The Business Case for Neutral-host Networks

April 28, 2016

Mobile network operators and venue owners both stand to make money with neutral-host networks. A new tool reveals cost savings and efficiency of resources that come from sharing wireless networks.

By Berge Ayvazian, Randall Schwartz and Haig Sarkissian

AGL Magazine May Issue — Various distributed networks in large venues such as stadiums, college campuses, commercial buildings, hospitals, airports, shopping malls, train stations, subways and convention centers serve with a high density of broadband users. Before a third-party neutral-host provider would want to provide shared infrastructure and support all operators in a venue, the provider has to justify such an undertaking on the basis of its expected commercial benefit.

Through more than 100 engagements with mobile network operators using 3G and 4G cellular technology worldwide, our company, Wireless 20/20, used a proprietary tool to analyze a range of implementations of distributed networks in various venues. We used the tool to compare and analyze network technology options such as Wi-Fi, distributed antenna system (DAS) networks and LTE small cells. We conducted a return-on-investment analysis for venue owners, mobile network operators (MNOs) and neutral-host providers. The tool was used to model the service-level agreements and cost savings under various business scenarios. We simulated various methods for making money with investments in venue networks. The process helped MNOs and venue owners analyze how to best partner with neutral-host operators.

Venue-led Deployments

Some venue owners have been investing in DAS and fiber network deployments to generate profit from revenue drawn from selling the use of their networks to MNOs. For example, the San Francisco 49ers commissioned DAS Group to redeploy what may be the largest DAS network at Levi’s Stadium. DAS Group deployed the JMA Wireless Teko DAS platform for the renovation and doubled the capacity of the pre-existing DAS, which was then a year old. The 49ers wanted to give wireless carriers enough cellular capacity for the expected high data traffic volume during the National Football League’s Super Bowl 50.

Data Group deployed more antennas to increase coverage and support more cell sectors inside Levi’s® Stadium and increased the DAS footprint outside the stadium in adjacent parking lots. For its first-ever Monday Night Football game when the 49ers defeated the Minnesota Vikings, the Levi’s Stadium DAS saw 874 GB of data traverse the AT&T cellular network, and an estimated 1 TB or more of data was used by Verizon Wireless, Sprint and T-Mobile customers. An additional 2.87 TB of data crossed the stadium’s Wi-Fi network, demonstrating that wireless data use inside NFL stadiums is only continuing to grow, with no end yet in sight.

Carrier-led Deployments

A few mobile carriers have taken the initiative to deploy and operate multicarrier DAS in other sports stadiums, especially when the stadium carries the operator’s brand. For example, AT&T increased cellular-network capacity at AT&T Stadium more than 50 percent in preparation for the 2014–2015 NFL season when the operator secured naming rights for the home of Dallas Cowboys football. AT&T Stadium has become a showcase for AT&T wireless service, which uses 17 macrocell sites. AT&T Stadium also has an extensive Wi-Fi network to optimize the fan experience.

AT&T has upgraded its DAS in several collegiate stadiums, including Ben Hill Griffen Stadium at the University of Florida, Martin Stadium at Washington State University and the University of Kentucky’s Commonwealth Stadium. AT&T also installed neutral-host DAS at the University of Kansas Memorial Stadium and at Ross-Ade Stadium at Purdue

AT&T has gone to great lengths to convince its competitors and the industry that its Antenna Solutions Group deployed DAS networks as a neutral-host provider in the same way a tower company or a third-party DAS provider would. This perception may change, because the Antenna Solutions Group no longer operates as a separate, stand-alone business unit within AT&T that proactively markets and leases DAS space. For example, AT&T and Boingo Wireless partnered to upgrade the DAS serving Soldier Field, the home of the Chicago Bears. AT&T and Boingo Wireless co-designed the DAS as a neutral-host system while optimizing coverage and capacity inside the stadium and in the outdoor areas including the parking lots. Boingo markets the DAS to other mobile operators. Boingo itself operates as a neutral host that provides cellular and Wi-Fi network connectivity at sports and entertainment venues.

Neutral-host Deployments

The challenge of keeping pace with mobile data growth has driven many stadium and other large public venue owners to

Figure 1. The neutral-host model for multicarrier distributed antenna system (DAS) solutions. MNO stands for mobile network operator.

turn to neutral-host DAS and small cell networks owned and operated by third-party providers to support multiple carriers in these high-traffic areas. Neutral-host providers have an important opportunity to serve a range of venue types beyond stadiums, including universities, enterprise buildings, hospitals, shopping malls and convention centers, when property owners are restrictive and when they prefer one infrastructure for all mobile operators.

Figure 1 shows how a single neutral-host service provider that can deploy a shared infrastructure can be beneficial to the venue owner, the mobile network operators and the neutral-host provider alike. Venue owners can have an excellent wireless infrastructure that can be used for their benefit. For example, the availability of an excellent in-building wireless service for all operators may be one of the key decision criteria for a company to locate to an office building. In addition, the venue owner can generate revenue from renting space and utilities for the wireless service. When the wireless service is provided by a neutral host, the venue owner can obtain the revenue under a single agreement and avoid having to deal with multiple operators. Some venue owners won’t allow multiple wireless infrastructures to be deployed and instead require that a neutral-host operator deploy one multi-operator network in their buildings.

Figure 2. The typical elements of a neutral-host agreement with mobile network operators.

Figure 2 depicts the typical elements of a neutral-host agreement with mobile network operators. The neutral-host option enables them to expand their in-building coverage while saving money and accelerating the rate at which they can cover additional key locations. Most operators have a long list of buildings that they would like to cover. A neutral-host deployment allows them to save the upfront money that they would invest in their own venue infrastructure and save even more by sharing the operating costs with other operators. By working with neutral-host operators on some venues, they can focus their own resources on other locations and extend their coverage at a faster rate to more buildings.

In cases where a single infrastructure is required, working with a neutral-host operator may be the only way for mobile network operators to gain access to these venues. For the neutral-host operator, these technical and business challenges create a new business opportunity. Neutral-host operators can deploy an in-building infrastructure that allows them to sell service to all mobile network operators. If the neutral-host operator can provide service to the mobile network operators at a price that enables the mobile network operators to save money over deploying and running the system themselves while allowing the neutral-host operator to turn a profit based on the cost to deploy and operate the in-building system, then the transaction makes good commercial sense for both.

Tower Company Neutral-host Deployments

For some tower companies, indoor neutral-host DAS deployments are a highly complementary opportunity to their primary multitenant tower businesses. For example, American Tower has focused on deploying neutral-host DAS, with more than 300 deployments in venues inside the United States and nearly 150 more outside of the country. American Tower believes an indoor DAS system’s commercial performance is much like that of a tower. The company has achieved an average of 2.5 tenants per network deployment in stadiums, shopping malls, hotels, convention centers and casinos.

Crown Castle has been investing in fiber-optic networks to support significant growth through small cell deployments. As a result of its acquisition of the NextG Networks, 24/7 Mid-Atlantic Network and Sunesys Quanta fiber assets, Crown Castle owns or has rights to more than 15,000 miles of dense fiber in the top 10 U.S. metropolitan areas, including New York, Los Angeles, Chicago, Philadelphia, Atlanta and Dallas-Fort Worth. Crown Castle has some 15,000 outdoor small cell nodes deployed along these routes and is now well positioned to address the desire for dark fiber backhaul solutions for small cell deployment by mobile network operators such as Verizon Wireless. By making these acquisitions, Crown Castle also bolstered its dark fiber capabilities to compete with other providers of fiber-optic small cell backhaul services. Crown Castle is competing with Zayo and Level 3 Communications, which have acquired some attractive independent metro dark fiber assets to provide small cell backhaul. In August 2015, Lightower Fiber Networks acquired Fibertech to expand its fiber footprint in the Northeast, Mid-Atlantic and Midwest regions.

Crown Castle is also one of the largest independent neutral-host DAS operators in the United States, with about 10,000 nodes and 26 venues in operation or under construction. Crown Castle invested nearly $100 million in the construction of new sites in the third quarter of 2015, and most of that was spent on small cells rather than cell towers, where new construction is leveling off. Crown Castle believes that eventually small cells will number in the hundreds of thousands and will be the next iteration of the shared wireless infrastructure business.

There is something of a land grab happening right now, similar to what the tower business experienced in the past. However, it has been much more challenging to add highly profitable tenants onto existing small cell deployments than it is to add them to traditional towers or neutral-host DAS. Carriers using different spectrum bands and different macro networks may find it difficult to identify commonality in deployment, even if space is available. Despite these challenges, small cells represent a form of incremental capacity that operators such as Verizon and Sprint need and are embracing.

Independent Neutral-host Deployments

Several mobile network operators are actively examining the economics of next-generation active DAS and small cell networks deployed by independent neutral-host providers among their options to address the data capacity challenge. The leading independent neutral-host DAS and small cell network solution providers are Boingo Wireless, ExteNet Systems and Mobilitie.

Boingo Wireless deploys and operates DAS, small cell and Wi-Fi networks to provide mobile Internet access in a range of venues including stadiums, airports, military bases and universities. Headquartered in Los Angeles, the publicly traded company is the world’s leading airport Wi-Fi and DAS provider, managing neutral-host networks in nearly 60 airports, representing more than 50 percent of the top 50 airports in North America and more than 30 percent of the top 30 airports worldwide. Boingo recently upgraded many of these airports with innovative S.M.A.R.T. Wi-Fi networks to offer tiered services at multiple speed options up to 20 Mbps, depending on the traveler’s needs. Boingo also uses advertising and location-based data analytics in a unique way to generate revenue with consumer products such as ipTV, high-speed broadband, and carrier and Wi-Fi offload. Boingo has Wi-Fi offloading deals with several mobile network operators including Sprint, where the carriers’ handsets are configured to automatically authenticate with Boingo Wi-Fi hotspot connections at no additional charge. Boingo expects to achieve profitability while continuing to invest in infrastructure, and does not plan to raise additional capital through a stock or debt sale in 2016.

ExteNet Systems is a market leader in multicarrier, neutral-host and multitechnology distributed networks for both outdoor and indoor settings. Based near Chicago, ExteNet designs, builds, owns and operates networks that support the four largest U.S. mobile carriers and that scale to mobile traffic growth. As a neutral-host, ExteNet has deep relationships and ongoing activities with the four major mobile operators, and its goal is to never build a network for just one carrier. By co-investing with mobile operators, ExteNet delivers much lower upfront cost than carriers could achieve building these networks on their own.

Extenet operates DAS systems in more than 100 indoor venues, including the Miami Marlins baseball park and NBA Barclays Center in Brooklyn. ExteNet has deployed DAS in office buildings such as the Empire State Building in New York, and Willis Tower and Trump international Tower and Hotel in Chicago. ExteNet also deployed an indoor DAS and outdoor small cell and carrier Wi-Fi network blanketing 15 square miles in Las Vegas, increasing outdoor cellular coverage and capacity within some of the leading casinos and hotels on the Strip. ExteNet is working with Aldridge Chicago to deploy a distributed 4G network in the Chicago subway with all four mobile carriers participating, covering all 22 miles of tunnels and in the stations with plans for service on the trains. Verizon partnered with ExteNet to deploy an outdoor small cell network with more than 400 fiber-fed small cell nodes mounted on city-owned steel light posts and wooden utility poles throughout the financial district of San Francisco.

Tower Company SBA Communications had been an investor in ExteNet Systems for five years, and then it decided that neither small cells nor DAS deployments fit into its portfolio any longer. SBA exited its investment in ExteNet and is now focusing on maximizing capital appreciation in the long-term through its tower site leasing and site development businesses. At the time SBA sold its share of the company, ExteNet completed a $1.4 billion recapitalization led by Digital Bridge Holdings and Stonepeak Infrastructure Partners. Digital Bridge is a holding company for several tower companies in the United States, Mexico and Latin America. Its cofounder and CEO, Marc Ganzi, became chairman of ExteNet’s board. Previously, 90 percent of ExteNet’s growth was organic, coming through network deployments. After the recapitalization ExteNet has additional funds to support long-term growth and has expressed an interest in acquiring carrier-led indoor network deployments that can be repurposed and modernized to support multiple carriers.

Mobilitie is the nation’s largest privately held wireless infrastructure provider. The company is based in Newport Beach, California, and has regional offices in the United States. The company funds, installs and operates communications towers and other infrastructure that carriers use to power their high-speed networks. Similar to ExteNet, Mobilitie is focused on deploying DAS, small cell and Wi-Fi network solutions that eventually reduce operating costs for its U.S. mobile network operator partners, venue owners, professional sports teams and government entities seeking ways to accommodate the ever-increasing need for seamless mobile access. Mobilitie is leading the effort to fund, design and build innovative wireless solutions for some of the most complex network challenges and has deployed more venue infrastructure and new outdoor macro networks than any other firm in the United States.

Mobilitie has led some of the most important infrastructure projects in sports and entertainment arenas such as the Kansas City Chiefs Arrowhead Stadium, St. Louis Rams Edward Jones Dome, the Anaheim Ducks Honda Center, Washington Wizards Verizon Center, Tampa Bay Rays Tropicana Field, and Churchill Downs, home of the Kentucky Derby. Mobilitie also owns and operates the largest carrier-grade Wi-Fi network in the world, in Las Vegas, through a partnership with MGM Resorts.

Mobilitie recently closed a $325 million debt investment, led by CIT Bank and TD Securities to fund the continued exponential growth of the company’s business investments. This debt funding is another in a long list of significant investment activities for Mobilitie since its founding by Gary Jabara in 2005. The company secured nearly $1 billion in investments from TD Securities and Shamrock Capital Growth Fund III between 2008 and 2011. Mobilitie also raised $1.1 billion by selling more than 2,300 towers and other mobile sites to SBA Communications in 2012.

Mobilitie is reported to be a primary partner for Sprint, which is planning to deploy some 70,000 outdoor small cells during the next few years. Operators typically plan to install outdoor small cells on utility poles, lampposts, church steeples and other structures that rise above most roof levels. Most of the sites require zoning, permitting and negotiations with municipal authorities. A single-carrier small cell deployment would require the acquisition of roughly the same number of discrete sites, and Sprint would have to secure the sites and negotiate terms for deployment. Alternatively, neutral-host small cells serve multiple carriers and would be located, where possible, on government-owned rights of way, which are typically far cheaper than space rented from private landlords.

In New York City alone, Sprint wants to deploy 2,000 new small cells in 18-months and is considering the use of multitenant locations to place its small cell equipment. Mobilitie may also be asked to help finance some portion of the Sprint deployment. More than 2,200 cells have already been deployed in New York, and another 8,800 applications are pending approval from carriers and neutral-host providers such as Crown Castle, ExteNet Systems and Mobilitie. Many areas of Manhattan are already saturated, and the city is looking to exchange old streetlight poles for multitenant poles with fiber backhaul where small cells could accommodate all four carriers.

WiROI Neutral Host Network Venue Business Case Analysis Tool

Wireless 20/20 used in-depth knowledge garnered from more than 100 engagements with 3G/4G operators worldwide to create the newest version of its WiROi venue tool. The neutral-host network venue business case analysis tool enables mobile network operators and venue owners to conduct a detailed analysis to understand whether a neutral-host solution can be successfully deployed for a certain venue.

The tool can be used to analyze neutral-host networks for various venue environments, such as college campuses, enterprise buildings, hospitals, airports, shopping malls, train stations, subways, convention centers, stadiums, racetracks and special-event venues with a high density of broadband users. The model can be used to analyze network technology options such as Wi-Fi, DAS and LTE small cells, and to simulate various methods for making money on venue network investments. The result is a complete return-on-investment analysis for neutral-host providers, venue owners and mobile network operators. The new tool can also be used to model the service-level agreements and cost savings under various business scenarios, allowing mobile network operators to analyze how they can best use neutral-host networks. Our analysis shows that in many cases, the best and most economical solution is for a neutral-host service provider to deploy a common and shared infrastructure that can support all mobile network operators in multitenant buildings and venue network deployments (see Figure 3).

Figure 3. The Wireless 20/20 WiROI neutral-host venue business case analysis tool graphical user interface.

Many high-density environments require improvements in coverage and capacity for mobile network operators during times of high occupancy. Many passive DAS systems deployed by individual carriers have been overwhelmed by the tremendous growth in data traffic that comes from smartphones, mobile laptops and tablets. Many venues simply cannot accommodate separate and disjointed deployments by each mobile network operator. The analysis tool simulates the effect of tens of thousands of users in a venue using smartphones and enables neutral-host providers to simulate performance enhancements, revenue potential and cost-effectiveness of a next-generation active DAS, small cell and Wi-Fi network over a 10-year period.

Several mobile network operators are using the new tool to pinpoint business models that can provide positive return on investment for neutral-host providers while offering improved economics and speed of deployment for mobile network operators. These solutions offer neutral-host mobile capacity for cellular carriers across indoor and outdoor areas of the venues. Most neutral-host systems can be more easily scaled to address continuing traffic growth and support advanced Wi-Fi services. However, the notion that new, multimillion-dollar DAS systems will be deployed in hopes that all mobile network operators will participate is just not economical or viable.

Our analysis for a 12-story enterprise building indicated that a neutral-host service provider could deploy a multi-operator DAS network for around $200,000 and turn a profit, if all four mobile network operators join the network. Wireless 20/20 has demonstrated that similar successful business models can be created for hotels, shopping centers, university campuses, airports, stadiums and other venues. A detailed business case analysis is needed to understand the key success factors for each case. But the analysis often shows that multi-operator infrastructure can be profitably deployed in most situations.

Conclusion

Figure 4 depicts the typical elements of a neutral-host agreement with mobile network operators. As current mobile operator networks are expanding to meet the coverage and capacity demands, the enhancement of in-building coverage is one of the key areas for improving networks.

Figure_4_model_for_venue_owners_and_MNOs

Figure 4. A neutral-host model showing advantages for venue operators and mobile network operators alike.

Venue owners, mobile network operators and neutral-host service providers all can take advantage of the cost savings and efficiency of resources that come from sharing infrastructure in venues. This creates a lasting advantage for all industry players. As such, the trend toward neutral-host deployments in desirable venues is one of the most important trends in the mobile industry.

Berge Ayvazian, Randall Schwartz and Haig Sarkissian are senior analysts and principal consultants of Wireless 20/20. Wireless 20/20 helps mobile operators and their vendors develop their 4G LTE launch strategies, service offerings, marketing plans, technology road maps and justification for a proposed project based on its expected commercial benefit. More information about the WiROi neutral-host network venue business case analysis tool can be found at www.wireless2020.com/wiroineutralhost/.