T-Mobile Leaseholders Can Expect Equipment Modification Requests

T-Mobile spent $1.8 billion on nationwide spectrum licenses in the recent AWS-3 auction. While just 1/10 that of Verizon ($10.4B), and even less that of #1 buyer AT&T ($18.2B), the licenses will go a long way in enabling T-Mobile to complete its 4G LTE rollout, as well as helping it fulfill some rural coverage gaps.  Follow the thread to find a nice map of T-Mobile’s market wins. Cellular leaseholders in any of the regions below should be on the lookout for equipment modification requests. We can also expect new tower builds in some of these areas.  Read More

Advice to Cities on Small Cell Agreements

Steel in the Air recently completed a workshop for a major metropolitan city regarding its small call policy. The City had been contacted by one Big Four wireless carriers, and multiple third party management companies, all of whom wanted a share of the City’s revenue in exchange for “managing” its small cell builds. In reviewing the proposal that the WSP made to the City, it was clear that all parties, including the City, were treating the proposal just as they would a traditional macrocell/ tower proposal.  It wasn’t until we sat down with the City, that we collectively began to understand that the real opportunity reached far beyond the revenue component.  .  Read Story

 

Most Influential Events in 2014

1. Sprint/ T-Mobile Deal Collapse

In May 2014, Sprint formalized its intent to acquire T-Mobile from Deutsche Telecom.  If the union had met with approval from the FCC, the new entity (with a combined total of ~108 million subscribers) would have effectively rivaled both Verizon (~118 million) and AT&T (~108 million subscribers).  For a brief amount of time this past summer, it was looking as though a marriage between the #3 and #4 carriers might, in fact, be blessed by the FCC, but that was before regulators denied Sprint and T-Mobile the opportunity to bid as partners in the spectrum auctions.   In July, Sprint called off their attempted efforts to merge with T-Mobile when it seemed clear that they would not gain approval from the FCC and Department of Justice.   Landowners with either T-Mobile or Sprint leases were happy as it meant that there was substantially less likelihood that either company’s leases would be terminated due to redundancy between their networks.

smallglobeview

2. Revised FCC Order on Shot Clock

The FCC’s October 2014 Report and Order on Improving Wireless Siting Policies provided a regulatory framework for local regulatory bodies, such as municipal zoning authorities, to adhere to when dealing with new cell site builds. The Report comes as a response to the wireless industry’s request that the FCC loosen some federal regulatory standards set forth by the National Environmental Policy Act of 1969 and the National Historic Preservation Act of 1966, particularly those regarding DAS and small cell builds. DAS and small cell systems, while technically classified as “wireless facilities” utilize a much smaller footprint than traditional macrocell tower builds.  The Report spoke favorably of both small cell and DAS systems, stating that “Because small cells are significantly smaller than traditional macrocells, networks can reuse scarce wireless frequencies, increasing spectral efficiency and data capacity within the network footprint” and “DAS deployments offer robust and broad coverage without creating the visual and physical impacts of macrocells.”

The recent Order will advantageously affect the wireless industry in several ways, in addition to paving the way for more efficient small cell and DAS builds.  It will be easier for carriers to receive approval to collocate on operational towers (provided that they comply with zoning and historic preservation conditions).  Additionally, the definition of “equipment” has been broadened to include all equipment associated with the operation of the antennas, which will allow technological upgrades to happen with less red tape.

3. AT&T Slow Down

In the first 4-5 months of 2014, SITA received approximately an equal amount of inquiries from landowners who had received cell site lease proposals from AT&T and Verizon.  In that same time frame, we saw almost no inquiries from landowners who were approached by Sprint or T-Mobile.  Then in late second quarter, landowners who had been approached by AT&T for new towers were being told that their projects had been put on hold.  Simultaneously, AT&T announced a two-month freeze on capital expenditures (CapEx) which later turned into a significant reduction throughout the end of 2014.

Why the slowdown?  AT&T suggested that it would not invest money in new infrastructure while the FCC pondered whether to characterize AT&T as a utility, thereby subjecting AT&T to a possible “net neutrality” policy.  Steel in the Air believes that is just a smoke screen.  The real reason behind AT&T halting its network infrastructure roll-out is because it spent, or plans to spend, too much money on acquisitions.  In March 2014, AT&T purchased Leap Wireless for $1.2 billion.  AT&T announced plans in May 2014 to buy DirectTV, which will cost $48.5 billion, but will give the company access to more than 38 million video subscribers in the U.S. and Latin America.  In November, AT&T also announced plans to buy Mexican Telecom Iusacell for $1.7 billion.  While it does seem that the company’s divestitures are broadening (particularly into video), the near term result is clear that the company pulled back on its plans to aggressively build out rural areas with new towers.

So what can the cell site lease sector realistically expect from AT&T in 2015?  More of what we saw in 2014 – fewer new site builds and a renewed focus on site upgrades and fiber backhaul to existing sites.  While the slowdown won’t impact existing site owners, it will delay new AT&T installs on existing towers and reduce the number of landowners who receive proposals for new AT&T ground leases.

4. T-Mobile’s Success

T-Mobile, the #4 U.S. wireless carrier in term of subscribers, has been called “The Most Innovative Tech Company of the Year” by CNN. T-Mobile added more than 3.5 million customers in 2014, much more than any other carrier.  It now commands more than 18% of the U.S. market, up from 11% the previous year, and there is a chance that it will surpass Sprint in the next year or two. While T-Mobile assures investors (and its customers) that it has the capacity necessary to meet demand from its new subscribers, some analysts are concerned, which is why success in the AWS-3 Auction, as well as the 2016 Incentive Auction, will be of paramount importance to T-Mobile in reaching its stated goal of providing service to 300 million POPs by January 2016. This will most likely mean equipment upgrades (additional antennas) for property owners party to leases with T-Mobile.  In addition to building out its network, T-Mobile must focus on optimizing capacity in key areas, such as Boston.  In November 2014, it announced the launch of a “wideband” LTE service, which utilizes a 40 MHz spectrum band (double the original 20MHz), allowing for more traffic to be handled efficiently at any given time.   To date, T-Mobile’s “wideband” LTE is available in 21 cities.  It has even begun to boast “fastest speeds” in some cities, which is possibly correct, given that T-Mobile currently has half the number of customers accessing the same quality of network as Verizon and AT&T do.   T-Mobile will certainly need to stay on top of its game, but from the looks of it, we believe that it has the resources and initiative to do so.  Additionally, T-Mobile seems to be ahead of the pack regarding some capacity issues related to what is known in the industry as “cell site densification.” “We’re dense already,” says T-Mobile’s CFO Braxton Carter.   The reason?  T-Mobile, unlike AT&T, Verizon and Sprint, began its network build with mostly medium-frequency (mid-band) spectrum (unlike the 700 MHz low-band spectrum that AT&T and Verizon started with).  While T-Mobile does have some DAS and small cells in place, it’s been made clear that their strategy is to improve coverage in rural areas with their newly acquired low-band spectrum.

T-Mobile’s popular “Un-carrier” market pitch has resulted in Verizon, AT&T and Sprint falling over each other to cut prices to keep its customers happy.  Doing so while managing stakeholder concerns is quite the balancing act.   Carriers in general are presenting so many different plans that customers are having difficulty keeping up.   In addition to price-cutting, carriers have had to increase data buckets for customers, and add new features like roll-over data, international text messaging and cloud storage allowances.  These innovations have yielded two significant results: First, cellular data networks for all the carriers must be robust to handle capacity demand; and second, AT&T and Verizon must meet the expectations of their customers who anticipate a superior network, which means they cannot slack on rolling out network upgrades – or at least they cannot appear to.

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FCC 17th Annual Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless

5.  Middle-band Spectrum Paid for and Ready to Use

Successful build-out of a nationwide wireless network requires a range of frequencies.   Low frequency spectrum, which travels long distances and easily penetrates walls, is good for rural areas.  High-frequency spectrum offers wireless carriers raw bandwidth that can be used in populated areas requiring fast data solutions, such as streaming video to phones. AWS-3 is middle-band spectrum and has some of the advantages of each.

After more than two months and 340 rounds of bidding, auction participants have paid just under $44.9 billion for the sought after AWS-3 mid-frequency spectrum.  The final results have yet to be disclosed, but we can presume that both AT&T and Verizon bid heavily and acquired a number of new licenses. The total paid to Uncle Sam was over double what was originally expected.  Most industry analysts assume that the AWS-3 band will be used to augment existing networks by increasing capacity.  For instance, Verizon and AT&T have both successfully completed their 4G LTE upgrades, and provide service to over 300 million POPs nationwide (while T-Mobile states its build-out will be complete in 2015), but this doesn’t mean that all of their customers enjoy stellar service.  In other words, while we can say on one hand that wireless coverage in most U.S. cities has reached a saturation point, high demand requires that network be augmented to provide greater capacity.

In December 2014, the NAB (National Association of Broadcasters) took the FCC to court over its proposed rules for its upcoming incentive auction of 600 MHz, low-frequency spectrum (currently used for broadcast TV). This delay is not good news for #3 and #4 wireless carriers, Sprint and T-Mobile, who need more low-band spectrum to compete with AT&T and Verizon. T-Mobile owns 6 MHz of low-band spectrum, while Sprint doesn’t have any!

The Incentive Auction will reserve 30 MHz of the best spectrum for “smaller” wireless carriers and new market entrants, which effectively means everyone but Verizon and AT&T.  Once the spectrum is freed up, more towers will be built and existing towers upgraded with newer technology, which is the intended goal – not just to increase data speeds for customers with wireless devices, but also to energize the economy itself. This strategy, in combination with rules that will give new entrants discounts, could potentially create opportunities for competition in the wireless space.  T-Mobile, however, has argued that if only 30 MHz is reserved, Verizon and AT&T will buy up and split all the rest, and suggests that the FCC must set aside more if competition is really the goal.  Because the proposed methodology is so complex and details are still pending, the procedure for the Incentive Auction is still open for comment, and will remain so until late February 2015.

Regardless of what frequency the RF spectrum is, the purchase of spectrum licenses does come with responsibilities.  For instance, every buyer is required to provide a reliable signal and service offering to at least 40% of the population in each market within six years, rising to 75% of the population by the end of the 12-year license term.   If they do not accomplish a successful build-out within the time frame, they will have to forfeit their spectrum.

So what does this mean for landowners who are party to leases with any of the Big Four carriers?  While the FCC doesn’t release specifics on who the big winners were, we can make some presumptions:

  1. Sprint already owns mid-frequency spectrum (in fact, that’s the only spectrum it owns), so it sat out this auction, in favor of waiting for the 2016 Incentive Auction, during which it hopes to acquire the low-frequency spectrum that it needs for rural builds. At the end of the day, we don’t expect to see much activity from Sprint – except in a few very populous and dense markets, where it will use its PCS (1900 MHz) spectrum to add capacity to its existing network.
  2. T-Mobile does need more AWS spectrum in order to cover approximately 1/3 of the country that is currently uncovered. If it did, in fact, score the winning bid, we can expect to see new cell site builds and improved coverage for customers.
  3. AT&T and Verizon will use their winnings to fortify their existing networks by adding small cells, and rooftop cell sites in densely populated areas, as well as some new site builds. Landowners who are currently party to cell site leases with AT&T can also expect to see requests for equipment modifications and additional ground space leases.

One thing is for sure, we can expect to see equipment upgrades across the board, for each of the Big Four carriers, which could mean additional compensation for property owners engaged in cellular leases.

Top Forecasts for 2015

1. Verizon’s Tower Sale Will Set the Market

Verizon recently hired an investment bank to help sell its tower assets.  Macquarie Securities Analyst Kevin Smithen estimates that 12,500 towers will be part of the portfolio offering, but we suspect the number to be between 10-12,000.  Verizon has suggested that AT&T’s 2012 tower transaction opened their eyes; however we suspect that Verizon wisely waited to be the last major carrier to offer a substantive portfolio of towers, and believe that Verizon will reap a higher price per tower for doing so.

AT&T’s 2013 tower portfolio sold for approximately $4.85 billion (~$485,000 per tower), while T-Mobile’s 2012 portfolio of 7,202 towers yielded significantly less –$2.4 billion ($333,241 per tower).   We believe that Verizon will set the market both in terms of the amount per tower and the total size of the transaction.  Here’s why.

Verizon-Towers

2. Wi-Fi Offload Expands

HotSpot 2.0, aka “The Next Generation Hotspot Protocol” could change how we use our wireless devices. Industry analysts project that by 2017, just two years from now, more than half of all mobile data will be offloaded to Wi-Fi networks, which is a clear case of the industry responding to consumer demand, since carriers would prefer to offload their subscribers onto their own (privately held) Wi-Fi networks than to lose them to competitors.  Luckily, it’s also in the best interest of carriers (cost-wise) to do so.

The Wi-Fi Alliance recently launched Passpoint, an industry-wide protocol for Wi-Fi use.  The standards include:

  1. All devices will identify and connect to Passpoint networks automatically;
  2. Authentication is no longer browser-based and doesn’t require a password;
  3. All connections are secured with WPA2-Enterprise industry standards.

While these standards are ideal, we are still waiting for infrastructure builds to catch up and believe that it will be at least another few years before significant and focused roll-out occurs. Wi-Fi offloading will be an essential part of the wireless carriers’ strategy, but we don’t expect this to result in cellular networks or towers disappearing.  There are some fundamental technological issues with Wi-Fi that will inhibit its widespread adoption as a ubiquitous replacement for cellular service.

  • Interference in the Public Spectrum. The interesting thing about Wi-Fi is that all Wi-Fi use happens on two radio-frequency spectrum bands: the 2.4 GHz band is unlicensed and used for public access, while the 5 GHz band is mainly distributed by licensed wireless carriers. Unless the bands are carefully administered, users can encounter quite a bit of interference using public access points.
  • Signal Strength. When a large number of wireless devices are in use over a dense network of access points, it’s necessary to reduce the signal power of some of them while favoring others, to avoid what is called co-channel interference.
  • The User Experience. A densely deployed network of hotspots doesn’t necessarily provide better end-user experience due to capacity and reliability concerns. Some end-users ultimately prefer to pay for access to cellular data networks.

So How Will Wi-Fi Offload Affect Your Cellular Lease?

Wi-Fi offload will help the WSPs provide better in home service.  Both Sprint and T-Mobile already offer it, and AT&T and Verizon both have indicated they will.   This will enable seamless switching between the macro network and Wi-Fi if sufficient Wi-Fi network quality is available.  Macro solutions, like cell sites, are going to remain necessary to handle both the capacity and coverage needs of subscribers. The industry will see a tremendous amount of restructuring in the coming years.  DAS, small cells, hotspots and carrier collocation will aid in coverage requirements, but will not be sufficient to replace cell towers and rooftop sites.  With the current demand for data, the number of cell sites is going to continue to grow, and the number of requests to modify existing sites will increase as carriers continue to augment and expand their networks. This should bring peace of mind to anyone involved with, or considering becoming party to, a cellular lease tied to a tower or rooftop.

3d Wireless network in miniature city with wifi tower, Concept of communication

3. Small Cells and DAS Deployed in Volume

According to CTIA, at year-end 2013, there were 304, 360 small cell sites in operation – up only 9% from 2012 year-end.  Yet for the past two years (2013 and 2014), industry analysts have prophesied that this year would be the year of the Small Cell.  Unfortunately, we still haven’t seen evidence of this.  SITA believes that 2015 might actually be the year of the Small Cell.   DAS and small cells are essential to delivering the coverage and capacity required by skyrocketing demand.  But instead of offering an either/ or proposition, we would like to view them as complementary options that can deliver an optimal solution.

Small cells are served by cellular base stations like cell towers, but they are low-powered and targeted to cover localized areas like stadiums, shopping malls, corporate gateways and schools. DAS technology is a bit different, but the effect is the same – they, like small cells, help relieve congestion from cellular networks by providing additional capacity in high-traffic areas, or indoors where cellular signal strength is poor.

Governments, universities, large corporations, and public venues have become increasingly aware of the importance of maximizing coverage indoors as well as out.  This is one of the reasons we see small cell and DAS deployments as the key technologies in 2015.

In the 2nd half of 2014, we observed a substantial increase in the number of inquiries to our clients and potential clients for small cell installation.   Most of these were from Verizon, and many were master lease proposals from Verizon to municipalities to utilize their street lights and utility poles.   We expect that Verizon will continue these efforts aggressively this year and that at least one other wireless service provider (likely Sprint) will step up their efforts.  Thus, to us, 2015 is the year of the Small Cell.

4. Wireless Spending and Network Parity

The newest wireless buzzword “network parity” suggests that networks are becoming fairly similar in operation and that the distinctions between them are less and less.   But how could that possibly be the case when some (Verizon and AT&T) have more money to spend on cell tower builds and technology upgrades than others (Sprint and T-Mobile)?  The top two carriers, Verizon and AT&T (with ~122M and 116M customers, respectively) invested significantly more money on wireless infrastructure deployment than Sprint (~55M) and T-Mobile (~50M) in the past year, and together control approximately 68% of the wireless industry’s revenues . Network parity however, is driven more from the user end.   In other words, for all intents and purposes, as long as the customer is in a service area for their wireless service provider they will have similar service as they would with another wireless service provider.  The distinction though is in the breadth and depth of the coverage areas.

As we’ve stated above, Verizon and AT&T have completed their 4G LTE builds nationwide (but still need to augment for capacity in high-traffic areas); T-Mobile has stated that it will finish in the next year or so; and Sprint is doing its best to keep up, but Sprint’s goal is the same as the others.  What this means is that at the end of the day, customers will have comparable capabilities (albeit with different payment packages and features).

Big Four Breakdown

According to the FCC, Verizon, AT&T, Sprint and T-Mobile spent 31.5 billion in 2013 on capital investments. Industry analysts have concluded that including spectrum license acquisitions, wireless capital expenditures for 2014 will exceed $204 billion (and remain roughly flat until the next auction in 2016).

Here’s a  breakdown of the Big Four.

Verizon.  Up until Q3 2014, Verizon had spent $7.8 billion on its wireless network ($2.5 billion in Q3 alone).  Much of this was used to add additional capacity in more than 400 markets by deploying AWS-1 spectrum, which it calls XLTE.  According to Verizon’s CFO, “steady and consistent investments in networks and platforms will fuel company growth.” Verizon’s build this year will be similar to last year- a mix of new macrocells and small cells.  Verizon will use AT&T’s slowdown to expand its network quality in the US while AT&T is focused on the DirecTV integration and the purchase of wireless service providers Iusacell and Nextel in Mexico.

AT&T.  During the first three quarters of 2014, AT&T spent $17 billion on fleshing out and upgrading its wireless network, although costs associated with integrating Leap Wireless (Cricket) were included in this figure.  Additionally, as mentioned above, CapEx for the second half of 2014 was significantly less than in the first half.  AT&T’s CFO stated that the company rolled out LTE to 300 million POPs four months ahead of schedule. AT&T’s plans for 2015 include a reduction in CapEx by about 18% which will translate to fewer new sites being built.   The primary reason for this is the proposed purchase of DirecTV for $41 billion.

Sprint.  Sprint reported that it spent about $1.3 billion per quarter in 2014.  Its successes included reaching 254 POPs with its LTE coverage.  It also launched Spark, which uses carrier aggregation technology to boost speeds, in 27 markets. In 2015, Sprint will continue to overlay its market with 2.5GHz antennas which means existing landowners with Sprint will receive inquiries about modifications to existing Sprint equipment.  However, there won’t be many new macrocells this year.

T-Mobile. T-Mobile spent an average of $1 billion per quarter during the first three quarters of 2014.  It reached its 2014 goal of covering 250 million POPs and has pledged to reach 300 million by 2015.  The carriers say that it is aggressively building out LTE as well as wideband LTE to augment capacity in high-traffic demographics. T-Mobile’s 2015 plans are a bit of a mystery at this point, but our expectation is that T-Mobile will continue to add macrocells at a slow pace, possibly as high as 1,000 new sites this year.

 

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FCC 17th Annual Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless

What is Wi-Fi Offloading and Will it Hurt My Lease?

off-loading

Wi-Fi offloading is the use of Wi-Fi technology to deliver data that was originally sourced by cellular networks. Wireless Service Providers can intentionally offload cellular 3/4G and LTE traffic to Wi-Fi, which basically means that the end user will be accessing unlicensed spectrum in the public domain via a Wi-Fi hotspot.  Why are the wireless carriers interested in offloading subscribers from their networks where they get paid by the megabyte?  Two words- Data Tsunami.

Industry analysts have estimated that Internet traffic will exceed an annual growth rate of 50%.  From 2012-2013, smartphone use rose by 40% to more than 1.2 gigabits per month per user, and tablet use increased by over 50%, largely due to video streaming.  In fact, in March of this year, Smartphone use (in minutes) surpassed TV use for the first time ever: 151 to 147 minutes per day respectively (with laptop and tablet using treading at 103 and 43 minutes).   Global data traffic is expected to increase 18-fold between 2011 and 2016.  These numbers have the wireless industry spinning and scrambling to keep up with demand.  Available spectrum and bandwidth are not the only concern – the ability for wireless infrastructure to handle the squeeze and alleviate network congestion is more critical than ever before.

Wireless carriers want to avoid churn (the industry term for subscribers changing service providers). They’d rather “offload” subscribers to public (or privately) owned Wi-Fi networks, rather than seeing their competitors benefit.

Deployment Strategies and Player Competition

Why use WIFI at all?  Because consumers expect consistent and fast access: 2/3 of Smartphone users expect a web page to load in four seconds or less – and are demanding that providers not only offer seamless Internet experiences, but competitive pricing on data packages, as well as a best-case user experience.  Wireless carriers are waking up to this and integrating heterogeneous models that span across technologies.

We have seen operators that have built offload networks in areas with dense data traffic, like universities, stadiums and hotels. AT&T has publicly discussed a number of Wi-Fi (and small cell) offload systems.  For instance, in January 2014, it installed 4G antennas at Sun Life Stadium to strengthen its cellular signal for voice calls. Each antenna is paired with a Wi-Fi router to provide AT&T customers better data access.

Does this mean that cellular towers will become obsolete because of WIFI offloading? Read on (but the answer is no).

Since Wi-Fi uses unlicensed public spectrum, it is free to use by anyone, which means that you don’t have to be a wireless carrier to provide WIFI offloading.  Some technology companies that don’t own wireless spectrum like Google and Comcast, have arrived on the scene with enough money to build out robust WIFI networks where they have fiber or cable already in the ground or in the air.  Both companies don’t want to depend upon the wireless carriers to provide mobile access to their services (search engine advertising in the case of Google, and pay TV in the case of Comcast).

So what does this mean to property owners, municipalities and anyone involved in a cellular lease?

Wi-Fi offloading will be an essential part of the wireless carriers strategy that will help them cope with the onslaught of the Data Tsunami, no doubt about it, but we don’t expect this to result in cellular networks or towers disappearing any time soon (if at all).  There are some fundamental technological issues with WI-FI that will inhibit the widespread adoption of WI-FI as a ubiquitous replacement for your cell phone service.

1. Interference

First, since WI-FI is provided over unlicensed spectrum, anyone anywhere can use it.  Typical WI-FI routers are built to broadcast relatively short distances.  That is why when you travel to large cities and look for available WI-FI, there can be tens or even a hundred access points within a close proximity.  A convenient outlay of wireless hotspots is great for easy access to coverage, but interference is a factor to contend with. When a dense network of access points is deployed on a number of wireless devices (from MP3 players to watches and shoes), it’s necessary to reduce the signal power of some of them, while favoring others to avoid what is called co-channel interference.  But at the end of the day (or perhaps even in the long-run), a densely deployed network of hotspots doesn’t necessarily provide better end-user experience because capacity and reliability may become problematic.  In other words, some end-users ultimately prefer to pay for access to cellular data networks, which the carriers own via specific licensed frequencies,  meaning that others can’t interfere with their network operation.

2. Seamless Connectivity

Currently, most WI-FI networks require an affirmative act to connect to each network, meaning that the user has to sign on at least once to each network.  While this isn’t an issue if you are at your home or office, if you are walking or moving in a car, doing so is inefficient, if not impossible.  However, Industry bodies like the Wi-Fi Alliance and the Wireless Broadband Alliance are pushing for standard specifications like Hotspot 2.0 (aka Passpoint), which would make Wi-Fi connectivity more seamless and easy to use by automatically connecting users to supported Wi-Fi networks.  The shift to ubiquitous Wi-Fi offload is likely waiting for these standards to even out. We believe that it will be at least another few years before significant and focused roll-out occurs and the technological devices exist on a wide spread basis to systematically access these networks.  Even then, someone still needs to build out these supported networks.  (Who better than the wireless carriers who already have tens of thousands of cell sites?)

3. Volume of Calls

The average number of voice calls that can be handled on a Wi-Fi access point is only 15. When interference is introduced, the number of calls that can be handled drops from there. Additionally, small amounts of interference seriously impact voice-over-Wi-Fi voice quality. The question is: will users be okay with this, or will they prefer to rely upon the cellular connections they’ve become used to?

4.  Security

Security concerns are no joke.  When small cells are brought into public areas (or even private residences) they are by definition less secure than when they are in managed in central offices tied to macro cell sites.  Because Wi-Fi hot spots are using unlicensed spectrum, they are easier to hack.

5. Number of Hotspots Needed

Wireless hotspots boast an average coverage area of about 65 feet. Consider that the coverage for the smallest small cells (femtocells) reaches about a 40-foot radius, and can support up to six users going full speed ahead. Slightly bigger microcells have a one-mile radius and can support about 200 users.  DAS installations have a three-mile radius and can support almost 2000 users. While macro (cell) sites provide coverage for up to ten miles, the quality of the service depends entirely on the number of people accessing the network at any given time, eg: the capacity.

Wireless carriers invested over $25 billion in 2013 to improve their wireless networks, and 2014 is likely to be no different. This capital is going primarily to new cell site development and to fund LTE modifications on existing cell sites, and only secondarily to wireless offloading efforts.

In rural areas, there simply isn’t any way to deploy enough hotspots to provide seamless, consistent coverage.  There are alternatives like Super WI-FI that hope to deliver much wider area coverage using TV white space, but these networks haven’t been deployed in any significant manner.

So How Will Wi-Fi Offload Affect Your Cellular Lease?

Small cells and accessible coverage is great to have, but capacity is perhaps the most valuable function for wireless carriers to consider in determining successful network deployment strategies. Macro solutions, like cell sites, are going to remain necessary to handle both the capacity and coverage needs of subscribers. The industry will see a tremendous amount of restructuring in the coming years.  DAS, small cells, hotspots and carrier collocation will aid in coverage requirements, but will not be sufficient to replace cell towers and rooftop sites.  With the current demand for data, the number of cell sites is going to continue to grow, and the number of requests to modify existing sites will skyrocket as carriers augment and expand their networks.

This should bring peace of mind to anyone involved with, or considering becoming party to, a cellular lease tied to a tower or rooftop.