Key excerts from those industry reports and analysis with links for direct downloads to full PDFs
Wireless carriers cannot roll out next-generation networks without the contractors and subcontractors who bring these plans from vision to reality. Carrier spending with wireless infrastructure service providers is a multibillion- dollar industry, and the companies that are part of this value chain range from multinational conglomerates to local construction contractors. All of these participants are impacted by current trends in the North American infrastructure services market.
Fidelity Investment: 2016 Sector Outlook – Telecommunication Services
Wireless carriers continue to compete for customers and spectrum, contending with each other and with potential new entrants such as cable companies. Carriers are increasingly turning to content as a way of differentiating their services. With demand for data growing, cell towers are still a key link in the wireless capacity chain.
Tower company growth may continue as long as capacity is still required
During the past few years, new smartphone and tablet adoption has been the main force behind an ever- increasing need for data capacity. Even though that growth in hardware adoption now shows signs of peaking, demand for larger amounts of mobile data continues unabated. For carriers to send out even more video, internet, and voice data over the networks, they will need to make capital expenditures to build capacity.
The companies that own, build, and maintain the cell towers that transmit that data will likely continue to benefit from this growth in 2016. Because communities typically resist new tower construction, the incumbent tower operators may reap the benefits of strong contracts with the wireless carriers, and will remain a necessary partner in network upgrades.
Wireless Infrastructure Service Company Review
As carriers enter the next phases of their network deployments, each is expected to follow a slightly different spending model. Contracts are likely to go to a smaller number of companies than in the past due to industry consolidation. Network planners and field technicians are focusing on skill sets related to LTE, such as radio frequency containment and antenna alignment, and on new skill sets that will facilitate metro and indoor deployments. Infrastructure service providers are finding new customers as companies from outside the traditional wireless ecosystem explore in-building solutions.
Carriers have spent billions on spectrum that will be useless to them unless they deploy more infrastructure. The question is what those deployments will look like. Carriers may choose to build new towers, add radios to existing sites, or to deploy small cells.
Wireless infrastructure service providers don’t just build towers, they also deploy the equipment that connects the tower to the network. The primary function of a tower is to support antennas, and antennas are evolving to meet the demands of LTE.
Madden thinks that within 3 to 4 years, the market for DAS and small cells will approach the size of the market for macro network infrastructure.
The global market for LTE capable antennas for wireless infrastructure is set to reach almost $4 billion in 2015, according to the latest forecast from ABI Research.
Madden expects spending on enterprise connectivity solutions to surge in the years ahead, growing from less than half a billion dollars today to $2 billion by 2020.
SNL Kagan report predicts tower, small cell outlook through 2025
SNL Kagan is the first single source for in-depth analysis and proprietary data on the constantly-evolving media and communications business. Boundaries between sectors are blurring, so we cover them all and connect the dots in real time, tracking both quantitative impact and qualitative implications.
The explosion of consumer demand for mobile data. Cisco estimates mobile traffic in the U.S. will grow by seven times by 2019
Public safety network, FirstNet, also has money to spend. It plans a 700 MHz buildout “that could create a new tenant for approximately 20,000-40,000 towers nationwide,” according to the report
Google could also play a role in the future expansion of tower sites. The company’s entrance into the field as a wholesaler and Wi-Fi-first carrier could “lead to an industrywide rush to improve wireless data throughput that would further enhance demand for cell splitting and new equipment, much like Google has done with wireline HSD.”
The wireless industry has followed a steady pattern of growth since 1G was introduced in 1984. About every 10 years, a new generation of wireless technology emerges. That is expected to continue into 2020 with the debut of 5G.
Internet of Things: Opportunities for Carriers and Vendors
Ericsson estimates 400 million machine connections currently use cellular networks and sees that number growing to 1.5 billion by 2021. Cellular networks will continue to handle many of the high-value IoT connections.
In 2015, AT&T signed more than 300 agreements to connect devices in the automotive, industrial, healthcare, shipping, home security and municipal sectors. Of the 25 million IoT devices now connected to its network, 5.8 million are connected cars.
In early 2016, AT&T said it is launching a smart city framework in Altlanta, Dallas and Chicago. The carrier is partnering with Cisco, Deloitte, Ericsson, GE, IBM, Intel, and Qualcomm to help support its smart cities initiative.
Verizon has started to talk about the In- ternet of Things in terms of dollars as op- posed to connected devices. The carrier said its IoT-related businesses generated $495 million in revenue during the first three quarters of 2015.
- “The technology that’s really grabbed people’s attention up to now has been cellular.” Robin Duke-Woolley, Beecham Research
- “It’s a big business for us, it’s a growing business for us and it’s a very strategic business for us” Mobeen Khan, AT&T
- “The carriers know they can’t do this on their own.” Stephanie Atkinson, Compass Intelligence
“We’re looking at introducing cellular products to connect things like oil fields, wastewater treatment plants, trains, other places where you want to bring data off of a system and it could be easier or more cost effective to use that already existing network,” said Jeff Lund, senior director in Belden’s industrial IT division.
DAS & Small Cell Site Update
Outdoor DAS and small cells will continue to be funded primarily by the wireless carriers. Verizon Wireless and Sprint have both made commitments to new outdoor small cell deployments this year. The centralized radio access network is emerging as a cost-effective architecture, with Verizon Wireless choosing this approach in San Francisco.
Moody’s: US cell tower industry supported by sustained, credit-positive trends
“We expect cell tower operators’ organic revenue and earnings to grow by 7%-10% per annum over the next few years,” says Vice President — Senior Analyst, Gregory Fraser. “The cell tower business model benefits from good operating leverage, and companies can generally add one or two additional revenue-paying tenants to a tower without much extra expense, resulting in better margins and cash flow.”
Moody’s expects wireless data traffic to surge over the coming years, as carriers compete for subscribers by offering consumers cheaper data plans. Although Verizon’s and AT&T’s 4G networks are mostly complete, both companies need more capacity to accommodate surging consumer demand for mobile broadband and ensure a consistent user experience. This means they’ll need to infill their existing 4G networks, primarily by adding more towers.
Online and mobile video streaming will continue to grow strongly. “A deluge of low-priced, unbundled options with high-demand content from a growing list of OTT providers has many households choosing Internet-based video streaming over cable TV,” says Fraser. “By 2018, mobile video is expected to account for nearly 70% of total mobile-data traffic, compared with around 53% today.”