American Tower eyes in-building CBRS opportunity

American Tower as looking at CBRS for in-building systems, like at entertainment venues or commercial real estate properties, but said the effort will take time. (Getty Images)

American Tower is evaluating opportunities to leverage Citizens Broadband Radio Service (CBRS) for more in-building private networks, as the tower company prepares for a long-cycle evolution from 4G to 5G technology.

American Tower CEO Jim Taiclet, speaking Thursday on the company’s third-quarter earnings call, cited a five to 10-year period ahead, during which data demands will continue to grow and there will be progressive incremental 5G spending alongside continued 4G LTE network investment.

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While early 5G service has been focused on millimeter wave, executives said less than 1% of American Tower’s 41,000 U.S. macro sites are in areas with high enough population density to economically support outdoor small cell arrays and the company sees minimal opportunity from mmWave in the near term.

Taiclet indicated that widespread mid-band spectrum rollouts for 5G could be even more impactful to the company than low-band deployments like T-Mobile’s 600 MHz because of the need for more cell sites, but pointed to extended timelines of when mid-band resources are expected to be available. 

Sprint’s 2.5 GHz spectrum is being put to use today, 3.5 GHz CBRS is ready for General Authorized Access (GAA) though an auction for licensed use won’t happen until mid-2020, while the C-band proceeding drags on, and that spectrum is “likely years away” from being available for terrestrial use, Taiclet said.

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In the meantime, American Tower wants to maximize revenues from its in-building system capabilities, and is exploring the potential to “significantly expand” the addressable market for neutral host and private indoor networks by utilizing CBRS.

It currently has 400 traditional indoor distributed antenna systems (DAS) up and running and rights for thousands of properties in the U.S. The aim is to use CBRS to make it economically possible for a greater number of buildings to support indoor installed networks.

“When you're using traditional, even neutral host architecture that we have today under kind of a 4G regime with licensed spectrum, the carriers have to put a base station in the building, there has to be fiber wire throughout,” Taiclet said. "It's a fairly expensive proposition to use the conventional technology.”

Using CBRS will drive down the cost of installing and operating indoor networks “dramatically,” including removing the need to use fiber for interior backhaul, with different methods of connectivity back to the base station and cloud possible, noted Taiclent.

In this situation American Tower would act as a neutral host, working with the landlord, performing installation and operating the shared part of the system as mobile operator’s networks handle the transmissions.

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“The scaling, we hope, can ramp fairly rapidly as to the addressable number of buildings in the United States you can get to with a CBRS, and ultimately 5G kind of technology because the cost per building will be lower,” Taiclet told investors.

Cost is increasingly important, he commented, saying the real driver for 5G deployments will be carriers’ need to keep the network cost per gigabyte down in the face of exploding data traffic.

“From a cost efficiency and practical perspective, 5G is the logical and necessary next step in network evolution,” Taiclet said

It’s not just the four major U.S. carriers American Tower is exploring CBRS interest with. The company is also conducting trials with partners in different verticals.  Without disclosing specific businesses, Taiclet said there are ongoing trials with property owners and indicated venues like sports and entertainment arenas are the types of businesses that could leverage 5G technology.

Last November, American Tower turned on a private LTE network at the ISM Raceway in Phoenix using 3.5 GHz spectrum, in partnership with Arris’ Ruckus Networks.  

On the call, Taiclet also pointed to building management for commercial real estate owners, including warehouses, factories and office buildings, where CBRS could provide an opportunity to keep operation costs down. Although priority access licenses (PALs) will be auctioned next June, GAA use is available now, though still in the initial commercial deployment phase.

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Still Taiclet noted that while trials with licensed spectrum in private 4G LTE setups are happening, there’s not necessarily a lot of activity in CBRS right now and the opportunity will take time to play out, including the rollout of capable devices.

“We think there is real prospect there, [but it] will take some years to play out,” he said.

In terms of American Tower’s Q3 earnings results, here are some highlights:

Property revenue for the quarter was $1.92 billion and organic tenant billings grew 3.7% in Q3. Services revenue was $32 million.

Third quarter adjusted EBITDA grew more than 12% to $1.23 billion, and consolidated AFFO increased 8.5% to $891 million, with AFFO per share of $2.00.  

American Tower said results were positively impacted by a new Master Lease Agreement (MLA) with AT&T.

While American Tower had a solid Q3 thanks to stronger than expected growth both at home and abroad, particularly in India, analysts at New Street Research remained cautious about declines in organic growth ahead as carriers step down spending.

“U.S. organic growth still remains high, but it has started to decline, and we think declines will intensify from slowing spend at T-Mobile, Sprint, and Dish, as well as a decline in spend from AT&T next year following their aggressive FirstNet deployment in 2019 (though the impact of this may be softened by the recently announced MLA),” wrote the New Street team in a Thursday note to investors.