Pai, O’Reilly, and the telco lobbyists proclaim the new FCC rules will result in far more 5G small cells deployed. They are wrong, as any conscientious reporter could have discovered. The new rules by some estimates will move US$2 billion from the cities to the telco bottom lines. (I think that’s a high estimate but haven’t looked closely.)
Some cities have ridiculous rules that should be changed, but the industry has long proven they can almost always be dealt with. The primary result will be lower charges to the telcos. Most of the savings will go to shareholders rather than increased investment, per Verizon CEO Hans Vestberg.
I knew the promised construction boom was hogwash because the companies were telling Wall Street they would keep capital spending roughly flat. They won’t be spending much on more small cells. This was confirmed by CEO Jay Brown of Crown Castle, with the largest deployment of small cells in the U.S.
I wouldn’t look at that and assume that we’re going to see a material change in our 18 to 24 month deployment cycle. In fact, we don’t believe that will result.
Brown has 30,000 small cell sites deployed and 30,000 more contracted for. They are designed to serve two or three customers, but he’s having a hard time finding more than one in many places. Verizon and the other telcos have been cutting drastically the number of small cells they will need.
Verizon tests found millimeter wave rate/reach is much higher than expected. They will be able to meet most of their needs with the existing network. In many places, 5G will require fewer cells than 4G because of the much greater capacity. VZ specifically said they will need very few small cells for 5G for at least 3 or 4 years. They will only add small cells where they were already needed for more capacity.
The other telcos have very little need for 5G small cells. With limited exceptions at AT&T and T-Mobile, their “5G” will be low and mid-band. Low & midband 5G uses 4G hardware with NR software. It has reach comparable to 4G and much further than mmWave. T-Mobile and Sprint plan 25,000 cells for better 4G coverage, but few additional for 5G. (Low & mid-band was not considered 5G in 2017 but the definition was changed for marketing reasons. Renaming 4G TD LTE to 5G NR bamboozled the FCC while eliminating the need for additional small cells builds.
T-Mobile promises to cover the entire U.S. with 5G in the next two years, whether or not the Sprint deal goes through. Crown Castle’s 60,000 sites can serve 100,000-150,000 carrier cells. It’s pretty clear telco demand will be met with at most modest additions to current plans.
The cablecos are likely to do a large build as they attack wireless, but only where they already have right of way, power, and fibre backhaul. By and large, they won’t need additional permits so weren’t affected by the changes.
If Pai or the New York Times spent an afternoon asking the four companies that control 90% of U.S. wireless, “How much more will you build if your proposals are accepted?” they would have discovered this.
Here’s the transcript for context.
On your first question, I believe the deployment of both fiber and small cell is forever going to be a very localized business. So what the FCC did last month is helpful to the industry to the wireless carriers and to ourselves by making clear what the underlying fees are associated with deploying and the public right of way and then setting forth some timeline, which municipalities are expected to respond to request in order to do that. So, what it does as it gives a clear line of sight both in terms of cost and timing. But it in no way negates the necessity and the importance of us continuing to work with those municipalities as we manage and deploy the infrastructure in ways that are sensitive to the aesthetic and the needs of the local community.
So I wouldn’t look at that and assume that we’re going to see a material change in our 18 to 24 month deployment cycle. In fact, we don’t believe that will result. But we do believe that it is helpful in some problematic municipalities where they’ve been absolute basically blockers to the deployment of the technology and the deployment of fiber and small cells in the public right of way. So in some places, we may actually see a little bit of benefit, but I think on the whole what you should expect is our deployment cycle will continue to be in that 18 to 24 months range, and the FCC order is helpful as the scale of the deployment, as I was mentioning earlier moves well past just the top 10 markets and moves across the larger portion of the U.S., as it gives us greater visibility on what the economics are going to look like and the timing of approvals et cetera at the local level.