On the Hot Seat—Crown Castle’s Jay Brown on millimeter-wave spectrum, IoT networks and additional fiber acquisitions

Crown Castle CEO Jay Brown is entering his second year as president and CEO of Crown Castle. (Crown Castle)

Jay Brown was named president and CEO of tower company Crown Castle in June 2016. Prior to that, Brown served as the company’s CFO. He joined the company in 1999. Before joining Crown Castle, Brown worked for a startup healthcare company and Arthur Andersen. He holds a BBA from Baylor University.

As Brown enters his second year as president and CEO of Crown Castle, he’s got plenty going on. He’s continuing the company’s focus on the small cell market—a strategy that largely sets Crown Castle apart from its fellow tower giants American Tower and SBA Communications. Furthermore, Brown is also furthering Crown Castle’s fiber strategy. In July, the company inked a definitive agreement to acquire Lightower for a whopping $7.1 billion in cash. And that is just the most recent fiber acquisition Crown Castle has signed.

FierceWireless sat down with Brown to discuss his outlook on the wireless market. Below is a transcript of that interview, edited for clarity and brevity.

FierceWireless: A number of carriers in the United States are looking to potentially deploy 5G services in millimeter-wave spectrum, or spectrum around 28 GHz and above. Can you talk about how this spectrum might be built out?

Brown: It's really early days of carriers starting to think about and work on how millimeter wave will be deployed. So at this point, it's largely trial or really small-scale deployments that are happening in the millimeter-wave space. Similar to what we've seen in other technologies, we're really agnostic to the kind of equipment that's ultimately picked and deployed. We're just providing the physical space for that equipment to be deployed. We wouldn't necessarily be deploying the equipment, but we would be providing the space for the equipment as it is deployed, whether that's on towers or on small cells.

FierceWireless: What about the details of millimeter-wave networks and deployments? What will it physically look like? How far can the signals reach? And will they all need fiber backhaul?

Brown: I think for the most part, those questions, I really beg off of them and let the carriers speak to them. It's obviously high-megahertz band spectrum. So, the amount of distance that it's going to cover is shorter than the 1900 MHz or 2100 MHz that you would find typically deployed by carriers.

So it's going to require a lot more density of sites and equipment. But to really get to the uses case and then be more specific about spacial distances, I would encourage you to talk to the carriers about that rather than having us speak for them.

FierceWireless: We're not talking about 200-foot towers here, right?

Brown: Any of the spectrum bands could be deployed on towers, so it comes down to use case. I think most people believe that the use case for the millimeter wave is more likely to happen in urban environments, and in that case it's probably more likely to end up on a small cell-like installation.

FierceWireless: How would you describe the millimeter-wave opportunity, considering that this is brand new territory for the wireless industry?

Brown: I like to look at these things more starting at a macro perspective and looking at what the consumer is both using and likely to use. And I think by anyone's estimation, the amount of growth we're going to see in wireless traffic, whether it's internet of things or data sessions from devices, whether those are tablets or phones or other devices, the amount of traffic that is likely to go across the wireless network over the next five to 10 years is going to be a dramatic increase from what we've seen historically. And that increase of usage is going to be a huge driver of the increase in data traffic across those networks.

And current networks are not sufficient to support those. So as the usage increases, I believe you're going to see the wireless industry driven largely by the carriers use a multitude of different spectrum bands in order to meet that at the standard that needs.

And I would put millimeter wave in that category of, over the long term, things that will provide additional revenue growth along with a number of other spectrum bands that are in the process of being deployed.

FierceWireless: Can you quantify the opportunity of millimeter-wave deployments for Crown Castle?

Brown: We tend to think about our growth over a long term of being able to grow our dividends 7 to 8% on an annual basis, and think we can do that over a long period of time. And the timing and the amount of contributions from various technologies is not something that we spent a lot of time trying to be that specific on. Millimeter wave is not something that we would expect would be meaningful to our results this calendar year. It's more of a longer-term solution that we do think will provide revenue to us, but not in the near-term.

FierceWireless: Let’s change gears and talk about the IoT, and deployment opportunities for Crown Castle specifically. There are a number of companies—Comcast’s MachineQ, Sigfox, Senet, Silver Springs Networks—that are building IoT networks. What is the opportunity here for Crown Castle?

Brown: There are obviously a number of companies that are focused on IoT. And at the moment, the current impact for us is relatively minimal because most of those companies are still in the trial phase. So we're working with a number of those companies on deploying trials for them where they can see how the network is designed and employed and how it functions and how it works.

And, back to my earlier point around the opportunity that we see in wireless, we believe there's going to be a significant increase in the number of connected devices and connected businesses. And there will be business models that develop around those wireless networks that are going to create opportunities for us to provide infrastructure as those networks are deployed.

So at this point, our goal is to stay close and develop relationships with those firms as they're going through the initial stages of developing business models and making plans for how the networks would be designed. And then over time, we believe that would be played out in more robust ways where there are real revenue opportunities for us from these companies in larger scale.

FierceWireless: Can you speculate on how big this opportunity is, in terms of actual numbers?

Brown: It's too early to speculate.

FierceWireless: Crown Castle has made a number of significant fiber acquisitions in the past several years. Is that going to continue, or are you satiated?

Brown: Well, at the moment, the vast majority of the acquisitions that we've made, as well as the organic investments—the capex investments that we've made in the U.S.—have been in the top 20 markets in the U.S. We believe, based on the need for small cells, that that will expand beyond the top 25 markets and may expand to the top 100 markets and potentially even beyond the top 100 markets as the carriers deploy small cells.

And our goal as a business is to continue to be the infrastructure provider of choice for the wireless carriers. We believe that the shared solution—sharing small cells, sharing fiber, sharing towers—is the most cost-effective way for the wireless carriers and others to deploy networks.

And by providing, as a third party, that infrastructure, we're able to drive down the cost of the carriers and then make an appropriate return for our shareholders through the investment in that. In the short term, given the size of Lightower, it's going to take us a little bit of time to digest that, get it integrated, up and running.

So at the moment, we're in the process of working to close Lightower and getting ourselves ready, getting our integration plans ready to integrate the asset. But I certainly would expect over the longer period of time that you will see us continue making investments, including acquisitions, to the extent that they meet the appropriate return hurdles.

FierceWireless: Including in smaller markets?

Brown: Including in smaller markets. At the moment, as I said, the vast majority of the investment is focusing in the top 20 to 30 markets in the U.S., and that's where we're focused. But as the carriers deploy in markets beyond the top 20, and we certainly expect that they will, we would expect to follow them as long as we believe that providing that shared solution can meet appropriate returns.