Two of the biggest problems facing wireless carriers are network capacity and the spiraling cost of their network infrastructure, especially lease rates.
Wireless carrier networks have traditionally consisted mostly of Macro Sites- cell towers that can provide a relatively wide area of coverage, supplemented by rooftop installations where towers cannot be built. These sites are relatively expensive to both build and maintain, and their coverage and capacity is both limited and static. Because of this, wireless carriers and the tower companies that serve them are looking for more affordable ways to expand coverage and increase capacity.
In an effort to extend coverage and capacity while throttling costs, carriers have begun to deploy “Small Cell” sites. Think of it this way: future deployments will use a combination of layers; Macro Sites, Small Cells, and other technologies to improve coverage and capacity. This new network design is commonly referred to as a “Hetnet” (heterogeneous design.)
Think of Small Cells as “fill in” sites, bridging the gaps between Macro Sites in a more portable and cost-efficient manner. The equipment used in these builds is generally small enough to be attached to or hung from a much smaller structure than a traditional cell tower, such as existing poles, street lights, small building and the like. This changes the nature of the site requirements needed by the carrier- there is no longer the need for a large shelter and equipment footprint on the ground under a 200-foot tower that is typical of a Macro Site. It does call for many more sites to provide effective coverage though.
Recently, Sprint Wireless announced plans to deploy tens of thousands of new Small Cells for its “Next Generation Network,” and are doing so without the assistance of the traditional tower companies that have provided the backbone of their networks for years. The repercussions of such a widespread change in network deployment strategy has not only sent a shudder through the tower industry, but also may very well change the leasing end of the industry as well.
From a rent amount standpoint what should a potential landlord expect?
Many of the Small Cell lease proposals we have seen have been less than half the rent you might expect on a traditional macro site.
The first wave of Small Cell leases that have been proposed by the carriers have looked much like traditional Macro Cell leases in form. They have simplified them a bit, made them seem less obtrusive than a standard Marco Site lease in an effort to sell their pitch that these sites are smaller and are not as valuable to them.
On the contrary, from a pure value standpoint they are as valuable as Macro Sites.
There are, however, numerous reasons why the carriers may be unwilling (or unable) to pay anywhere near the typical Macro Site rent, not the least of which is the large number of these sites that must be built.
This leaves the property owner in a quandary as to how hard they can push back on rental rates. Of course, the answer is dependent on the property owner’s individual situation.
This tug of war for advantageous lease rates will remain a fluid situation during the initial widespread roll out of Small Sites. It is important for property owners to be able to make well-informed decisions in the event of such a proposal. Of course, we recommend that property owners seek the advice of industry professionals when presented with any wireless lease negotiation.