Over the course of the last 25 years, the cellular industry has experienced tremendous growth. Cell phones have graduated from an ultra-expensive communication device to an inexpensive commodity. The cellular network – the foundation that all cell phones depend upon for service – has rapidly expanded as well. Cellular networks have spent much of the past 25 years leasing property, building “cell towers,” and establishing “cell sites” as quickly as possible in order to meet demand. Today, changing cellular technologies are causing cellular networks to re-organize their cell sites and towers (and their leases).
When cellular phone technology first began to gain popularity, the rush was on to build a cellular network as quickly as possible. Most of this expansion occurred during the first and second generations of cellular technology during the late 1980s and 1990s. During these days, cell towers and cell sites were often chosen based on location. Certain properties and buildings offered “ideal” coverage, and cellular networks often paid exorbitant lease rates for these “ideal” spots because the cellular technology of the time was simply too limited to work anywhere else.
But as the expression goes “times, they are a changin’.”
Today’s third generation cell phones operate completely different than the first and second generation of just a few years ago. Older cellular networks were far less sophisticated than today’s networks, and they required higher antenna sites to cover more area. Today’s networks…not so much. Today, carriers need more sites closer to the ground that are operating with greater bandwidth. The closer to the ground, the more locations to choose from.
The bottom line is that cellular networks no longer need to focus on finding the “best” locations for cell sites because cellular phone technology has changed.
These advances have benefited the consumer, but cell site lease holders have not profited from this new reality at all. Recently, in an effort to cut costs, wireless networks have been meticulously going over every lease they have because a good number of them are much too expensive in the current climate. Changes in technology have also allowed for an increase in competition between property owners. Now that there is no longer such a things as an “ideal” location, more property owners can offer leases at lower rates than current leaseholders.
The progress that has been made in this industry has been huge. After 25 years, the industry is still advancing technology at full speed. As the hardware for the cell sites changes over the course of time, re-negotiation of lease terms is the norm. Consumers are naturally happy about this improvement in service, while property owners are understandably disappointed about the lower site rates. Still, there is an upside to this sea-change in the cellular leasing industry. In exchange for re-negotiated lease terms, many wireless carriers are offering guaranteed long-term leases. Even in a competitive environment of declining rents, there’s a silver lining.