Why renting makes sense in the 5G era
Real Conversations podcast | S5 E16 | August 24, 2023
Mike serves as Extenet’s Senior Vice President for Engineering. He collaborates closely with major wireless carrier clients to identify opportunities to address capacity and coverage that aligns with the customer’s overall objectives while driving top-line growth for the business.
Neutral hosts are reinventing the infrastructure game. Mike Alt from Extenet discusses what this means for the provision of 5G.
Below is a transcript of this podcast. Some parts have been edited for clarity.
Michael Hainsworth: Mike Alt has seen the evolution of the wireless world where telecom companies no longer see value in owning and operating the infrastructure. That’s where Extenet comes in – a neutral hub company that is essentially a digital real estate company, serving mobile network operators and enterprise customers with everything from towers to the equipment necessary to leverage 5G’s campus capability. And as the Senior VP for planning and engineering at the neutral host, Alt tells me 5G has changed the industry's economics.
Mike Alt: It’s a shared economic situation. To your point, when carriers in the past would own and operate the entire infrastructure, which means that they had financial and operational burdens. And so, companies like us come in, and we build that same infrastructure, but we share those economics across multiple tenants with the intent of not only providing a better economic solution but also as good a service level, same operational support takes a lot of that operational burden off of the carriers, as well as obviously an economic benefit to them.
MH: What do you see as the most prominent use cases in multi-domain neutral hosting?
MA: The two that obviously come to mind that rise to the top, the first one is outdoor small cell solutions. We provide pole as well as fiber. It could be pole, fiber, or turnkey to where a carrier would provide their small cell equipment on our pole. We interconnect it with fiber if that's what they require. And then they operate the network as a small cell network, no different than they would if they own that pole infrastructure, for example. And then the second one is the indoor solutions, DAS (Distributed Antenna Systems) solutions or what's called (D-RAN) Distributed RAN solutions indoors. Those tend to be big stadiums. The AT&T Stadium is an example of what we have. The MGM portfolio, that's a contract that we have where we've provided a combination of DAS and Distributed-RAN or D-RAN solutions that the carriers attach to, and then they serve their customers inside. Their wireless customers inside, are going through some or all of our network.
MH: Some of my favorite use cases for your world involve things like eSports, where you've got an arena, you've got many people with a lot of need for connectivity, and you can roll in, make it all available, and then when the event is over, exit, or I suppose as well, just build that in on a permanent basis like AT&T Arena, for example.
MA: Correct. Yes. Most of the applications we have are permanent applications. Now to your point, they usually have different configurations. A stadium, for example, AT&T Stadium, has one configuration with all the components. It stays there permanently. One of the configurations is for a football game, and then one of them is for a concert. You don't want to cover the field during a football game; during a concert, you do want to cover the field, for example. So those applications you mentioned were some. They have a specific event that sometimes we have to tune or modify that system to accommodate that particular configuration. It doesn't involve installing or de-installing equipment. It's more about configurations, making some changes, software, and hardware to meet that requirement.
MH: Right. Every use case has a different need for a network that's capable of not just high capacity and high speed but also low latency. Sometimes you only need two out of the three.
MA: Correct. That's true.
MH: What are the main challenges in your business model as the owner of a digital infrastructure? Is it onboarding the CSPs? Is it regulation? Acquiring new tenants?
MA: It's a combination of all of them. We always say that we have, ultimately, especially on the indoor neutral host solutions, we have two real customers. We have the venue customer, and we have the carrier customer. We say that from the perspective of the venue, first of all, they might require their own service that we offer to them, as well as the wireless service. But then also the venues. They're very concerned about aesthetics. And so, it's a bit of a push-pull to get the best wireless network solution for the MNOs (Mobile Network Operators), you would have to put assets in places that the venues don't want them to put. They don't want them seen. They don't want them noticed. The biggest conversations that we always have are about luxury suites. The venues want those luxury suites to be rock solid, as do the MNOs. The venues, however, don't want to see a single piece of equipment. So, the biggest struggle is coming to that compromise between what is truly ideal from an operational or an engineering perspective versus what is aesthetically pleasing.
MH: Yeah, I can imagine it's so much easier to turn a cell tower into a palm tree than it is to turn a small cell box that hangs on a wall into something that people don't notice.
MA: Exactly. If we put a palm tree in a building, I think someone would notice that and probably not want that.
MH: I'm fascinated by your world because I have some experience with it in Toronto, Canada, where the transit system has a third party that built in the infrastructure so that you can use your smartphone on the platform, on the train, what have you. But the three primary carriers in the city all said they wanted nothing to do with it because they didn't build it. They aren't the gatekeepers. What kind of struggle and challenges do you face when it comes to CSPs still having that old-school thinking that we have to own everything? How do you overcome that hurdle?
MA: It's a challenge. There's no doubt. Now, things have changed over the course of the last few years, where when you talk about capital markets, you talk about expense dollars, you talk about dollars per bit that are necessary to be delivered. Carriers in the past might have been a little bit heavier on the capital side or they have capital available, now they don't. Or, likewise, they want to defer some of that spending over to the expense side so they can stretch their capital. One of the challenges that has taken a turn within the market itself is when carriers have come to relinquish that control for economic benefit. For lack of a better word, when the engineers were looking for the optimal solution, it was some of their business managers that came in and said, "We really need just good enough. And good enough might require that we don't own the network from end to end or that we don't supply a particular service level that maybe you would if you owned your own network."
It's always a struggle, especially when you have three different carriers who have three different positions that they want to take in these systems. So again, reaching that compromise can be challenging. But in many cases, the market itself is driving that compromise. The market's understanding that, hey, we do need to stretch those dollars. The bits per dollar need to be maximized. We have to deliver as much as we can with as little spending as possible.
MH: You say things have changed. How has the business model changed?
MA: Well, for starters, there's more about the service to the venue itself, as an example. Talking indoors now. There are more applications that we have. The way we look at our assets and business, we look at that fiber asset as connecting ‘I don't care’ to ‘I don't care’. We want to deploy that fiber for the sake of carrying mobile traffic or enterprise traffic, or venue traffic itself in some cases. And so, how the business model has changed is, instead of just looking for a network solution that is really very carrier-centric or MNO-centric, we're now looking at applications that we've laid that fiber that will serve the carrier's needs, but then also with a small little modification to it, it can serve an enterprise solution, or you build a little bit more, and it now becomes a ring architecture. So that's how that's changed to where we are we looking at more revenue streams and revenue opportunities to maximize that asset than we were in the past, where it was just very carrier centric.
MH: You've used the term MNO quite a bit, Mobile Network Operator. Is that sort of interchangeable with Mobile Virtual Network Operator (MVNO)? Because I can see that your business model is evolving. It's not just that you are working with the telecommunications companies themselves, but companies that previously you would never have expected had an interest in being a mobile provider now are.
MA: Very true. We are speaking with some. MVNOs that we're talking to are mostly cable companies with existing MVNO agreements with, say, a traditional Verizon or somebody, and they're looking to build their own network. The Dish network is in the same situation. They're using that existing mobile operator’s infrastructure to serve their customers so they can build a customer base that they would ultimately serve themselves with their own network assets. We are talking to MVNOs as well, to your point, who are interested in, "Hey, we might have a better economic advantage by going with an Extenet than we would stay with the MNO for a long period," or some sort of mix between the two where it's preferred that it resides on our network, whether it be Extenet or whether it be the MVNO'S network itself until it can't, and it gets outside of its range and then it roams over to that same MNO part that it has today.
MH: We recently had a conversation with the NTCA's Shirley Bloomfield about how these mom-and-pop companies that provide fiber into rural areas now have an opportunity to become their own MVNO.
MA: True. It's funny, some of the customers that we have today are rural utilities. They have... In some cases, they build their own fiber. In many cases, almost all cases. They have their own spectrum. And so they are starting to utilize their assets, using infrastructure that we provide or services that we provide to be a data provider for rural customers that they're providing electricity to. They really don't have too many data options. It's not as if cable companies can stretch out that far. So now they're using our infrastructure or a combination of ours and theirs to add data service to the same customers they supply power to.
MH: Let's talk about monetizing your fiber assets, specifically through ecosystems. Cloud companies have always been looking for better connectivity solutions. They have a need today to connect better to the cloud, particularly AI computing. We talk about augmented reality and offloading, the heavy lifting of the computations necessary to make that possible for the cloud. What are your thoughts on the ecosystems and the cloud companies monetizing assets?
MA: Sure. So, a lot of the services that they usually would do on more of a desktop-based application are now becoming cloud services. Oracle is a good example. Oracle has shifted its entire business, such that we're not talking about Oracle on local servers, we're talking about Oracle as a service on their own cloud solutions. Well, when they made that shift, what they didn't really account for at the time was the total amount of payload they'd have to support in their own cloud solutions to provide the service. And so now, we're having conversations with these kinds of companies about building very purpose-built networks, very purpose-built optical networks that are designed not only for high capacity but for low latency. It technically started with some of the trading companies. In the trading world, if you can shave off nanoseconds, you've got a competitive edge.
And so, these networks had to be built with the minimum distance in mind and the minimum latency in mind. Now, from the cloud providers, the same situation. It's not only latency, but it's also massive bandwidth that needs to address their needs and not be built as a me too. Well, yeah, you can ride this network. This network has to be optimized for my specific needs.
MH: What role does AI play in the evolution of your world, as we see more computes move to the edge of the network for that technology?
MA: There have been requests recently to put more edge-based hardware into the same hub locations that used to house just wireless telecommunications equipment. As we move those into mobile edge computing, as we move things further and further out into the edge of the system, now at those locations, the equipment has to be co-located with the actual telecommunications equipment itself. It's all about decreasing the distance from the server to the user. And so, we don't just see rooms that have telecommunications equipment in there anymore. We see server racks where... This server rack is for Netflix, and this server rack is for MSN or whomever that provider may be. We're really changing more from a real estate perspective, where we have to account for additional technical requirements within the real estate that we provide.
MH: You have significant deployments. A lot of focus on 5G is on that millimeter wave band, that indoor high speed, low latency capability. Tell me about the evolution of your business and the needs of 5G, and the fact that it's not just a case of sticking another box on a tower outside a building. You're going to want to wire up these campuses directly.
MA: Sure. It almost falls in the same category of being closer to the user, as well as being closer to as many users as you can get. The need for 5G or millimeter wave solutions, obviously massive broadbands that propagate at very short distances really for what's called nomadic traffic; people who are walking, looking at their phones, are using their phones while they're walking, or they're maybe stationary for a while, say on a street corner waiting for the light to turn. They do their own interactions, then they move on to the next location. All of those transactions, all the data requirements, drive for significant broadband usage or needs. And so, therefore, the millimeter wave solutions are being deployed on small cells for the sake of capturing that specific nomadic traffic. In addition to future applications, autonomous vehicles are very heavy in data requirements. And son that constant connectivity is going to be critical.
I just attended a conference just a few weeks ago about autonomous vehicles. And even before that, or before I attended that, I had no idea exactly how much data would be necessary to make this a reality. And we're not just talking about vehicle-to-vehicle communication, but we're talking about vehicle communications with the rest of the world. So those 5G or those millimeter wave deployments are critical to providing that band with massive bandwidth for that short distance, such that when that vehicle goes from down the block, it has constant communication, constant bandwidth that it's using in order to really drive the car safely and avoid any kind of accidents.
MH: Yes. I had a fascinating conversation with the CTO of Intel a little while back, and it was his assertion that autonomous vehicles will consume two terabytes of data every single day. It was just a fascinating look at what's expected in the not-too-distant future. But also, in the not-too-distant future, back to the millimeter wave devices, I'm thinking about smart buildings and IOT specifically. What kind of evolution are you seeing in your industry as companies recognize that 5G provides a tremendous opportunity to basically quantify every aspect of our lives?
MA: Yes! We're not inching towards a connected world. We're racing towards a connected world right now. The most obvious application we see in that regard is that it is very clear what at least T-Mobile and Verizon are doing, competing head-to-head with a cable provider for data services. You no longer have to get your data just from a cable coming in, or even an optical link coming in. They're using that fixed wireless aspect from millimeter wave deployments to provide data solutions for the home. That's just one example of where providing a broadband solution is well beyond just mobility. It's well beyond just what we talked about from a vehicle perspective. It is providing connectivity in all facets of life, which we're all now very accustomed to. Even when people go on vacation, most people do not look to be disconnected, unfortunately. They probably should be. I know I would love to be disconnected when I'm on vacation. I never am. And when I am disconnected on vacation, I feel very anxious about it.
MH: Yes, you and me both. I think I have five or six USB-based chargers in my carry-on luggage alone. I can't imagine what the guys are going through with the scanners. The X-ray machines must be thinking “what is in that bag?” But what would you like a telecom executive to leave with after listening to this conversation about the evolution of neutral hosts?
MA: The executives today are very savvy about what our business is. They understand what service we're providing, what benefit we're providing. I think that it's been challenging so far for them to think of us as a service provider versus a competitor. Often, to the point we were talking about before, these carriers like to do things themselves; they like to maintain that control. And it's really at that executive level that we see those conversations shift. At the local level. We see the engineers. I'm an engineer. I've been an engineer for 30 years now. I understand the need to have that level of control and make sure that I can meet those requirements. And so, at the local level, it's very much... I want to make sure that I'm doing what I'm supposed to do for my customers. At the executive level, there’s much more that I want to balance what I'm doing for my customers with what I can afford.
And so, I'd like those telecommunications executives to really have those conversations with us. We are well more than just a, well, we'll put you on a pole, we'll charge you money. There are a lot of services that we can offer. There are solutions we can offer. Private LTE is the perfect example of something we can provide the service at the same level that a MNO can, possibly with a shared economic situation, right? So that's what I want them to understand: that we're more than just a real estate company. We are a service provider that they can benefit from, still having levels of service that they expect, in shared economies that are better for them.