Opportunities for an independent infrastructure provider in European DAS and small cells

Wireless Infrastructure Group, an independent towerco with over 2000 macro sites in the UK, Ireland and Netherlands entered the DAS and small cells business in 2012 and have since grown to be the biggest installer of large venue-DAS systems in the UK. With not only ambitious plans for expansion of the venue-DAS business in the UK and other European markets but also a developing business in outdoor small cells, WIG see strong opportunities for growth. In this interview we speak to Wireless Infrastructure Group CEO, Scott Coates.

TowerXchange: Please can you tell us a little about yourself and how you got into the telecoms business?

Before launching WIG I ran TMT investments for an infrastructure fund.  In 2007 a 5,000 tower portfolio was sold by National Grid to Arqiva and I ran one of the under-bidder consortiums.  This process got me very close to sector and I saw a huge opportunity to build an infrastructure business in a very dynamic industry.

TowerXchange: Please can you give us a bit of an introduction to Wireless Infrastructure Group?

We launched WIG as an independent infrastructure company eight years ago.  We set out from the start to be a pure play telecoms towerco rather than follow the broadcast led model that was the norm in Europe at the time – we were probably the first in Europe to do that.  Everything from our strategy, systems and the KPIs we use to run the business were drawn out of the US market.  We’ve built the business up from scratch  through a combination of organic and M&A initiatives and also navigated some interesting challenges along the way such as network sharing and consolidation.  We now have 2,000 towers across three European markets and a fast growing DAS and small cells business.  We see a tremendous opportunity to scale up our business, both in the UK and through M&A in other European markets.

TowerXchange: When did you decide to enter the small cells and DAS market and what was your rationale behind entering?

We started looking at DAS and small cells five years ago and entered the market in 2012. When people talk about small cells, they use the term very openly but effectively there are two different streams. The first is the indoor side of our business which we term as venue-DAS. This is where we build and operate shared infrastructure in large venues such as shopping malls. Then there is the outdoor small cell market. In the US you have outdoor DAS as well but we don’t currently see that architecture in the UK or elsewhere in Europe.

When we launched, our focus was on venue-DAS. We looked around Europe and couldn’t see any independent DAS players, one or two of the larger broadcast players had dipped their toe in the market but the MNOs didn’t seem happy with the product. We wanted to find technical solutions and a business model that could gain support and traction with the MNOs before launching this business stream.

We spent some time in the US and noted the presence of independent infrastructure providers in the space, either towercos (such as Crown Castle) who had extended into small cells and DAS or independent small cells players such as ExteNet Systems (the largest independent distributed network business in the country). The type of business model that we aspired to was being executed by ExteNet Systems; we liked the way that they were approaching the market and we set out to at least try and follow their customer driven model.

TowerXchange: What barriers to entry were there?

One thing I would say about entering this market is that DAS and small cell delivery requires very long lead times. When building new networks you have to first of all secure the relationship with the venue owner and then with the anchor MNO. A lot of the early business development for a new network involves persuading venues to value the wireless utility that the infrastructure will deliver.  We have to make the case that venues seeking income from these solutions will only push up prices to the MNOs and risk the bigger prize of better coverage. We launch all of our venue-DAS with a single anchor MNO which is part of the value proposition that our independent network infrastructure has brought to the market. We allocate capacity on the network to our anchor MNO and they only pay for what they use, which significantly lowers lifecycle costs compared to an MNO deploying their own network. We take the risk that other MNOs will use the network over time, which we are highly incentivised to pursue as we don’t make a return until we’ve got the network populated.

We launched our first venue-DAS in early 2013, launched another in 2014 and at the end of 2015 we’re up to twenty deployed networks. Momentum is now building and we have a pipeline over fifty venues we’re working with – it’s taken a while to build that momentum but we’re now seeing the benefit.

TowerXchange: What differentiates WIG’s value proposition and makes it so customer centric?

In venue-DAS, the venue generally only wants one DAS network deployed and it’s also costly for the industry to invest in separate DAS networks to support each MNO. As an independent infrastructure provider we are incentivised to get all of the MNOs onto the same network which is highly desirable to our venue partners.

Another part of doing business differently is the level of service that we offer – all of our networks come with full SLAs for our MNO customers, we provide service credits if there’s downtime and we have an obligation to monitor and maintain the network around the clock.

Furthermore, we work hard to create the very best network designs that people want to support, we have invested heavily in getting the technical specifications for our networks right from the beginning. This is key when your business model is dependent on getting additional customers to sign up, you need to design a network that is desirable to all MNOs. It has taken time but our design standards are now being adopted by some MNOs when specifying their own network requirements which gives us confidence that we are delivering a design that our customers really value.

TowerXchange: Which verticals did you decide to focus on when entering the venue-DAS market?

Shopping malls and large office developments were the verticals we decided to focus on initially. Our first venue-DAS was deployed at MediaCityUK in Manchester (see picture one) which is still to this date, the UK’s largest multi-operator DAS network. It was the first 4G MIMO DAS network in the UK, it covers two million square feet, has 300+ antenna points, 40-50km of cabling and provides service to a number of venue tenants including BBC and ITV’s offices, Europe’s largest studio facility, a hotel, a university and over 200 SMEs. The second installation we completed was a top five UK shopping mall – intu Trafford Centre in Manchester, which was the first shopping centre in the UK to get a dedicated 4G network.

The majority of our deployments to date have been in shopping centres and offices. There is still huge potential in both – if you look at the top 100 UK shopping centres, less than 20% have 4G. We have a relationship with Intu (the largest shopping centre owner in UK) who are a partner in our venue-DAS deployments and this is an important part of building our business. We have completed installations in hotel and leisure venues and see potential in concert arenas, hospitals and other sectors. This month for example we will switch on new networks in The Leadenhall Building (the City of London’s largest building, see picture two) as well as Center Parcs latest holiday village in Woburn.

TowerXchange: What is the route to market in the venue-DAS business?

Generally this would be us going out and speaking to the venues (or the venues reaching out to us) and creating network solutions that we can present to the MNOs. We are however increasingly getting asked by MNOs to try and acquire specific venues on their behalf, putting in place our infrastructure so that they can deliver services on a cost effective basis.

TowerXchange: You mentioned at the time of launching that your focus was on venue-DAS but what opportunities do you now see in outdoor DAS and small cells?

Our view is that in the next ten years, the UK needs over 50,000 small cells deployed across city streets. Whilst there is some wireless technology which can help connect small cells, over time we believe that the vast majority will need to be on fibre.

Fibre companies (such as BT) would like to connect all the nodes individually and charge for transmission to each separate node. We can provide an alternative solution and disrupt that business model by creating outdoor distributed networks, tying multiple nodes on a single fibre backbone and effectively creating savings relative to buying separate circuits from players such as BT.

In the US market you find that the DAS and small cells market is more of a fibre business as operators tend to deploy their own equipment at the end of the fibre. This model typically results in single operator nodes whereas in the UK and Europe, operators are much more cost conscious and willing to share infrastructure and this creates opportunities for independent infrastructure providers such as ourselves to help facilitate this demand.

In the UK, the venue-DAS business is based very much on infrastructure sharing - we own, operate and manage the nodes and share the capacity between the MNOs. Infrastructure sharing goes right the way down the network to a far greater degree than it does in the US, and we think that outdoor small cells will be the same.

The value proposition for the MNOs under our model is shared economics on both the fibre and the node and a partner that is doing all the asset management – the prospect of lowering our customers cost of ownership is significant and we see huge opportunities there.

TowerXchange: What work has been done on developing your outdoor small cell business model and what has been deployed to date?

About two years ago we started R&D on outdoor small cells and have developed some very interesting IP, essentially enabling an installation that can support multiple MNOs at a single lamp-post in a way that works for UK streets. It will involve a cabinet on the ground which can support eNodeB and cloud-RAN architectures and even a more traditional DAS approach should the market require it.

In terms of how we’re starting to go into the market, we competed successfully against BT last year and were awarded rights to the City of Aberdeen’s lampposts and so are developing a trial there. We are also working in various stages with other cities in the UK to become their partner.

TowerXchange: Will Aberdeen be the first UK city to run a trial for an outdoor small cell network?

We know that some of the MNOs are doing trials, and in the UK a lot of the cities have run concession tenders for Wi-Fi but Aberdeen was the first city to award a 4G small cell led concession. Some other cities are now starting to look at that this as well.

TowerXchange: How does the UK compare to other European markets in terms of outdoor small cells deployment?

Trials are taking place across Europe, particularly in the dense metro areas. The UK, however, has very fast take up of 4G and we believe that the combination of demand for online and our urbanised nation will position the UK amongst the European front-runners. What we might find in Europe is more MNO-led solutions as a starting point – from a WIG perspective, we first need to create the market for independent infrastructure providers, we don’t expect it to land in our lap.

TowerXchange: Do you envisage permitting problems with municipalities and other authorities to be a hurdle further down the line?

We are a communications code operator which means we have the rights to deploy infrastructure in certain places. Part of a partnership that you need to form with a city or municipality (which is where a lot of the hard work goes in) is in assessing and setting up the processes for deployment. What assets do they have? What is the physical capability of their lampposts and traffic light systems and can they handle our infrastructure on top of them? Is everyone happy to sign off on that? How do you connect up power and transmission to these? We have been doing a lot of that work over the past 12 months with Aberdeen, just getting all the processes set up for deployment. That is a big part of our value-add to the MNOs, handling all this in the field.

TowerXchange: How will monitoring be managed and how costly will this be relative to management of macro structures?

We run 24/7 monitoring on all of our venue-DAS assets at the moment and carry out both routine preventative and unscheduled corrective maintenance. Our monitoring system is intelligent enough to tell us when something is wrong and we work with a group of partners who both build the assets and support some of the monitoring activities as well.

With outdoor small cells, we need to look at the US to see what experience they have. The trick is that we need to build good networks on day one and we need appropriate monitoring and maintenance. It will be a different kind of monitoring and maintenance to that with macro structures – coming with its own set of challenges

TowerXchange: How do you forecast the outdoor side of the business developing?

With outdoor systems it is too early to say at the moment, we are still in the trial phase and it’ll probably be 2017 before we see anything of any scale coming through. We’re not getting into any revenues for outdoor small cells yet, we are still developing the product however this is critical groundwork for us ahead of MNOs starting to look at options for deploying small cells in a major way, we need to be ready.

TowerXchange: What have been MNO attitudes towards using an independent infrastructure provider versus developing networks themselves?

We’re seeing a really open mindset from the MNOs and whilst we are still at early stages of engagement, we’re optimistic about their appetite to partner with an independent infrastructure provider that can deliver a cost effective alternative to the fixed line incumbent.

TowerXchange: Where do you see the immediate opportunities for WIG in the small cells and DAS market?

There is a huge amount of work for us to still do in venue-DAS in the UK. Whilst it’s very hard to size the market, there could be around 1000 venues that need infrastructure and we’re just starting on that journey. We’re the market leader in the UK in the deployment of venue-DAS networks, having deployed more than anyone else last year including (we think) the MNOs. We are also looking at the UK transport network and are very keen to deploy infrastructure along tunnels in the UK which is a big priority for the government. Our next move for venue-DAS will then be outside the UK, potentially forming partnerships with other mid-market European towercos.

TowerXchange: Which countries would be the most logical next step for WIG in venue-DAS?

There are a few different thoughts around that. As a company we already have macro-structures in both the Netherlands and Ireland which gives us an understanding of those markets and so both could be attractive options. Secondly, a lot of European real estate gets run through London and so relationships we have built with companies here could facilitate our entry into other European markets. For example, our largest partner, Intu, also has three shopping centres in Spain and so we are in discussions with them about providing networks to those venues. Our focus will be on capturing multi-venue owners to facilitate further venue-DAS deployment.

TowerXchange: How do you see the small cells and DAS side of the business shaping up relative to the macro side in years to come?  

We’re a long way off it being close to the revenues from the macro side but small cells and DAS is definitely a key area of growth. If you look at Crown Castle’s last set of results, small cells represented around a third of growth. We see towers as long term infrastructure assets which will provide steady revenues in supporting wireless networks for many decades. DAS and small cells represents an entirely new and very significant independent infrastructure opportunity as network densification becomes critical to our customers.