Tower Power

When Colin Holland mentioned that AT&T Wireless Services (AWS) was looking at "selling some sites for build to suit," you could see the audience snap to attention at a recent build-to-suit (BTS) conference in Florida. Holland is AWS vice president of network operations, and the conference audience consisted of carriers and BTS companies, so the interest was not surprising.

What is surprising is the speed with which the BTS concept is moving into the mainstream in the wireless industry. A year ago, no one was talking about BTS. It started coming into its own about six months ago with the proliferation of PCS companies heading toward market. While some contend BTS represents a paradigm shift -- a completely new way of doing business for carriers -- in other ways it seems a natural progression.

In the beginning, wireless carriers mostly built and owned their own sites. They and they alone were responsible for all the headaches of site ownership and maintenance, but they also maintained all the control. Carriers like control.

Then came co-location. Why build two towers when one tower can serve two (or more) carriers? Local municipalities embraced this concept as did new market entrants, especially those who were having trouble getting their own tower sites approved. Less enthusiastic were some of the carriers owning the towers that weren't inclined to aid the competition unless there was something in it for them. This led to a number of "quid pro quo" arrangements where carriers started trading spaces on their towers.

BTS goes a step further. Here, the carrier selects the site and may be involved in getting the permit, or it turns the site over to the BTS company, which is responsible for everything from permitting, capital costs and construction to operations and maintenance. Depending on what kind of a deal it cuts, the carrier may get first position on the tower, priority in trouble shooting, rate abatement and some sort of back-end protection should something happen to the BTS company. The BTS company then goes out and obtains other tenants for that site with each new tenant adding to the profitability.

The sale-leaseback scenario is similar, but the carrier develops the site, then sells or assigns the leases to a purchaser, which in turn assumes all the operational responsibility and then leases the site back to the carrier. The new owner then can locate other carriers on that site. One conference speaker predicted about 7,000 carrier-owned towers would be coming onto the market in the next year or so, allowing carriers to profit from these assets.

A third possibility is build to rent. The carrier controls the sites and rents space on them to other carriers or outsources the site management to a professional management company.

BTS is being driven by zoning, the need for capital and time-to-market issues. It is boosted by Wall Street's favor; predictable and recurring revenue, high growth and just 1% churn for site tenants make BTS attractive to investors.

But there is still the matter of giving up control -- trusting some other entity with the well being of your network.

Paul Pachuta, AWS director of site development for the southeast region, described a California-type encounter seminar he once attended. In the seminar, people were paired with virtual strangers. One person was to fall straight backwards to be caught by the other before he hit the floor. But no one could do it; there was no basis for trust.

How do you as a carrier make a quick decision on a long-term relationship with a BTS company when timing precludes a lengthy courtship? What do you have to give up? How do you get the best deal? Who can you trust to catch you?

As the old Turkish proverb goes: Trust in Allah, but tie up your camel.