Charter Uses Towers To Mine for Revenue
By JEFF BAUMGARTNER -- Multichannel News, 11/12/2000 7:00:00 PM
More cable operators have realized that old technology can carve out new streams of cash as wireless spectrum increases in value.
In this case, the source of that revenue happens to be the hundreds of wireless towers owned and operated by cable companies. As the cable industry shifts from terrestrial microwave to fiber, the need for those towers is quickly diminishing, leaving with a base of fully depreciated but languishing assets.
The latest MSO to recognize that is Charter Communications Inc., which recently hired Dallas-based KGI Wireless to license spectrum on its roughly 1,500 microwave towers to wireless carriers that hunger for more capacity. This way, Charter doesn't have to write contracts on each site, but instead allows KGI write up master agreements with wireless carriers.
"This agreement will enable Charter Communications to leverage its tower assets and maximize their revenue potential by licensing space on its cable towers to the wireless industry," Charter senior vice president of engineering John Pietri said, in a press release.
"Wireless carriers are desperate to create or locate cell cites-not so much for coverage anymore, but capacity," KGI partner Stott Greenwell said. "Wireless carriers are saying they've got enough coverage, but what they can't handle is all of the people who want to talk at the same time."
Because wireless is little more than controlled interference with limited amounts of spectrum and channels, the quick fix is to add more sites. However, local municipalities and zoning boards shudder at the thought of littering the landscape with scores of new towers.
The solution? Tap and sell the available capacity on existing but relatively dormant wireless pillars.
In Charter's case, KGI serves as the facilitator for such deals, bringing the cable operator and wireless carriers together and finding common ground. Time Warner Cable has also signed KGI to license capacity on its 700 existing towers.
"We put these corporate giants, these two industries, together in a way that makes compelling sense," Greenwell said His company leases spectrum to "the cream of the corporate crop," he added, including tenants such as AT&T Corp., Verizon Communications, Sprint Corp. and SBC Communications Inc.'s Southwestern Bell.
KGI is presently auditing Charter's tower inventory to verify locations. Because of pent-up demand for capacity, however, there are already about a dozen or more deals in the cue, Greenwell said.
"It doesn't matter whether I've audited it or not, (carriers) want to locate on it even before it has been audited," he said. KGI gets paid a fee based on the total initial-term license revenue written into each contract. The tenant pays for ongoing tower maintenance, Greenwell added.
Several cable operators have already identified the concept of renting tower capacity to wireless carriers. In 1999, for example, The Tower Synergy Group-which at the time consisted of Rifkin & Associates, TCA Cable TV Inc., Triax Telecommunications Co. LLC and Multimedia Cablevision Inc.-hired Centerpointe Communications to market space on about 700 towers.
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