American Tower operates 178.8k towers, which are a key component of digital infrastructure, in addition to fiber and small cells. The company operates towers in the United States (40.6k), India (73.6k), Latin America (40.9k), Africa (18.8k) Europe (4.8k).

Demographics Define the Need for Fiber and Small Cells

In terms of demographics, 85% of the people in the United States live in places with less than 5,000 people per square mile. This is considered a non-dense living environment. In comparison, in Argentina, 85% of the people live in places with more than 5,000 people per square mile. American Tower highlights that Argentina is the mirror opposite of the United States from a demographic density perspective. Therefore, digital infrastructure, such as small cells are much more important and effective in Argentina. In turn, carriers deploying 5G in Argentina will use small cells sooner, compared to a similar carrier in the United States.

The United States has a low population density and most people live in suburban environments. Therefore, it is more conducive to use macro towers in the U.S. and that is the ecosystem that has been built. However, in places with high population densities like Buenos Aires (Argentina), Mexico City (Mexico) or Delhi (India), there is a greater need for small cells. Nevertheless, the U.S. will still need small cells deployed too, for example in dense urban markets, like New York City.

Given that small cells are fiber-fed antenna systems, the availability of fiber connectivity and capacity is of paramount importance. The United States has an existing fiber optic cable industry which is well-funded, highly competitive, and already commercially available to any company that desires a fiber connection for their small cells. Comparatively, in Buenos Aires, Mexico City or Delhi, that same fiber industry does not exist at the same scale.

Fiber – American Tower Perspective

The United States still needs more fiber-to-the-tower and fiber to indoor facilities to be built. Fiber connections ensure that there is sufficient capacity for data to be transported from the tower, back to the local telecommunications operator or local point-of-presence (PoP). In the United States, the carriers have built out much of that fiber-to-the-tower. However, this is much different than what has occurred in international markets.

Without fiber connected to the tower, full 4G or 5G services cannot be achieved. Because of this, American Tower has positioned itself in the fiber business in some emerging market countries. American Tower is taking this role because there is not an existing infrastructure provider for customers to commercially buy capacity. Thus, American Tower is building the last quarter-mile or half-mile of fiber under the ring, in particular metro areas. The company is then connecting its fiber with fiber that other providers have already built.

Small Cells – American Tower Perspective

Small cells in a 4G environment have really been tower supplements, as opposed to tower substitutes. This is American Tower’s expectation for 5G as well. Ultimately, the important factors for 5G are the spectrum being utilized on the small cell, and the propagation distance of that spectrum in areas where small cells are deployed.

In a 5G environment, millimeter wave spectrum and small cells will serve pedestrian hotspots and other predominantly fixed location applications in urban and dense urban areas. Whereas macro towers are still the most cost-effective way to serve people in suburban and rural areas.

Less than 1% of American Tower’s United States portfolio of tower sites are located in areas with high enough population density to economically support outdoor small cell arrays. Consequently, the impact to American Tower’s tower sites from 5G millimeter wave spectrum deployments will initially be minimal. This impact is both from a risk and opportunity perspective. However, over time, there will be tower-related uses for 5G with millimeter wave bands. Specifically, for products such as wireless backhaul, Fixed Wireless Access to homes and enterprise applications.

Convergence of Wireless Networks

American Tower stipulates that digital infrastructure, including towers, fiber, small cells and data centers, will ultimately all converge in the future. Bandwidth will increase on networks from 5G roll-outs and more sophisticated handsets and applications will proliferate. These factors will create a greater need for convergence of the different components of digital infrastructure. Each piece of digital infrastructure will need to interconnect to make the networks truly function at their peak performance.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G.

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