In a PR today, Level 3 Communications (NYSE:LVLT, news, filings) announced a new service for wireless tower access. Now, that doesn’t mean what I first thought it did, which was that the company was preparing to enter the fiber-to-the-tower market in force. They still might do that I guess but this offering seems to be more about bringing the tower to the fiber. That is of course much less capex intensive for Level 3, and allows it to squeeze a bit more revenue out of existing facilities.
Level 3 has “identified 300 tower-ready network sites with the geography and right-of-way access to support the addition of wireless towers.” In other words, if a wireless carrier needs a tower in the area, Level 3 will help them build it next door. Who knows, they might even offer a slice of that licensed LMDS or microwave spectrum to throw into the deal. While some sites are in metro areas, most of the sites are of course in rural areas. In fact, this Tower Access offering is probably best seen in light of the company’s extended on-net services and the deal with OpenRange. In other words, they’re hoping to lure new wireless towers to the land on, adjacent, or whatever to all those amplification huts scattered all over the country on railroad rights of way etc.
It’s a creative approach, but a necessarily limited one given that Level 3’s facilities aren’t that close together – one Tower Access site per market in most cases. So we’re not talking about metro-wide wireless backhaul here, although each could serve as a local fiber backhaul access point for a wireless backhaul network in the area. I do look forward to the time Level 3 has the resources to pursue FTTT buildouts in force, though.
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Categories: Fiber optic cable · Internet Backbones · Wireless
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It sure substantiates recent statements and strategies by Crowe. (3) doesn’t feel compelled to make any investments unless the wireless players “invest” with them at the same time “connect” to (3) facilities. He wants wireless companies to have their “skin” in his game, like hopefully, he’ll start doing again inclusive of buying stock that isn’t born from the sweat of his share owners’ backs by being pulled off the shelf.
so lvlt would offer up the row next to an lvlt regeneration station as an incentive for say american tower to build a tower next to lvlt. whats the incentive for amt to do that if they already have a tower in that area served by an rboc? i assume lvlt would have to work out a nice arrangement for them. if there was a new tower company wanting to get into a market i can see them being interested in doing this.
if i remember my history right sprint sold their towers a few years ago in a sale lease back. they would be a good partner on this.
Why focus on new tower only, seems others like a Zayo feel fiber to the tower is a good business and are very aggressve in that space. Using that model you can increase the on net building count and open up more small enterprise business akin to the GO OCAL strategy while funding the builds with anchor wireless customers. ( not all cell site are tower sites many are located in multi tenant buildings). I wonder the economics works for 1 company and not the other.
anonymous. why would you do fiber to the tower if the wireless system is as efficient? the cost has to be less since lvlt owns the 39 ld spectrum and they wouldnt have to spend any money to build it out?
hey rob have you noticed how often lvlt and clearwire are rolling out services in the same area? is there a connection?
Any wireless carrier would need to spend their own capital to build at each location. L3 is risk/capital averse.
Although, if they have 1 carrier at a location, L3 should build a monopole (with that anchor) and then upsell to other carriers as a quick roll-out solution….that provides a solution to the wireless carrier and cheap fiber backhaul that can be implemented quickly….this would make sense to Level 3, but they probably won’t do it.
I ask the question because I think nearly every cell site in the US requires an upgrade to existing bandwidth. The wireless companies want that upgrade in lock step with there rollout of nw equipment and increased services like 4G and LTE. Meaning over the next few years all cell sites appear to be new revenue opportunity.
If I were on a Board of companies chasing fiber-to-the-tower … I would be asking to see the capex return.
Today, building the fiber to a tower to only deliver the equivalent of a T1/TDM services have several carriers looking at 60-72 months payback on capex. Some may never get a pay back.
We will not experience substantial broadband tower capacity growth until there is greater deployment – ubiquitous deployment — of 4G, WiMax and LTE gear. Which some research firms report may be 2-4 years away.
Depending upon whose brochure you read, it is alleged as LTE, WiMax and 4G will enable a 4x to 20x last mile equivalent in bandwidth availability. Reliability – unknown. But factually, deployments are needed of the technology to justify the fiber builds, otherwise, in my opinion, you are gambling with share owners money.
We have built to towers. Our return model is 12-14 months or we wait. Wireless carriers are not willing to take any risk — a MUG or “take or pay” … with that, replacing a T1 with fiber is in fact a 60-72 month payback.
The top line glory of doing T1 replacement deals via fiber may seem trendy for the top line in the short run but anyone with a fiduciary duty to investors really need to make sure capex is being optimized, returned and recycled.
If the 2-4 year window is correct based upon various research houses, one can conceive of deploying the same capex now in non-tower situations, getting your return in less than two years and putting the cash back to work when demand, technology are more aligned for tower access.
Just my opinion and experience …
I have to say Thank You. That is tremendous insight from a experienced industry leader.
Mr. Rusin, do I understand you to be saying that, you don’t envision a “rush” to “build towers” near LVLT facilities which can hop onto their backbone?
And, assuming I am understanding you correctly, is your analysis directed towards more main stream wireless traffic as opposed to the rural communities which (3)’s announcement seems to be focused upon? tia
Rural is a different ball game … less of a rush
Interesting concept, but I hope L3 would invest in substantial electrical grounding studies and improvements at their ILA sites for tower placements. Having a 200′ metal lightning rod next to their regen huts could pose problematic, and replacing their infinera amplifiers and other equipment will be an expensive proposition!
You hope they ‘would’? I hope they DID! 🙂
I’d like to thank everyone for contributing to this discussion, it has been illuminating! Looks like fiber to the tower is a subject of great interest, I’ll see if we can’t find more to talk about on the subject.
Would Rural ILEC’s that receive settlement money be more likely to build to the tower and wouldn’t that be competition to L3?
If owned an RLEC, that is exactly what I would be doing.
Level 3 is limited to their backbone, where Rural telco’s have more coverage. There could be some competition, but Level 3 is nationwide, so it is easier to check with them first before going to a rural telco.
I am dealing with them (L3) currently at several sites to find a spot for wireless. Their issue isn’t land, but lack of AC power systems (UPS, etc.). Grounding is a good point, but it isn’t too hard to place a grounding ring, and usually poles will be 200-300′ from an ILA hut.
Level 3 is slow on finding their own facility/property information currently, so if they really want a push into this space, they need to get their house (i.e, info) ready now. The delays they have in tracking down their own facility info (on L3, Wltel, Broadwing, genuity, etc.) will cost them several deals.
As mentioned earlier, if L3 was smart….once they had a wireless customer at a particular location, L3 should engineer the tower (for multiple carriers), pay and install it, then market this to other carriers. They would have literally paid for it with the anchor customer, and the rest is gravy. Long term deals/leases that more than pay for the pole. And wireless backhaul for years over their already exisitng fiber…..not a bad plan….but think they aren’t positioned to execute.
RLECs that I know are pretty smart people — they’ll figure things out for themselves.
All the government can do is screw things up by funding new competition in rural areas that do not economically support it.
It’s like Congress or your state legisltures rasing your taxes for education … “it’s for the children” – and we know i9t’s a big lie, it’s really for the unions and special ibntertests hiding behind the children.
That said, when it comes to rural broadband, we hear “it’s for the under served” or “non-served” (aka “the children”) … spend some time with an RLEC operator, things are not as bad as one would think and enabling them should take precedence over creating new rural competitors given the economics.