AT&T is looking to alternative infrastructure partners as it continues to play hardball with traditional tower companies. And existing macrocell partners that are unwilling to consider new business arrangements risk being left behind.
“Last year we said we believe the tower model is unsustainable,” said Bill Hogg, AT&T’s president of technology operations, during an investors conference (reg. req.) this morning. “And I think if you look at the competitive wireless environment right now, there’s intense price pressure, and ARPU is under a lot of pressure, and that amplifies the fact that the tower model is not really sustainable.”
AT&T has moved aggressively over the last year to renegotiate terms with tower companies to cut costs in an increasingly competitive wireless market. And that effort appears to be paying dividends, analysts at Wells Fargo Securities observed in February.
“So what we’ve done is we’ve found new suppliers that are embracing a different business model, and we’re starting to reallocate funds to those new suppliers that allow us to have a different business model that we believe is going to be more sustainable,” Hogg continued. “And we’re also talking with our existing suppliers to try to get them to embrace that new model, and depending on how that discussion goes, they’ll either evolve with us or, over the next few years, we’ll start to make decisions about reallocating towers to new suppliers and new contracts to those suppliers that embrace the new business model.”
MoffettNathanson research reported last July that AT&T was openly soliciting real estate developers to build new towers close to existing cellular installations to give the carrier negotiating leverage, and in September FierceWireless posted a letter sent to tower owners pushing for “fair” early termination rights, the ability to upgrade or modify tower equipment at no extra cost, reduced or eliminated price increases, and “rents reduced to competitive rates.”
AT&T’s strategy may open the door for smaller vendors of small cells and other next-generation transmitters, Wells Fargo analysts said. And that may pose a threat to entrenched companies that have built their businesses on macrocells.
But zoning and permitting headaches have slowed the small cell market. Some municipalities are fighting small cell deployments based on concerns over aesthetics, noise, rights-of-way issues and other worries.
At least 20 states are considering legislation to address those concerns, according to a recent report from NPR. Laws on the topic are moving forward in Arizona, Colorado and Virginia, among other states, and last year Kansas and Ohio passed laws to address the matter. And the FCC is pursuing implementing rules to ease deployments at the local level.
Those efforts are drawing pushback from local governing boards, though. The Daily News of Palm Beach, Florida, reported last month that Mayor Gail Coniglio is lobbying against multiple bills she said undermine “home rule,” using broad legislation to remove power from local agencies, for example.
Hogg said such efforts are necessary to standardize zoning and permitting processes, however.
“Municipalities are looking at this as something new and as something they’ve got to respond to, and they’re responding in very different ways,” he observed. “Some view it as a real plus for improving the coverage inside of their municipalities and they see the benefits of that … Others look at it as a big revenue opportunity and are looking at it in terms of zoning and permitting and other requirements that go well above just the deployment of small cells."
“I think it’s going to be very difficult in the absence of state-level legislation to go municipality by municipality,” he added.