What Powers the Telecom Towers?

What comes to mind when I say the word "telecommunications"?  Perhaps you thought of Verizon?  China Mobile?  Or even British Telecom?  The reality is that today's telecommunications industry is far more diverse and complicated.  Neil Smith joins Power Bytes to help us understand this critically important industry.

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Transcript

Lou:  Good Day and welcome everyone to Power Bytes!  I am your host Lou Signorelli and Power Bytes is your destination Podcast for power generation discussions.  As always please know how much we appreciate you, our listeners.  We hope you find our topics helpful and interesting.  There are several ways for you to get in touch with the show. You can send us an email at powerbytes@cat.com, visit us at Cat Electric Power on Facebook or LinkedIn.  Please remember to subscribe to Power Bytes wherever you listen to your favorite podcast. 

 Lou: What comes to mind when I say the word "telecommunications"?  Perhaps you thought of Verizon?  China Mobile?  Or even British Telecom?  The reality is that today's telecommunications industry is far more diverse that most ever have reason to recognize.  So, today we'll start to unravel this extremely important industry.  

 Lou: Joining me to do that today is Neil Smith  Neil is the Global Accounts Manager for Caterpillar's Electric Power business focused on Telecom.  Neil has worked with Caterpillar for the last seventeen years and previously worked at Caterpillar dealerships in the UK and Africa where he first became involved in the mobile telecommunications industry.

 Lou: Thanks for joining us today Neil!

 Neil: It's a pleasure to be here, Lou.

 Lou: So Neil, let's start by talking about the different layers and players in the telecommunications industry.  Might you lead us through that?

 Neil: Everyone knows the name of their mobile provider – whether that is AT&T, Verizon, T-Mobile or many other brands across the world – but most of us really don't know who operates the network that enables our calls and apps to work. In some markets, some of the best known mobile brands don't even own any of the network assets – they buy airtime from other operators and sell it on.  What we have in most markets today is several layers of companies providing parts of the infrastructure.  At the top of the pyramid is the Mobile Network Operator. or MNO, who in some markets will still run all the infrastructure required. But mobile communications has become a complex business over the years, and many of the MNOs have contracted with other businesses to provide parts of the service they provide. Many will use a third party to build and operate the data centres that host the information being processed in your mobile apps. Many will use third parties to install and maintain infrastructure such as fibre optic cables. And many will use independent tower companies to build and operate the towers that everyone has seen that carry the radio equipment that transmits the signal between the network and your mobile device.

 Lou: Sounds like each of those play an important part in the market, but could any of it happen without the Telco Tower companies?

 Neil: The Tower Companies (or Towercos) are a critical part of the telecoms network, as those towers provide the coverage for your mobile device. But there are economic limits as to how many towers a market needs, and there are often planning limitations as to where towers can be built  When MNOs owned all their own towers it was not unusual to see a location with three or four towers, one for every operator, in a small area.  This is wasteful in terms of capital expenditure, but also annoying to communities who don't want to see a tower on every street.  The industry has solved this problem through sharing of tower infrastructure between operators, usually with an independent towerco owning the asset and hosting several MNOs.  The Towerco industry started in the USA but has spread to most markets in the world. Usually what will happen when the Towerco enters a new market is they will buy existing towers from the local MNO then lease back the tower access.  This allows the MNO to move these assets off their balance sheets, and reduce their operating costs as the Towerco runs the network more efficiently, with less duplication of tower assets. The business model has grown rapidly, and continues to do so, with some of the Towercos also delivering services such as fibre optic networks and even working on the development of Smart Cities (where telecoms infrastructure is key to every public service).   Major international tower companies such as American Tower, Cellnex, Crown Castle, SBA Communications and  IHS Towers are names the public won't recognise but without them millions of people would have no mobile communications.

 Lou: So if every service requires access, just how many towers are there today?

 Neil: There are around five million base stations either on towers or rooftops, and over three and a half million of them now belong to Towercos rather than operators.  This sounds like a big number, but when you remember that there are over five billion mobile subscribers in the world, and over ten billion connected devices you start to understand the scale of the global network. The number of connected devices, including cellular IoT devices, is growing by around 6% per year, but this is expected to grow rapidly as 5G is rolled out.  So the future for the tower industry looks rosy. MNOs are still moving assets of balance sheet so there are over a million existing towers that could move to Towerco operations in the next few years. But the bigger opportunity is the build out of new infrastructure for 5G in developed markets, and improving coverage for the 30% of the global population who are currently not connected.  The mobile phone industry is a trillion dollar business, that will invest over $600Bn of capex in the next three years. 85% of that capex spend will be on 5G networks. This investment will add 400 million new subscribers in the next three years, and all of them will need tower coverage. 

 Lou: Is it possible to estimate the total power requirement of the Towers alone?

 Neil:  The power requirements are continually changing as the network builds out, but currently peak load for a 4G tower ranges between 8-14kW and a 5G tower can take up to 24kW. Given that older networks in developing markets are still running 2G equipment the overall energy demand for the tower industry could be fifty gigawatts or more, and it is rising as 5G is rolled out.  Much of the load is provided by grid power, but in remote locations and in developing markets with unreliable grids, powering these towers can be a major problem. People expect their mobile devices connected at all times, and the service level agreements towercos sign with MNOs will demand 99% plus availability, so a power outage cannot be allowed.

 Lou: Neil, there is so much to unpack in this exciting industry.  Can you outline the power challenges you see for the towerco's going forward.

 Neil: There are two major power challenges for towercos today.  Firstly, in areas with no grid or unreliable grid the towers have traditionally been powered with diesel generators. As mobile networks grow the supply of diesel is becoming a major operating cost, and a logistical nightmare. The MNOs also have some stringent decarbonization targets that towercos are expected to help with, so the industry is aggressively rolling out renewable energy and hybrid power solutions. The second challenge is that the move to 5G will increase the power requirements on each site, but also require power for the EDGE data centres that will be needed to handle all the new data streams 5G enables.  Towercos are likely to spend much more of their time thinking about energy in the future, and are often now looking to power generation specialists, in the form of Energy Services Companies, to help out.

 Lou: There you have it folks!  I'd like to thank Neil Smith for joining us today.  Neil, will you come back and help us explore the power challenges of the Towerco's?

 Neil: Absolutely, there are a lot of developments coming our way, and the telecom sector is certainly looking to be a leader in the energy transition.

 Lou: That would be great.  Thanks also to everyone listening.  If you'd like to get in touch with the show you can reach us at PowerBytes@cat.com or at Cat Electric Power on Facebook or LinkedIn.  Be sure to subscribe to Power Bytes wherever you listen to your podcasts.  Until next time, have a great rest of your day!