Originally predicated on a steel and grass model, or steel and grass plus power-as-a-service model in certain developing markets, the scope of a towerco has evolved since their inception in the 1990s.
Few contest the idea that leasing space on macro-towers to MNO tenants will continue to make up the bulk of revenue for towercos for the foreseeable future. Yet, towercos have steadily been developing new service lines and expanding into adjacencies as they look to better serve existing customers, maximise utilisation of their assets, expand their client base, and future proof themselves in an evolving communications landscape.
In TowerXchange’s Tomorrow's Towerco report, Capacity's sister publication takes a deep dive into eight product or service offerings that are now being offered by towercos around the world.
These include energy related services; smart towers, smart cities and data as a service; in-building solutions (IBS); fibre; satellite backhaul and other non-terrestrial network (NTN) connectivity; network-as-a-service; mobile private networks and edge data centres.
With a business model remarkably similar to the towerco model (deploying neutral host infrastructure to serve multiple operators, under 10-15 year contracts with fixed monthly fees and escalators kicking in after the first couple of years), in-building solutions represented the business line into which the largest number of towercos had diversified.
Of the 47 towercos profiled in the report, 32 were generating revenues from the provision of IBS.
Whilst once only the domain of towercos operating in markets with underdeveloped and unreliable electricity grids, more and more towercos are now moving into the provision of energy services.
In some instances this is motivated by tenants, in others this relates to getting sites on line faster, whilst ESG targets present a further motivating factor.
Towercos are also starting to think outside the box, exploring a role for themselves in the electric vehicle and potential grid balancing ecosystems.
Whilst the extent to which towercos are providing power, and the business model under which they are offering the service varies significantly, currently 31 of the 47 towercos profiled in the report now have an energy service offering.
26 companies had a smart pole/ street furniture offering with densification and 5G requiring more points of presence closer to the user often in urban areas where the deployment of macro sites isn’t feasible or aesthetically acceptable.
Towercos are becoming creative in thinking about further usage of their towers in such areas, with CCTV, IoT sensors, lighting, public Wi-Fi and digital messaging boards all creating incremental revenue streams.
Just over a third of profiled towercos were now active in the fibre space, some having grown their fibre business organically, others having acquired fibrecos or the fibre assets of MNOs to stake their position.
At the one end of the spectrum, towerco involvement in fibre was limited to connecting MNO tenants on towers with just a few hundred metres of fibre from the closest node, at the other end of the spectrum some towercos had built robust fibre businesses connecting networks of small cells and playing in the FTTH space.
Whilst mobile private networks (MPNs) are in their relative infancy, particularly outside of the US, 16 of the profiled towercos are now active in the deployment of MPNs with a further three towercos exploring the business area.
The movement into MPNs represents a material shift for towercos, not only through needing to touch active networks but also in working with a much larger, diverse potential client base.
Partnerships will be essential for towercos to tap the market and care must be taken to manage relations with traditional towerco customers – the MNOs, who are also eyeing up lucrative opportunities in the MPN space.
When it comes to edge computing, with enviable locations close to data consumption, and existing power and fibre connections – towers are being tipped as potential sites on which to build edge data centres, something that has piqued the interest of towercos.
Of the 47 towercos profiled, 14 are now active in edge data centres and whilst some of this is centred around the deployment of edge data centres at towers, towercos are also eying up other locations.
As for the role for the towerco in the edge computing ecosystem, there are skills required which are very much in a towerco’s wheelhouse. Site acquisition and permitting, security, monitoring, power provision, cooling and co-location (albeit targeting a new set of clients) are all transferrable skills.
Providing a true edge computing solution will however require a layer of orchestration, and for this partnerships will once again be required.
Whilst the outsourcing of passive infrastructure to towercos is now commonplace, when it comes to active networks, operators have traditionally preferred to retain control.
In rural areas, where low population density makes the economics of a cell site challenging, we have however started to see the emergence of rural network as a service offerings – both from specialised rural netcos and from traditional towercos.
Plus, in a handful of markets we have started to see MNOs separating out their service and network business forming netcos in the process. Currently of the 47 towercos profiled, just 7 have a network-as-a-service offering.
How aggressively towercos have been pushing the perimeter of the traditional towerco model, and which areas they have prioritised, depends on the towerco’s DNA and the markets in which they operate.
Whilst for a long time we have heard towercos talk about superior ROIC and significant growth still forecast in the macro-tower business, even the most traditional players are starting to think about how their service offerings will need to evolve to better serve their existing customers.
For more innovative players, those who want to position themselves at the heart of tomorrow’s communications landscape, significant strides have been made in taking new service lines beyond proof of concept to full commercialisation, and further ideas are in the pipeline.
To dig deeper into how the towerco model is evolving, download the Tomorrow's Towerco report.
Available exclusively to TowerXchange subscribers, visit www.towerxchange.com to find out how to sign up and access the world’s most comprehensive data set and industry resource on the global telecom tower industry.
