American Tower doesn’t appear concerned with recent reports that Apple is working on a secret satellite initiative, as the tower company’s chief executive said Tuesday that direct satellite-to-device connectivity likely isn’t economically scalable outside of far-edge cases.
Many details around Apple’s project, reported by Bloomberg, are still unknown, but the iPhone maker apparently hired about a dozen engineers with backgrounds in aerospace, satellite and antenna design, and has former heads of Google’s satellite and spacecraft operations leading an initiative to potentially use satellites for direct-to-handset communication. Wells Fargo Senior Analyst Jennifer Fritzsche noted last week that beaming service directly to iPhones from satellites could enable Apple to “essentially bypass carriers and towers which service them.”
Jim Taiclet, president and CEO of American Tower, speaking at an investor conference said that these types of satellite networks have been tried before but “none of them have succeeded, based on ultimately the physics of doing this at scale.”
In response to a question about the report, Taiclet described American Tower’s view that macro towers are at the middle of the bell curve when it comes to connectivity needs and environments.
“When you’ve got a mobile architecture that you’re trying to deploy, for most people in most places, the macro tower is the optimal technical solution for that,” he said during the Citi 2020 Global TMT West Conference.
According to Taiclet, direct satellite communication typically works on the far edge—two to three standard deviations out—in low-density, low data-rate environments like aboard cruise ships and airplanes traveling over water. On land, Taiclet used the example of consumers traveling on a camping trip in the middle Utah’s Moab Desert, where there are few people and no freeway.
“That’s where the satellites actually are effective because there’s not that much utilization, not that many people and not that much data traffic,” said Taiclet. “So as long as you’re within three standard deviations of what generally is the norm, satellites don’t work on an economic basis. Technically they don’t work either once you get inside probably two standard deviations from the normal load.”
Taiclet said when it comes to satellites specifically, and Apple in particular, companies are likely obligated based on their own business strategies to explore avenues like satellite communications, to see whether it’s a viable way to help get connectivity to people or devices.
“We are well aware of Apple’s initiatives, really just nascent initiative…they’re looking at this, they should. Other companies are looking at it, they should” he said, adding “Google is probably turning off a couple things they’ve tried looking at.”
In terms of scaling to hundreds of millions of people who are using 10 GBs per month with certain latency requirements “and a megabits per second load…satellites don’t really work, and economically I’m not sure they’ll ever work outside those edge cases,” Taiclet said.
On the other side of the curve are high-density environments serviced by small cells, but those too are challenging to scale economically, Taiclet said.
Operators, in particular Verizon, are using small cells to deliver 5G service in dense urban areas over high-capacity millimeter wave spectrum, and American Tower peer Crown Castle has pursued a small cell business.
In October Crown Castle said it expected to install around 10,000 nodes in 2020 (similar to 2019) and in the third quarter had about 40,000 small cells on air and 30,000 under construction, but acknowledged elongated timelines last year because of significant delays from municipalities and utilities.
“We’re really in the early innings of this whole rollout of small cells and really haven’t gotten into 5G,” said Crown Castle CFO Dan Schlanger on the company’s third-quarter earnings call. “What we’re looking at is how can we make this business sustainable and scale it, because we believe the activity levels are there and will continue to grow.”
Taiclet on Tuesday said American Tower isn’t seeing much 5G activity from millimeter wave on macro towers because the architecture doesn’t make sense, but reiterated “there will be a huge need, we think, for mid-band spectrum on towers in the United States to economically deploy 5G.”
While new generations of wireless technology enable faster throughputs, Taiclet said mobile operators invest in them because of the reduction in cost of delivery per gigabyte, “so every decision on 5G is going to be driven on economics.”
Edge compute opportunities
Though American Tower thinks most 5G deployments will be with mid-band spectrum on macro sites, the company is also exploring how to leverage its tower infrastructure assets for future opportunities including edge computing.
“Five to 10 years from now we believe there’s going to be a capillary system of process and storage outside of big data centers, it will be fairly pervasive,” Taiclet said. “In a 5G world and IoT world that’s coming there’s going to need to be capillarization of storage and processing for latency, cost reduction, for being able to cache things close to the customer so they have better experience.”
The company isn’t looking to be in the data center business, but American Tower has 40,000 U.S. towers and 140,000 international tower locations that it’s exploring for use as storage and processing sites, as they have electricity, security, and fiber optic backhaul to the web.
“So we have 180,000 places for edge compute, but we don’t know what the capillary system is going to look like, so we’re working with companies that are going to bring that together now so that we can get, as [Wayne] Gretsky said, ‘to where the puck is going’ before anybody else, not where the puck is today,” Taiclet said.
That includes working with cloud providers, data center companies and existing customers. As part of American Tower’s innovation program, it's making small investments to build prototype platforms, including its $75 million investment in Atlanta-based ColoATL data center last year.
Taiclet said that investment is located across the street from a Digital Realty data center, and American Tower can make a connection back to an exchange office and “see where the capillaries go, how fast they go, and what you use them for.”