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Small Cells Offer an Incentive to Move Antennas from Towers: Engel

By Don Bishop, Exec. Editor, Assoc. Publisher, AGL Magazine

Speaking at the IWCE convention in Las Vegas, Tom Engel, a director at Strategic Tower Advisors, said that the ability for wireless carriers to use small cells in rights of way near locations where they currently pay high rents for antenna space may influence them to pursue small cell development nearby. As a business broker, Engel helps buyers and sellers come together in transactions to buy and sell telecommunications and broadcast towers.

Engels said some circumstances lead wireless carriers to pay as much as $10,000 per month in antenna space rental. Some locations he cited are city-owned water tanks in locations where the cities prevent or make it difficult to erect towers. “If the carriers have an alternative, they are going to a different rate,” he said.

The FCC-mandated maximum of $270 per pole for cities to charge when renting space on city-owned utility and light poles in city rights of way becomes attractive when those poles are near telecommunications towers with high rents, Engel said.

“Almost all of the carriers do a five-year lease with three- to five-year renewals,” Engels said. “Verizon, Sprint and AT&T — if you are unsophisticated — they build a clause in that they can give you a 90-day notice and get out. Or if they say it is no longer suitable for our purposes, they can give you 60 days and get out. Which means that if it rains on Thursday, they can get out of it, if they want to.

“The smart attorneys get that, and the big guys don’t let these early termination clauses in. But if you are three years into a five-year contract, the out is only going to cost you two years of rent. So, the value of what they are paying to the cities, if they can find an alternative where they can do it cheaper, they’re going to move. And they are going to move within that five-year window when that lease expires.”

Many water tanks have cellular antennas on them because of their favorable position and because wireless carriers cannot build cell towers nearby. Engel said if there is a way for carriers to place small cells nearby to do the job, they will leave the water towers where they are paying a lot of money for rent.

“The cell sites are using smaller antennas, now,” Engel said. “They are putting radios on the top with fiber coming down, instead of coaxial cable. The small cells take very little space. One cell hands off to the next cell. As opposed to a broadcast station that may move a transmitter a half-mile away from a current site, if you can get clearances, any time you move one cell, it messes up the network. The cells have to talk with one another. So, to move a cell, you can’t move it very far. That’s the biggest criterion. So, if you move it across the street on a building, or on a small cell, they are going to move off of these high-priced facilities. The carriers just can’t continue to make the business work with high rental prices.”

Engel recalled what cable TV companies paid for pole rental in rights of way when he was in that business in the 1970s. “We were only paying $18 to $20 per pole.” He said that, in comparison, the FCC-mandated maximum of $270 per pole seems high. He allowed as how it may be low for the first year when all the work needs to be done to construct the small cell, “but 20 years into it, $270 times 1,000 poles, is $270,000 a year. What do they have to do, once it is up and running? So I am not sure this whole concept of valuation makes sense to me. But it doesn’t interfere with what I do, so I don’t pay much attention to it.”

Engel said the wireless carriers will move their antennas off of high-priced towers, if they can. As technology changes, the flexibility for them to move may increase significantly, he said.