HOLLYWOOD, Fla.-Wireless carriers are going to have to fortify their networks to become increasingly reliable as more people cut the cord.
Does that sound like good news for tower companies, which have been victims of carriers’ tightly closed purse strings during the past year?
Not so fast.
Carriers also are facing an imminent Nov. 24 mandate to enable wireless local number portability. Wireless LNP likely will bring high churn. If churn rates are high, carriers are going to be under increased pressure to bring down their operating expenses. That likely could mean carriers will demand tower companies lower their lease rates.
Those issues were just two of the good-news, bad-news scenarios bantered about at last week’s PCIA Wireless Infrastructure Conference & Expo, held here. The well-attended show-nearly 1,100 people-was missing one notable figure, PCIA President and Chief Executive Officer Jay Kitchen, who was not able to attend the show because of a medical condition. According to Rick Harris, PCIA’s senior director of marketing, Kitchen had some medical tests done and was advised by his doctors not to travel last week.
Julie Coons, executive vice president of the association, stepped in to fulfill Kitchen’s responsibilities at the show in his absence.
Minutes of use are driving the industry, noted John Kelly, president and chief executive of Crown Castle International, during Thursday’s keynote address. With average minutes of use at 425 minutes per month, pressure is being placed on the network.
Also, people who are leaving traditional wired telephony are expected to drive minutes of use up even further. About 3 percent of people cut the cord in 2001, Kelly said, and estimates project up to 20 percent of people will cut the cord during the next three years. People who are dropping wired phone service will expect greater reliability from their wireless service, he said.
Increased minutes of use will even outstrip operating efficiencies gained from carriers that implement digital technology, said American Tower’s Jim Taiclet, president and chief operating officer.
Increasing data use also will drive minutes of use, Kelly said. “This simply reinforces in our view that there are some really bright horizons for industry.”
As LNP looms, carriers are increasingly marketing call quality, Taiclet said. Tower companies should benefit from an emphasis on the network.
But carriers must address churn issues, Taiclet noted, as churn still kills profit. Even as the top six wireless carriers added nearly 4 million subscribers in the second quarter, churn rates during that time were annually projected to be at 25 percent.
With LNP, there likely will be more churn, said Jon Morris, national real estate manager, wireless network services, at AT&T Wireless Services Inc. Costs per gross addition might increase, which will force carriers to work with tower companies to reduce costs, he said. “There’s a dark side to it.”
Much like carriers are trying to reduce costs, tower firms have done the same, said Tim Biltz, COO of Spectrasite Communications Inc. In mid 2001, Spectrasite employed 850 people in its non-services business, and generated $275,000 in annual revenue per employee. The company currently employs 445 people in its non-services business, but each employee generates $709,000 in annual revenue.
Meanwhile, there are innovative ways tower companies can study to try gain additional revenue, said Jeffrey Stoops, president and CEO of SBA Communications, including allowing billboards on tower properties and getting fixed-wireless tenants on sites. Stoops said he believes it will be awhile before the tower industry benefits from homeland security as the issue seems stalled.
