly sent letters to tower lease holders seeking better terms while Keathley’s T-Mobile counterpart Dave Mayo, recently called for the “industrialization” of the complicated tower lease business model, according to Rethink Research.

Crown Castle CEO Jay Brown defended the model in the company’s latest earnings call, noting the value equation “and the provision of that value to the carriers today is about 2.5 percent to 3 percent cost of lease against the overall cost of the asset.” Brown calls that “attractive, as we share the asset across multiple carriers,” which in essence provides the carriers with a low cost alternative. “We just don’t see that changing.”

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