Wireless Infrastructure Industry CEOs Say Economic Recession Won’t Hurt Business

There are more households with wireless and no landline than ones with landline and no wireless, and the younger generation is driving the wireless-only trend, Kelly said. Wireless has gone from a discretionary product a few years ago to a necessity today, said American Tower CEO James Taiclet.

Increasing consumer demand for data services means a recession won’t stop carriers from bulking up their network, said SBA Communications CEO Jeffrey Stoops. The iPhone showed consumers are interested and willing to pay for phones with “a lot more” applications, Kelly said. In 5-10 years, “the notion we didn’t have faster data rates will be laughable,” he added.

Last year’s Advanced Wireless Services (AWS) spectrum auction and the coming 700 MHz auction give the industry a “solid multi-year view,” Stoops said. The industry will start seeing revenue from AWS in 2008, and revenue from 700 MHz in 2009 and 2010, CEOs agreed. The industry would make the most money if a new entrant emerged in the 700 MHz auction, but the auction will create good business no matter what happens, Stoops said.

Tighter FCC build-out requirements for the 700 MHz auction mean more certain business, Kelly said. However, build out could be delayed if UHF’s demise turns into a political issue, he said. It can be “tricky” to get spectrum sitters out of spectrum, he said, citing delays to the AWS rollout when the U.S. Defense Department stalled in removing itself. “This won’t win me any favors with the National Association of Broadcasters, but the fact is, in 2009, they need to vacate that spectrum,” he said. “I can only imagine what will occur as that date starts to loom in front of us and all the discussions [start] about how horrible it will be if XYZ’s television set suddenly goes dark.”

Industry consolidation should continue, but mergers and acquisitions will be driven by economics, not strategy, the CEOs said. All sizes of infrastructure businesses are active with acquisitions, said Global Tower CEO Marc Ganzi. Mergers are relatively easy for the industry because they deal mostly with “hard assets” that are easy to integrate, Stoops said. But though SBA is “always interested in acquisitions,” deals must be at the right price, he said. An acquisition is a “financial equation” and not a “strategic imperative” for Crown Castle, Kelly said. Before making an acquisition, Crown Castle asks whether the deal makes more sense than buying back its own stock, he added.

Expansion globally is similarly governed by economic logic, CEOs said. Businesses must ask themselves whether opportunities in other countries are better than those in the U.S., Kelly said. Focusing on existing markets may be a better decision, he said. Stoops agreed: “We won’t make an international foray for a couple years” due to “plenty of opportunities domestically,” he said. Still, going abroad does pose the advantage of opening an international exchange of ideas, said Ganzi. In late July, Sydney-based Macquarie Infrastructure Group closed an acquisition of Ganzi’s company, Global Tower. As a result, Global Tower has ties to Australia and the U.K.

Distributed antenna systems (DAS) represent “another tool we have to better serve consumers for wireless services,” but shouldn’t be viewed as a “unilateral” system, Kelly said. Traditional systems are still more cost effective, and DAS should be used selectively for the time being, he said. DAS is a “nice tool over time,” Taiclet said, but carrier economics must be considered. But though it may cost more, DAS is often an “accidental necessity” for carriers on tight schedules, Ganzi said. MetroPCS and Cricket Wireless could not have reached deadlines without it, he added. -- Adam Bender

PCIA Convention Notes…

PCIA’s regulatory committee is talking with the FCC and FAA about backup power, migratory birds, and other industry concerns, co-chair Ed Roach said Wednesday. The backup issue is pending, and there are “rumors” FCC will make a decision “fairly quickly,” Roach said. PCIA’s Solving the Avian Tower Interaction Committee is talking to the FAA about changing lighting requirements to reduce bird deaths (CD Oct 3 p9), he said. The committee is seeing “positive signs” regarding its request for Part 17 revisions, and FAA action is pending on a request to add to its list of common frequencies automatically cleared for use in cell sites, he said.

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Ultra-bright-white LEDs will “change the landscape” of the tower business, said PCIA technology committee chairman Ted Abrams. The lights have four-times the life of a incandescent device, he said. Abrams also spoke on the migratory bird issue: “The impact on avian flight paths by the telecom industry is minuscule compared to the impact on flight paths created by the copper-aluminum cable that carries power.”

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The FCC’s backup power requirement for cell sites should not apply to distributed antenna systems (DAS), said Allen Dixon, president of PCIA’s DAS Forum. “If you think it’s difficult to find 8 hours of battery backup at a cell site, try finding a place to put a generator at the bottom of a light bulb in New York City,” he said. “It’s just not likely to happen.” The DAS Forum has filed with the FCC on the matter, he said. PCIA will unveil a new DAS Forum Web site at www.TheDASForum.org within two weeks, said Tim House, PCIA marketing & sales director. The “utilitarian” site includes a message board to discuss DAS issues, he said. PCIA wants content and functionality suggestions for the site, currently in a pilot phase. “This exclusion is appropriate given the unique design and power supply of such alternative sites, which are deployed in unique circumstances in which a macro cell site is particularly infeasible,” the forum said in an ex parte filing at the FCC. “DAS installations are typically deployed as multi-node cell sites, using unobtrusive design elements where space is at a premium. This makes the required addition of back-up power sources especially problematic from a design perspective.” The forum also said “the impact of a partial power failure to a DAS network is generally far less than the impact created by the loss of power to a macro cell site” because of the nature of DAS systems.