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Get To Grips With Neutral Host

Podcast episode 64

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Neutral host companies provide open access to mobile operators enabling higher levels of connectivity. In part one of our two-part special on neutral host, Jose Antonio Aranda, innovation director at Cellnex, Spain provides a detailed introduction to the topic and explains what it means in practice.

Below is a transcript of this podcast. Some parts have been edited for clarity

Michael Hainsworth: Communication service providers recognize the complexity and power of 5G means, they can't go it alone. Multiple vendors and other partners are required to fulfill the promise of ultra-reliable, low-latency communications. But the need to partner doesn't begin and end with edge cloud computing companies or hardware manufacturers utilizing the Open Radio Access Network. CSPs need to leave their comfort zones and that starts at the top, both the top of the C-suite and the tower.

Cellnex owns infrastructure at more than 71,000 sites, with plans to almost double that figure across Europe. Its global product strategy and innovation director, Jose Antonio Aranda, sees the neutral host as a key ally in a CSP’s 5G future. So what is a neutral host?

Jose Antonio Aranda: In the end, the neutral host refers to the independent infrastructure company, but specifically, it refers to the company that offers open access to the mobile operators and other wireless operators in a specific country, to have higher connectivity. I will just add a little bit of what is the added value that a neutral host will provide. Basically, in Europe, all neutral hosts across the different countries provide more than 100,000 towers across the continent to provide connectivity to millions of Europeans. Another important aspect of neutral host is the possibility of offering an industrial wholesale model, to offer it to the mobile operators to host their services.

Also, one of the things that I think is relevant from the neutral host perspective, is that it reduces the time to market from the services from the mobile operators because of that neutrality. As well, and we will talk afterwards, one important thing is the capability of this industry, of a neutral host in general, to provide long-term investment, and that's something that will be critical for 5G.

Sometimes also we talk about colocation radio, so the amount of mobile operators that a neutral host can have. Normally, a neutral host has twice the number of mobile operators in their towers. And the last thing that I would like to mention is that also one of the key aspects of a neutral host is that it reduces infrastructure costs from the mobile operators once they share infrastructure.

MH: Some neutral hosts would be focused more on the fiber optic rollouts and fiber to the home type technologies, but for Cellnex as I understand it, you're really about the towers and the associated equipment that's hanging off them. Correct?

JAA: Correct. We are all about the towers, but it's true that little by little in the last few years, we have been trying to extend our offering to the mobile operators to other types of assets. For instance, one of the things that has been required by the mobile operators is also to provide support also for their metropolitan offices and their regional offices, so their sort of small data centers or medium data centers that they have across the country.

But not only that, also they have requested us to connect them. So, we have started investing in fiber to connect those data centers, and those data centers to the towers as well. But also, as part of the rollout of 5G, we have started implementing new small cells. That's an area that we have been deploying with the mobile operators already for 5G, but for 4G we have already done so outdoors, but also updating their towers, rooftops, 5G macros to enable services.

One other thing that we see that is an opportunity for the mobile operator and the partnership with the neutral host is the possibility to start in densifying areas, so going to city centers, providing coverage in places where they have a lot of communication demand like stations, airports, malls, and that's an area that also is another growth for the mobile operators. And the last thing that I will mention is also, another area that we see, is supporting the delivery of the services with the mobile operators in different areas.

MH: Tell me how the business evolved because traditionally, tower companies just provided the mast.

JAA: You are correct, and I completely agree with you. And that's where we come from. We come from providing real estate basic tower company, but what we have seen in the last year or year and a half is the demand from the mobile operator to request our company to not only manage adjacent assets as we mentioned, or passive infrastructure like just purely the mast. Some mobile operators have started asking us, "Why don't you also take care about our antennas? Why don't you also take care about our radio units, but also the basebands [units] that you have there?"

And also, one of the important aspects is, "Why don't you take care about both, the fronthaul and part of the backhaul towards the network?" And that has helping us start thinking of, "Okay, we are going to move from that specific model of being a tower company to what we call an augmented tower company"

MH: This sounds like a bean counter's best dream ever. The idea that any given telecommunications company wouldn't have to worry about the capital expenditure associated with building towers or managing the antennas that are attached to them and dealing with the rollout of fiber and managing metropolitan offices. They can redeploy that cash to expand their organization elsewhere, and then that's where you fill the void.

JAA: Correct. And in fact, one of the things that we could provide is also the possibility of investment, and help the mobile operators reducing the total cost of ownership. How? Because we could foresee and anticipate future sharing of a specific mast, and when we buy the mast, we flatten the cost of that mast and we make the mobile operator pay a very reduced amount that you can extrapolate across 10-15 years, instead of having to invest CapEx in one shot.

MH: So, you had mentioned one particular issue that's associated with 5G, that is really critical, which is that you are rolling out smaller cell sites in metropolitan areas. As we move from that centralized world to a decentralized one, I can imagine companies like Cellnex would benefit from the demand for things like edge cloud, near-edge cloud, ultra-low latency that 5G offers. As a CSP, my head would be pounding at the thought of having to roll out all of these small cell sites myself, I can just turn to you.

JAA: I agree. And we see this happening already. We have examples. In France for instance, with Bouygues Telecom, where when they're defining the strategy to deploy those edge data centers that you mentioned, they have relied on us to build them, but also to maintain the old ones. And you see more and more mobile operators are implementing this strategy, but it's true that the amount of nodes that they are deploying are less than 100, depending on the size of the country.

But we see that as we are a neutral host and the presence of a neutral host like Cellnex is more than 100,000 towers, that capillarity will provide an important competitive advantage for us to deploy closer to our antennas, that edge computing capabilities and offer to the mobile operators also to share. And that is opening up for us a very interesting framework where we see not only offering the edge computing capabilities to MNOs, but also going with MNOs to third parties to offer edge competing capabilities, such as enterprises for the installment of private networks or installment of neutral host DAS (distributed antenna systems) in stadiums, that can also add on top of the infrastructure its computing capabilities.

MH: Tell me about that and the competition that's inherent in this new rollout. If I was a CSP, why would I want to share towers with a competitor, particularly when it comes to some of the next generation services that you might experience if you went to a football game or a baseball game at a stadium or any other kind of large event?

JAA: This is a very good question. And if we talk about stadium, what is currently happening is that the mobile operators go there to serve and to provide coverage to the crowd normally once every two weeks, for 1, 2, 3 hours. So, the feasibility or... Yes, not the feasibility but the rationale by investing in a lot of towers in that area is not as if it were an area that you have all day long coverage. That's basically the business model. If we have a neutral host where Cellnex could provide the infrastructure across the entire stadium for instance, and you share among the four mobile operators, you have that capability shared and therefore the cost will [decrease].

I will not say by four if you are four mobile operators, but by a lot. And at the same time, you have the possibility to differentiate yourself. So, you can say, "Mr. Cellnex, I want to have double antennas in this space." And therefore, despite we have a specific coverage, we can have ad hoc dimensioning for specific mobile operators when required, and that's the balance that they need to evaluate.

MH: What about industry 4.0 applications? We know that for the ultra-low latency that's required for machine-based control, that you're going to have to install a lot of microsites within the campus of any given factory setting or what have you. Is that the kind of environment you go into or do the CSPs still have to knock on the door of the automaker and say, "Trust us, we've got a great idea."?

JAA: At the moment, in Europe, the reality is that the mobile operator has to go and knock on the door. Why? Because at the moment, there are few countries where you have specific spectrum allocated to the industry, countries like Germany, and it is spreading. But at this stage, it is the mobile operator who has to provide the frequency and therefore knock on the door. It's true that there is a possibility for the mobile operators to partner with a neutral host like us, for us to take care about the installation initially of all the infrastructure, all the private network that they may require to cover a specific area or a specific industry. And if they want, we can also maintain on their behalf.

In fact, we have recently bought a startup, a company who had already installed 40 private networks across Europe, and the reality is that they have agreements with the mobile operators to do so in different countries. And you mentioned ultra-low latency requirements, and we see that more and more in manufacturing mainly for automation, mainly for communications between vehicles that might happen across a factory. But we see also growth in transport, and we can talk a little bit further afterwards, and also in everything that has to be with big machineries like mining or oil and gas.

MH: Tell me more about that, largely because I can imagine that if I was a CSP and I have a mining company as a client that I would want only my equipment within that mine. So where does the benefit to Cellnex come in, and where does the benefit to the CSP come in in that kind of scenario?

JAA: What is happening most of the time is that the traditional factories don't have an expert in networks. They do have an IT expert, so they are very good in providing cloud-defined part of the services. But the most that they have developed is basically Voice over IP. So, a company like a mobile operator or like a neutral host could provide expertise in building that network on their behalf. And it's like sort of outsourcing because we are expert in building networks in general.

And also, on top of that, if you have the mobile operator, the added value is the type of services that the mobile operator together with the neutral host could bring, because currently the mobile operators have the expertise and they have contacts with, not only application providers and services providers or product providers, but also integrators.

MH: How will neutral hosts help fill in the gaps in rural coverage? 5G frequencies are incredibly high power, but they have shorter wavelengths, they require more cells.

JAA: Yes. That's a very interesting area that we are trying to also develop. We have approached this in different manners and let me just explain a couple of them. One thing is what we are doing for instance in Ireland. With Cellnex Ireland, we have developed a website where a customer, a mobile operator user can go and say, "Listen, I see that here there's a black spot, so there's an area where I don't have coverage. Please consider this area for your next planning." So, we received that, and we have regular sessions with the mobile operators where we explain, "Listen, there is certain amount of this," because sometimes it's not individually. Normally they come with the town hall, and we have like a sort of map of potential places where we could support, and normally it's in rural areas where we could support implementation of the mobile operators. So that's one thing.

Another area that we are deploying is, and now that in Europe we are talking about the next generation new funds and all those recovery funds, there is a potential opportunity to invest those funds in building infrastructure, and building infrastructure mainly in rural areas, because that will be potentially one of the areas that will benefit from the digitalization and the mobile operator will cover more gradually. And sometimes having a neutral host covering the rural areas, as we mentioned, make the numbers to look a little bit, I would say happier, a little bit more positive.

But it's true what you mentioned, that in 5G you have a lot of different frequencies, and the solution for the rural areas is the low bands. In Europe, they are deploying the 700s, and that's probably what the mobile operator will need to implement to provide coverage in those areas. Last week, for instance in Spain, Vodafone announced that they have started deploying different antennas in the 700-megahertz spectrum, and that will be one of the key points to start covering rural areas as well.

MH: So, if mobile operators see neutral hosts as a strategic alliance partner and Cellnex approaches a country with a core tenant and then offers services from there, what's one issue that a CSP needs to understand when building a partnership such as one with you, so that we can help them to avoid the traps?

JAA: Yes, one of the key aspects that the operator needs to understand is the different neutral host options and one of the options is an investment fund. It is a company that buys your assets, you monetize that, and helps you develop other areas. In our case, we are not just an investment fund. We provide also our industrial model and that means that we can optimize several things. We can help them for instance in site hunting because we are a specialist in that. We can also take the responsibility of the site owners, the landlord owners, on their behalf, so they do not need to talk to the rooftop owners of the buildings and so on and so forth.

But also, we can help them one of the things that I had mentioned before, there are two important aspects that we are leveraging as well; one is the capability for us to invest on behalf of the mobile operator, and the second is the possibility of increasing the usage of that tower. And therefore, I will buy your tower, if you allow me to also offer that tower to your competitors. And those are the key aspects that the mobile operator needs to consider.

MH: So, if it's about optimizing assets and offering the ability to share capacity with other providers to save costs, what about stacking neutral hosts? In another episode, we'll be talking about a neutral host that's focused on fiber, specifically in rolling it out through metropolitan areas, which would tie into a lot of those towers that you're talking about. It sounds like the opportunities under 5G in this next generation technology is that partners are going to be working with other partners as well as the CSP.

JAA: Yes, I agree. One of the areas that I see that the mobile operators will be working with other partners is the private network space. And there, it seems to be one of the key aspects of why the mobile operators expect to deploy 5G networks. There’s a huge number of different ecosystems players that can provide support to the mobile operator, and the mobile operators are balancing their capacities to include this as part of their offering. And in that sense, we see already a lot of different companies willing to experience and willing to pay for building the private networks services from the mobile operators together with Cellnex.

Let me just give you a couple of examples. So, we see in the airports that private networks are very important, and we have implemented for instance, private networks together with the mobile operators in the airport of Helsinki. And sometimes we think about the private networks just purely from, "Okay, this is for providing services to, I don't know, my staff at the airport," but sometimes we forget that the private networks could enable additional business. How about if you use that private networks to provide services to the catering companies in the airport, or the logistic companies, and so and so forth?

So that's why as you mentioned, the mobile operator needs to also partner with key application provider or products or services providers to be able to satisfy the demands of the airport in this case, because sometimes it is not about just providing the private networks, it's what comes behind the private network.

MH: So, as we know that Infrastructure as a Service frees up capital to invest in new value-added services. The 2020 to 2025 CapEx outlook according to the GSMA for network infrastructure is $1 trillion. How much of that is going to be neutral hosts such as yourselves rolling out these types of Infrastructure as a Service offerings, and how much of that one trillion do you think is going to be the CSPs having to open up their wallets?

JAA: We are part of EWIA. EWIA is the European Wireless Infrastructure Association. And we have been studying what will be the long-term investments of the entire industry in Europe. And to give you an approximate figure, we are talking about 160 billion euros will come from neutral hosts to implement 5G infrastructure in general. So, if you see the rest will come from the mobile network operator, because there is not only need to implement new antennas and new masts. The mobile operator needs to change also their entire core network and evolve towards different capacities. Sometimes they need to virtualize, and also, they need to decentralize part of the intelligence and start building its data centers and its computing capabilities to do local breakout and offering services closer to the user. And that's a lot of investment.

MH: Yeah, I can imagine. Again, back to the chief financial officer at the start of this conversation, if you could cut the CapEx costs 13% at your organization, that's a huge win.

JAA: It is a huge win. And in fact, most of the time, the first entry point to make initial agreements is the CFO, because they see the impact of partnering with a neutral host. You can imagine that if you go to the radio access network department, most of the time they will tell you, "Why do I need you if I can do it myself?" That's a good point, and sometimes you see that mobile operators still have some teams that think that the tower is something that they must have. The tower is something that is a differentiating factor. We need to play with all the different teams, but I agree with you that the ones that could see quicker could be the CFO.

MH: So how does the role of the neutral host evolve as 5G evolves?

JAA: This is pretty similar to one we mentioned before and let me give you a couple of examples. So as we evolve with the mobile operators to implement 5G, we have started for instance to deploy small cells in cities. And we have examples of the City of Milano. We have already covered with 277 antennas across the entire city to offer services to the mobile operators. And we have other examples, like what is happening with 14 of the London boroughs, we're using urban furniture. We are offering the possibility to share up to 900 small cells across-

MH: Hang on, back up, urban furniture. Are you talking about literally park benches, garbage cans, phone booths, signage? That's what you mean by urban furniture?

JAA: Yes. I will list in a different priority. I will say lamppost, traffic lights. You see my point. So, it's not about bins, it's about things that are high enough to provide coverage. A signage could be because the height of a signage could be interesting for the mobile operators because you need to have a specific height to mount an antenna.

MH: So, to come full circle, if I understand what we've discussed correctly, neutral hosts not only offer turnkey access with connectivity, but CSPs can reduce the cost of rollouts and the time it takes to build out that 5G topology.

JAA: The neutral host offers open access, one of the key aspects. Second, that will enable high levels of connectivity. And the last one is that services with neutral host will be faster and deployed reducing the time to market.

MH: This has been fascinating. Thank you for your time and insight today.

JAA: My pleasure.

MH: Jose Antonio Aranda is the global product strategy and innovation director at Cellnex in Spain. Next time, part two of our focus on openness and neutral hosts by connecting the towers to the next generation fiber networks being built by neutral hosts with Ben Bawtree-Jobson of the US-based infrastructure company SiFi. We'll learn how neutral hosts can provide a fresh backbone to an aging incumbent, and how that relationship evolves as the global 5G buildout continues.

Ben Bawtree-Jobson [Teaser]:

We always welcome incumbent providers to work with us, but the corporate philosophy and strategy at the moment for a lot of them just won't align, but it makes an awful lot of sense. If you are on an aging infrastructure in your market and you've got someone who's coming in to build a competitive fiber network which has got the most resilient, the most reliable, the fastest network, frankly better than the network that you've got, and you don't have to spend any money on it, and you can transfer all of your existing customers across to it, it's a bit of a no-brainer frankly.

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