Towercos and Distributed Network Systems: towards a different business model
Infrastructure companies might need to look beyond towers to maximise growth
During the fourth TowerXchange Meetup Americas, panelists took centre stage to discuss the future of the towerco business model and how towercos can remain relevant in an ever-changing technology world. Moderated by Berge Ayvazian, Senior Industry Analyst and Consultant at Wireless 20/20, the panel saw the participation of Estrella Zaharia, President of Andean Tower Partners (ATP), Edgar Geidans, Group CTO at Trilogy International Partners and Nick Johnson, CTO, ip.access.
Understanding the need of your customer
The panel opened by discussing how towercos can meet the needs of MNOs in terms of new technology and products without getting out of their comfort zone and too far from their core business model.
Estrella noted how towercos need to look beyond macro-towers in today’s competitive market and simply listen to their customers’ demands. If it’s true that small cells require a higher level of complexity - in terms of maintenance, fibre et cetera - while macro-towers remain the core of towercos’ activity, thanks to its sister company ExteNet, a small cells pioneer in the United States, ATP is now able to transfer that experience into Peru and Colombia and its customers have been extremely receptive. “We are running the equipment for our customers, replacing it when necessary as well as performing the necessary maintenance” Estrella added.
The crucial point, according to Edgar, is that the moment a towerco adds an active electronic component to its range of products, it will need to change its structure to serve clients 24/7 with a guaranteed 99.99% uptime in its SLAs. This would represent a significant change for a CALA tower industry very much focused on the real estate model.
On the other hand, while carriers tackled the densification challenge first by focusing on adding extra outdoor coverage and utilising available assets like street lamp poles, the shift towards indoor connectivity is tougher and more complex as “dark fibre is less available indoor and players need to deal with property rights and landlords” according to ip.access’s Nick Johnson.
When it comes to outdoor solutions, Edgar noted that carriers review the best possible products, including looking beyond primary vendors, although they tend to work with one of the existing providers (often Huawei or Nokia) for the purposes of simplicity. In Trilogy’s case, the operator has about one hundred small cells in place, not really for densification yet but more to fill holes in the network or to overcome Not In My Back-Yard (NIMBY) issues. But - in Edgar’s words - “if someone had 200 multi-frequency small cells in place with backhaul, which we could access just by plugging in, we’d be all over that! Usually we buy small cells and our vendors deploy them but we’d be very open to Small Cells as a Service (SCaaS) agreements.”
What role for towercos?
Moderator Berge Ayvazian then asked a provocative question to towercos “if Nokia and Huawei can host small cells on behalf of an operator in a given band, then what’s the role of towercos? How can towercos serve multiple operators?”
ATP’s Estrella highlighted that one thing is to manage small cells for the carriers’ own purposes and another one is to serve carriers as a neutral host, deploying first and then offering capacity to customers. ATP can support both models if the economics make sense and its clients in the Andean region are quite open to both options. But while ATP is willing to acquire equipment directly, Estrella stressed that often large carriers can leverage volume discounts better than towercos.
With regards to the choice to outsource versus self-deploying, the panel stressed that each carrier has its own strategy. And while leaders are often inclined to self-deploy, those with lower market share tend to opt for outsourcing, especially if they’ve already sold their passive infrastructure and are used to work with third parties. In-house engineers tend to prefer to have their own network which they can control and manage. But when the volume of small cells grows, the best way to accelerate time to market is to opt for a neutral host and again, this is particularly true for operators seeking a competitive edge against a strong incumbent market leader.
How to enter the small cell and DAS business
Berge asked how towercos enter the heterogeneous network business and Estrella stated that after having secured the exclusivity in a few premium venues, ATP is now focusing on iDAS since this is the number one priority for carriers. She added that many carriers are currently trying to deploy cheaper small cell solutions rather than DAS, but ATP is now designing and installing iDAS and then offering it for co-location.
In fact, towercos can either wait for clients to approach them or build solutions and then offer SCaaS. And the ability to either deploy upon request or deploy and then offer for co-location will be particularly crucial as the industry moves towards 5G; a many-headed beast that will surely require a considerable densification effort from all parties.
In the case of ATP, the support and experience of ExteNet has been critical in expanding the inherently multi-operator DAS model to the Andean region. And in Mexico, Mexico Tower Partners, another company of the Digital Bridge family, has been learning from ExteNet too and has already deployed DAS in a dozen venues.
Winning small cell customers and extending the sharing paradigm
Discussing the issue of competition among small cell providers, Nick stressed that ip.access competes against its larger competitors by appealing to the pockets of their customers. In fact, while revenues are falling, demand for data is growing at a fast rate and operators simply cannot continue to own their networks indefinitely. ip.access has attacked the problem from an economic perspective as well as from a regulatory angle since many operators do not have time to understand the ever-changing regulatory framework in each market whereas third party hosts often do include this as one of their key services.
Sharing doesn’t mean compromising quality of service, but it is often a means to facilitate a healthier competition and to manage costs. Often sharing is a necessity that goes beyond passive infrastructure and this is particularly true when it comes to spectrum availability. In some markets, carriers aren’t allowed to combine spectrum or RANshare but at the same time, the GSMA has a mandate to push infrastructure sharing in emerging markets and is tasked to negotiate at a government level to overcome those limitations.
Sometimes active sharing is the only way to bring connectivity in rural areas and, since the ultimate mission of telecom regulators is to raise the standard of living by connecting otherwise underserved remote areas, we are bound to see some changes when it comes to RANsharing and other types of active sharing agreements.
Berge asked how players can crack the code in the “middleprise” segment which is often too small for DAS and not necessarily multi-operator from day one. In Nick’s words “ip.access identifies great pent up demand among middleprises, especially since enterprise venues need multi-operator services but carriers still want to own the enterprise relationship” ip.access tries to “address this issue with a neutral host model to serve all carriers, the enterprise and their customers with huge positive impacts on their businesses. In fact, the impact of bad mobile service on shared workspaces or hotels can cost 20% occupancy or more!”
Berge concluded the panel by asking how big the diversification opportunity was for towercos in enabling the heterogenous network. ATP’s Estrella noted that as 4G is just the base for 5G, the industry needs to gear up for radical changes - there is simply “no end to the evolution”. To which Edgar replied with the carrier’s perspective “we need space, towers, real estate and small cells. We as operators will welcome a service proposition as we are inclined to preserve capital for other business areas.”
In conclusion, it seems that the road is still quite long for CALA towercos to fully diversify beyond macro towers, but the discussion is there and a few entrepreneurial companies are putting themselves at the forefront of the evolution from the traditional business model. Towercos can become a unique trusted intermediary between landlords and carriers to effectively deploy multi-operator small cell and DAS solutions wherever they are needed, whether indoor or outdoor.
Introducing the panelists
Edgar Geidans is CTO at Trilogy International Partners, a carrier active since the nineties in the United States before selling to Deutsche Telekom (now Verizon) and currently operating in Bolivia under the brand Viva and in New Zealand as 2degrees.
Estrella Zaharia heads Andean Tower Partners’ operations in Peru and Colombia. ATP is part of the Digital Bridge group of companies alongside, among others, Distributed Network Systems experts ExteNet Systems.
CTO Nick Johnson introduced ip.access, a UK based specialist company which has been providing small cell products since 2003 to clients such as T-Mobile and AT&T.