Husch Blackwell’s Telecom Industry Trends and Outlook

SHARE THIS ARTICLE

Share on facebook
Share on google
Share on twitter
Share on linkedin

Telecommunications law firms offer valuable and often unique perspectives on wireless infrastructure developments while representing mobile network operators, tower companies, fiber providers, investors and property owners.

Husch Blackwell LLP is a law firm with noteworthy expertise in the telecommunications arena.  With over 700 attorneys in 23 offices practicing in business and industrial fields, the Firm’s geographic footprint reaches from California to Washington, D.C., with the majority of their offices in the heart of the Country, from Denver, to Austin, to Chicago. The Firm assists companies nationwide, providing a unique understanding of their clients’ day-to-day operations and long-term strategies.

In a discussion with John Celentano, Inside Towers Business Editor, Rodney Carter, Partner and Telecom practice lead, and his colleagues Jake Remington and Mike Long shared their perspectives on current and future trends in the wireless sector.

With deep and extensive experience in law and industry, their practice handles tower siting applications, property leasing, real estate disputes, mergers, acquisitions and other infrastructure development matters. They also advise clients on state and federal regulatory issues, spectrum matters, and data center development and management opportunities.

 

What We Have Seen

In a recent discussion, Inside Towers had the opportunity to draw upon collective industry knowledge of Carter, Remington and Long, addressing both how the industry has evolved and how they predict it will continue to evolve. Since spring 2020, the COVID-19 pandemic has been accelerating structural challenges and trends that have long faced the telecommunications industry. The most recent developments build upon many decades of technological progress, notably marked by widespread deployment of existing wireless capabilities and a proliferation of actual and proposed uses of wireless communications. Small cells and 5G deployments have dominated the focus of the industry, with the COVID-19 pandemic also affirming how important broadband internet access is to the American economy, particularly in rural areas, schools, libraries, and health care facilities.  The attorneys have seen an uptick in the demand for services advancing this evolution.

In the rural development arena, Husch Blackwell resolves a lot of disputes in tower siting matters, typically when municipalities deny new tower builds. “We either try to save the application or frame a strong story. We settled a dispute with a township in a remote area of Michigan’s Lower Peninsula and settled another matter in the Upper Peninsula out of court to get the tower built,” says Remington.

However, the resistance to tower construction is not simply a rural issue. Local governments are pushing back on deployment of wireless assets, both macro towers and small cells. The rates they can charge for small cell placements in the municipal rights-of-way have declined due to state regulation and FCC siting rules, so local governments are resistant to accommodate carrier requests for access. Municipalities also maintain they lack staff and resources to process the volume of applications submitted to meet carriers’ development schedules.  Allocation of resources is also a concern for infrastructure providers.

Infrastructure funding carries with it the ongoing demand for improved carrier margins and additional money for capital investment. A lot of capital is available for infrastructure deals, especially in smaller markets. Cash flow multiples are remarkably high. Infrastructure companies will spend in litigation because it is worth it in the long run if they can get the asset developed because the upside is great.  The Husch Blackwell team credits the zoning battles often required to site wireless infrastructure as the reason the tower business attracts capital. If you obtain the right location, they maintain you have an asset of immediate and immense value.

Carter points out, “One of their biggest complaints is the poor quality of many carrier applications. Getting your attorney involved early in the process can avoid application problems.”

Hiring attorneys is a cost that carriers want to understandably avoid. Remington adds, “Often, we are brought in after the application is fully baked and a meeting has been held. We are already behind because the application received an unfavorable recommendation or is not looking good. We have limited time to get it right and go to court.” Husch Blackwell tries to counsel clients in advance on what’s needed – to be penny-wise, not pound-foolish.  It can be as straightforward as crafting an effective and clear narrative in the application itself, or a more nuanced and relationship-based conversation with the municipality’s legal counsel.

COVID-19 affected document approvals and site access. The siting volume has not slowed but the approval process stretched out as municipalities postponed face-to-face meetings in favor of Zoom or meetings conducted under stringent conditions.

Online technology streamlines document approvals and helps improve the process. Still, there are FCC shot clock milestones that must be met. That puts scheduling pressure on the municipalities.

The wireless sector remains strong with the emphasis on opportunities in smaller, unserved markets. Wireless broadband and FirstNet are driving infrastructure development in counties without many towers.

M&A

M&A activity is flourishing in towers, fiber, and data centers. The tower business now includes backhaul, edge computing and power in some cases. Long comments, “Tower developers can now build the tower and provide fiber backhaul. This allows for the capture of two monthly recurring charges. Carriers may have a hard time coordinating these services. But if it’s plug-and-play and meets the monetary parameters of what the carrier has to spend on backhaul then it’s good for both parties. This is easier in the new build space where the asset developer can plan the fiber backhaul with the tower.”

Fiber

Unlocking the full potential of 5G in the United States rests on driving fiber builds and acquisitions. “We represent a large fiber developer that is doing deals on a statewide basis throughout the U.S. We’ve also completed a deal with an electrical co-op that had the fiber infrastructure already in place but did not want to manage it. So, it sold to a private equity firm that is buying up fiber assets throughout the country,” Long points out.

Ground Rents

Tower owners benefit if they also own the land under the tower. “We just closed a deal where a client purchased the tower and the underlying land.” Long says. In the case of ‘disruptors’ building new towers, land ownership varies. “Often, they have first right of refusal if the landowner wants to sell,” comments Remington.

Another consideration is ground rents which are “sky high” for 25–30-year-old towers with a long-term property lease. Carter says, “Towercos are being disruptive, telling landowners they want rent reductions, or they will leave. And we’ve successfully negotiated many deals to achieve the savings sought by the tower company.” When third party companies offer to buy the land from the landowner, Husch Blackwell has advised the parties involved on proper processes and procedures.

Unconventional MLAs

Towercos are establishing MLAs with property owners of national chains such as storage facilities or drugstores to make their rooftops available for small cell installations. Often it is easier for carriers to deploy on a rooftop rather than trying to install multiple small cells in rights-of-way. “It’s a great way for carriers and towercos to maximize reach while minimizing cost, but they have to work with advisors that have a network of contacts on both the Telecom and the rooftop sides. Retail, mixed-use, military and student housing…they need partners that can introduce them to several opportunities,” according to Long.

With the pace of wireless technology change accelerating, carriers are asking towercos to lease RAD center space with flexibility to make equipment changes within a designated space, without submitting requests for an engineering change each time. “This is easier in new builds versus unwinding an old lease which tower owners are often times unwilling to do,” Long explains.

What We See Going Forward

The lessons learned in COVID-19 are continuing to drive industry initiatives into 2021 and beyond.  COVID-19 demonstrated that networks should be built for peaks, and not just averages.  Likewise, the Pandemic taught us that new applications which utilize increased bandwidth benefit both the economy and society. Expect ongoing COVID-19 impacts but no overall slowdown in the 5G buildout pace, according to Husch Blackwell.

A slowdown in the tower disruptor space is likely. The Big 3 towercos are settling rent disputes with their biggest carrier customers.

Towercos are offering added services including backhaul and edge computing to drive more value. Smaller towercos and data centers will continue to be acquisition targets.

A greater focus on more broadband in rural areas will drive new infrastructure builds.  Affordable broadband (through wireless, coax, or fiber) is going to take center stage, along with 5G deployment.  Husch Blackwell suspects grant opportunities will certainly spur growth in this area, including broadband infrastructure deployment grants for state and provider partnerships to support infrastructure development, as well as tribal minority connection grants and minority community expansion programs.  The Pandemic has shown the critical need to provide the ability to learn and work from anywhere.

Questions? Ask the Attorney

For information about Husch Blackwell’s Telecom law practice and its services, go to:
https://www.huschblackwell.com/industries_services/Telecommunications

Address your issues and concerns directly to Rodney Carter in an email from that web page.

 

Reader Interactions

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.