According to Wikipedia a “perfect storm” is an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically.” The term gained popularity when George Clooney stared in a film called The Perfect Storm (based on the book by Sebastian Junger of the same name) about the 1991 Halloween Nor’easter in which three weather conditions combined to generate a perfectly fierce and deadly situation:
• warm air from a low-pressure system coming from one direction,
• a flow of cool and dry air generated by a high pressure from another direction, and
• tropical moisture provided by Hurricane Grace.
Today in both Europe and North America, the wireless industry shows its own combination of circumstances which could create a future perfect storm:
• market saturation – it is estimated that 85-90% of Americans own a cell phone and the number in many European countries are estimated to be at or over 100%,
• cheaper “all-you-can-eat” rate plans – in the USA, all of the four major carriers offer voice/data plans for $99/month and Metro PCS offers voice plans for as low as $50/month, and
• increasing OPEX – the two largest expenses for wireless carriers are payroll and rent roll and both are inflating.
It doesn’t take a meteorologist to forecast enormous pressure on cellular operating margins. And it is safe to assume that cellular operators have and will continue to focus on this issue.
On the revenue side of the equation, operators will battle it out for the final 10-15% of market share, and operators will continue to search for more ways to increase ARPU by adding cool apps and services as well as introducing cooler handsets to encourage subscribers to remain loyal and/or switch to their service. The iPhone/Blackberry battle is the classic example of this.
On the expense side, these conditions place pressure on payroll and rent roll and operators are looking for ways to lower OPEX. Expect to see more outsourcing and tighter cost controls. Also expect to see more rigorous scrutiny applied to lease costs. With annual rent rolls in the billions, operators will be keeping a close eye on the rent expense.
CommNexus of San Diego joined with CTIA, West Wireless Health Institute and Qualcomm last night to host a panel discussion on Wireless Healthcare at the impressive Irwin M. Jacobs Qualcomm Hall in San Diego. While the panel’s discussion was not directly related to cell sites and cellular antenna leases, it was very interesting take a peek into our future to see the impact that the wireless industry will have on global healthcare. The panel included a trio of fore-thinkers from the West Wireless Health Institute including its founder, philanthropist Gary West.
West noted that by 2020 there will be major shortage of doctors to treat the rapidly aging population in the USA and that wireless monitoring of patients will significantly reduce the number of office visits. Key vitals can be remotely monitored with the data being transferred and managed electronically whereby patients only come to see a doctor if their results are outside the norm. Imagine it… not only implantable devices like pace-makers and heart monitors, but also wearable devices such as portable ventilators with wireless capability and even digestible devices. The panel noted that this will lead to not only wireless monitoring but remote analytics and predictive modeling to forecast health issues before they occur.
Additionally, the panel made the point that growth in this area will be consumer driven, rather than doctor or prescription driven as patients will most likely choose to purchase their monitoring devices as a preventative measure rather than waiting for their doctor to prescribe one for treatment.
This is all pretty cool stuff! While many of these devices will be Bluetooth based, I can still see a much greater need for cell sites as dropped connections will now become a liability – you don’t want to be the network that caused a person to die because the transmission of a patient’s vitals did not make it through to the doctor. While my job of negotiating, documenting and administiring cellular antenna leases is not as sexy as developing wireless devices that will save future lives, I am proud to play a small part in maintaining the infrastructure that many of these devices will operate on. I say it is great to be part of an industry that will revolutionize health care not only in the USA, but worldwide.
In my first Opinion Pole blog I commented that PCIA 2008 in Hollywood, Florida was silent on cellular leases – not the site acquisition process itself, but on the actual leases documents and what can be done to improve them for the betterment of the entire industry. Well I am happy to note herein that PICA 2009 in Nashville, Tennessee was better. The company I work for (Md7, LLC) pushed the topic and began driving the conversations a bit more than usual this year. While it is not my goal to turn this blog into a promotion for my company, it was through the presence of Md7 on two panels and hosting a hospitality suite that we were able to have several public and private conversations about leases and how to make them better.
My colleagues, Thomas Dolislager and Sudeep Gupta both participated on panels in which improved leases were at least part of the conversation. Thomas’ panel was called “Outsourcing to Experts: How to Reap the Benefits” and was sponsored by Message Center Management. The biggest take away from this discussion was to trust experts and select specialists who do one or two things really well. Lease documentation is no exception. While lease negotiations and preparations have long been entrusted to site acquisition companies and law firms, I do see a trend to concentrate in this area even further.
Meanwhile, Sudeep participated on a panel called “Innovative Strategies for Reducing Network OpEx” where he raised the very valid point that over time the single biggest cost of operating a cell site is the rent expense. Monthly rent that escalates each year will eventually outweigh the cost of base stations, zoning, maintenance and even construction. So if rent is in fact the largest expense, then it makes sense to concentrate on managing it and making the documents themselves more efficient and standard.
While not everyone agrees with me that there is a LOT of room for improvement in the hundreds-of-thousands of cellular lease documents currently in existence in the United States and abroad, most agree that rents are high and leases have to be negotiated and renegotiated multiple times – especially each time and upgrade is made to a cell site. Let’s find ways to improve this process.