Infrastructure evolution set to test tower space
Dan Meyer, RCR Wireless Oct. 11th, 2012
We have come to expect technology advances that result in consumer electronics equipment getting smaller, more powerful and in most cases cheaper. This process can be seen in the hands and pockets of most consumers where that smartphone or tablet device houses more processing power and came at a cheaper price than desktop computers of a decade ago.
This evolution has also occurred in the infrastructure space, where network equipment has become more powerful while at the same time smaller in size. A number of infrastructure vendors have for years been touting their advanced wares with a smaller footprint, advances that they claim make it easier for carriers to deploy and cheaper to operate. What were once towering boxes in need of their own “houses” have more recently become small units able to share those houses with a few neighbors. And, despite the shrinking nature of the equipment, those boxes are now able to do more in a more efficient manner.
This evolution of network equipment has also trickled down – or up, as the case may be – to the tower space where network equipment is slowly leaving the safety of houses on the ground and migrated up towards the top of the tower. This move has been pushed by smaller equipment that can now be safely housed closer to the antennas, or so-called “remote radio-head” deployments, or combined with the antenna into an “active antenna.”
These network infrastructure upgrades have been rolled out over the past several years as carriers were beginning to see the need for equipment to support the evolution of wireless networks to all IP. With LTE technology now being pursued by most operators, the need for that new equipment is here and now.
For carriers, this move to installing more equipment closer to the actual antennas is expected to result in network efficiencies both in the spectrum being used and coverage provided, as well as financial benefits from running more efficient network equipment. Equipment providers have claimed that the move to RRH equipment could provide carriers with up to a 25% signal gain, while Nokia Siemens claims its Flexi Multiradio solution takes up just 20% of the footprint of its conventional cabinet base station and 70% less power.
“Reducing operating costs is especially important now,” explained Lance Wilson, research director at ABI Research, in a recent report. “So the remote radio head has become an integral part of these new distributed base stations. Remote radio heads are also very ‘smart;’ almost all are software-controlled and can be configured remotely to handle a number of air interface technologies within a given air interface family.”
ABI noted that the tower top RF electronics space could generate $4.5 billion in revenues by 2017, highlighting the strong support expected for this type of move.
Vision of the future
This move to smaller network equipment has been highlighted by Sprint Nextel’s $5 billion Network Vision program, which will see the carrier reconfigure approximately 40,000 cell sites. The program, which was announced in late 2010, includes the decommissioning of the carrier’s legacy iDEN network; turning off about 20,000 of the carrier’s nearly 60,000 cell sites; upgrading its current CDMA coverage and capacity and rolling out LTE services.
Earlier this year, Sprint Nextel hosted members of the media at its Overland Park, Kan., headquarters to provide an in-depth view into the program, including a tour of a recently update cell site that showed the dramatic changes taking place in the field. The tour showed the footprint of the new equipment on the ground casting a shadow less than half of that seen from the legacy equipment, as well as equipment boxes located just feet away from the antennas.
As part of its presentation, Sprint Nextel also had representatives from its network infrastructure partners – Alcatel-Lucent, Samsung and Ericsson – showing just how close these companies work with the actual deployment of tower equipment. Heading up that deployment was Ericsson, which several years ago signed a network management agreement with Sprint Nextel to oversee the carrier’s network infrastructure.
A similar network overhaul is expected from T-Mobile USA, which recently announced a network upgrade program that will see the carrier update approximately 37,000 of its 50,000 cell sites with advanced equipment that will allow the operator to rollout LTE services. T-Mobile USA tapped Nokia Siemens and Ericsson to handle the heavy lifting.
T-Mobile USA also noted that it has installed fiber-based backhaul capabilities across 32,000 cell sites in support of its HSPA+ and LTE networks. These moves have meant that the carrier has needed to reach out and touch a significant portion of its cell sites just to install upgraded backhaul capabilities without yet working on the installation of LTE radio access equipment.
Challenges at the tower
For tower vendors, this miniaturization has had a profound impact on operations. Carriers have needed to renegotiate lease agreements at cell sites to take advantage of these equipment advances. This has resulted in a boost in revenues for some tower owners as these modified leased typically include either increased monthly charges or one-time fees to handle the changes at the cell site.
Crown Castle noted that recent amendments made by T-Mobile USA regarding 7,300 site leases will generate $20 million in site rental revenues during the second half of 2012.
In some cases these new agreements also call for additional tower support, as the movement of equipment up the tower has resulted in additional weight and wind load on a structure not originally designed to handle such conditions. SBA reported that it spent $5.4 million during the second quarter on tower upgrades, with customers reimbursing the company approximately $2.9 million of those expenditures.
Analysts noted earlier this year that Sprint Nextel had run into some issues with select tower sites not being sufficiently reinforced to handle the extra load brought on by moving the equipment towards the tower head. This resulted in tower companies needing to reinforce some structures at a cost to Sprint Nextel.
“If part of the fix here is the need for additional equipment on the tower structure itself, this would bode well for the towers, in our view, as it should translate into greater amendment revenue from Sprint,” noted Wells Fargo Securities in a research note.
More recently, infrastructure vendors have come out with smaller cells that some have said could even bypass the traditional tower model. These devices, whether Alcatel-Lucent’s LightRadio or Nokia Siemens Liquid Radio solution, to name but two, have seen slow uptake in the domestic market. However, Sprint Nextel recently took the plunge, signing a deal with Alcatel-Lucent to install its LightRadio equipment in select markets as part of its Network Vision plan.
Another potential challenge for this equipment evolution could come from reliability. A report released last year by Tolaga Research noted that RRH solutions have an annual failure rate of between 2.5% and 5%, which is much higher than traditional infrastructure. Tolaga placed the blame for this increased failure rate at the feet of the power amplification equipment required to power RRH solutions.
“The impact of such a failure rate will prove costly in mature markets,” Tolaga Research explained. “For example in markets like the [United States], each base station tower climb costs between $1,000 and$4,000. In these markets, RRH solutions are better suited to rooftop installations, micro-cells and distributed antenna systems where maintenance and infrastructure replacement costs are lower. Tower mounted RRH solutions are more suited to emerging markets which benefit from lower labor costs.”
Regardless of the challenges, technology progresses at a rapid clip and the move to smaller and less expensive network equipment shows no sign of relenting. Tower companies and their suppliers will of course remain on the front line of that progress, and while the challenges will test their business savvy, the benefits for those that succeed could be sky high.