While the big dogs in the tower industry have national footprints, there are still places they don’t or can’t cover. And often, hard-to-cover areas mean hard-to-gain-access-to land. But a few companies are finding clever ways to zero in on what used to be considered off-limits.
Take the case of City Switch L.L.C., an Atlanta-based company that’s funded largely by Norfolk Southern Corp., the railway behemoth with 21,200 route miles throughout 22 states east of the Mississippi River. The railroad company’s huge “network” has easements and right-of-ways throughout rural areas as well as in dense urban markets.
Enter City Switch, an 18-month old company headed by Steve Raville. The basic City Switch business model involves leasing space to carriers on either existing or newly built railroad towers, which are used primarily for the railroad’s own internal communications systems.
“We can build in a lot of places that others can’t,” said Raville. “Carriers are beginning to understand what we do. We try to build sites that are useful to common carriers as well as to the railroad. We discuss the search rings of both the carriers and the railroad, and we try to marry those needs.”
While traditional tower companies usually work with local municipalities in areas where they would like to build towers, Raville explained that railroad land is controlled largely by the federal government. And while the railroad can’t necessarily build a McDonald’s restaurant on its land, it can build communications towers pretty much as it sees fit, provided that the towers be used to some extent for railroad purposes.
“Many carriers like to work with us because they can deal with a single landlord, and access is easier-we generally have flat land that doesn’t need a lot of grading and we already have access to utilities, like power and telecommunications networks.”
Nonetheless, Raville stressed that the key to City Switch’s business model is the ability to provide tower space in difficult-to-develop areas.
“There are some areas where the locals don’t want any development, and there are areas where there’s no space for more development-those are the areas we can usually serve. We refer to ourselves as the tower company of last resort.”
Granted, most railroad land runs alongside major highways and Interstates, which often isn’t necessarily considered hard to access by tower companies since many rural landowners are more than willing to sell or lease land along major thoroughfares. However, Saville points out that sometimes wealthy landowners in rural areas will not allow a cell tower to be built on their property, and in such cases, the railroad facilities can be a carrier’s only option for tower space.
Interestingly, Raville mentioned that the railroads have historically held “good-neighbor” relationships with many municipalities by aiding public-safety departments with their communications needs. As many railways run through the middle of smaller towns, offering access to the railroad’s communications network provides cities and towns with at least some benefit for having the railroad in their backyard.
In urban areas, railroad companies typically own a lot of property right in the middle of downtowns, such as train depots and rail yards. For traditional tower companies, access to these types of properties is unheard of, but City Switch can often build in such an area through its relationship with Norfolk Southern.
City Switch touts itself as the anti-volume tower company, opting to build primarily in areas where it can solve a communications problem. The company says its three-year plan is to build about 100 sites. Saville divulged that while City Switch has access to thousands of existing towers owned by Norfolk Southern, the company owns just 7 of its own towers. He further noted that in order to achieve cash-flow positive status, City Switch needs to collect site-leasing revenues from about 25 towers, which Saville says he expects to be doing in 2007.
To date, the company is working with at least three Tier 1 carriers to expand and fill in their search rings. With just five full-time employees to handle leasing and contracts, Saville pointed out that City Switch lets Norfolk Southern’s construction contractor handle its building needs.
And there are no plans to cross the Mississippi with the railroad-friendly business model, says Saville, though he admits that his firm is constantly in talks with other railroad companies.
“We have so much on our plate, we feel we can work with Norfolk Southern for a very long time. But a lot of people are interested in our model, and at this point, we wish them luck. It could help us if someone had a railroad relationship west of the Mississippi-perhaps we could share resources, form a consortium.”
