Virtually all of our operations are located in the U.S. and Australia. We conduct
substantially all of our operations through subsidiaries of Crown Castle Operating
Company ("CCOC"), including certain subsidiaries which operate
our wireless infrastructure portfolios in the U.S. and a 77.6% owned subsidiary
that operates our Australia tower portfolio.
We own, operate and lease shared wireless infrastructure, including: towers
and other structures, such as rooftops (collectively, "towers"), and
to a lesser extent, distributed antenna systems ("DAS"), a type of
small cell network ("small cells"), and (3) interests in land under
third party towers in various forms ("third party land interests")
(collectively, "wireless infrastructure"). Our core business is providing
access, including space or capacity, to our towers, and to a lesser extent,
to our small cells and third party land interests via long-term contracts in
various forms, including license, sublease and lease agreements (collectively,
"contracts"). Our wireless infrastructure can accommodate multiple
customers ("co-location") for antennas and other equipment necessary
for the transmission of signals for wireless communication devices.
We generally receive monthly rental payments from tenants, payable under long-term
contracts. We have existing master lease agreements with most wireless carriers,
including Verizon Wireless, AT&T, Sprint and T-Mobile; such agreements provide
certain terms (including economic terms) that govern contracts on our towers
entered into by such carriers during the term of their master lease agreements.
Over the last several years, we have negotiated up to 15-year terms for both
initial and renewal periods for certain of our customers, which often included
fixed escalations. We continue to endeavor to negotiate with our existing customer
base for longer contractual terms, which often may contain fixed escalation
rates.
Our customer contracts have historically had a high renewal rate because (1)
our wireless infrastructure is integral to our customers networks, (2) it is
generally financially unattractive for our customers to relocate their antennas
and other equipment to other wireless infrastructure or to construct new wireless
infrastructure, and (3) zoning and other barriers may preclude our customers
from constructing new wireless infrastructure. With limited exceptions, the
customer contracts may not be terminated prior to the end of their current term.
In general, each customer contract which is renewable will automatically renew
at the end of its term unless the customer provides prior notice of its intent
not to renew.
The average monthly rental payment of a new tenant added to wireless infrastructure
can vary based on (1) the different regions in the U.S., (2) aggregate customer
volume, and (3) the type of signal transmitted by the tenant, primarily as a
result of the physical size of the antenna installation and related equipment.
In addition, with respect to our small cells, the amount of the monthly payments
can also be influenced by (1) the cost of installation, including with respect
to the fiber, and (2) the amount of upfront payments received. We also routinely
receive rental payment increases in connection with contract amendments, pursuant
to which our customers add additional antennas or other equipment to wireless
infrastructure on which they already have equipment pursuant to pre-existing
contract agreements.
Approximately two-thirds of our direct site operating expenses consist of lease
expenses and the remainder includes property taxes, repairs and maintenance,
employee compensation and related benefit costs, and utilities. Our cash operating
expenses tend to escalate at approximately the rate of inflation, partially
offset by reductions in cash lease expenses from our purchases of land interests.
As a result of the relatively fixed nature of these expenditures, the co-location
of additional tenants is achieved at a low incremental operating cost, resulting
in high incremental operating cash flows. Our wireless infrastructure portfolio
requires minimal sustaining capital expenditures, including maintenance and
other non-discretionary capital expenditures.
We use public and proprietary databases to develop targeted marketing programs
focused on carrier network expansions, including DAS, and related network services.
We attempt to match specific wireless infrastructure in our portfolio with potential
new site demand by obtaining and analyzing information, including our customers
existing antenna locations, tenant contracts, marketing strategies, capital
spend plans, deployment status, and actual wireless carrier signal strength
measurements taken in the field. We have developed a web-based tool that stores
key wireless infrastructure information above and beyond normal property management
information, including data on actual customer signal strength, demographics,
site readiness and competitive structures. In addition, the web-based tool assists
us in estimating potential demand for our wireless infrastructure with greater
speed and accuracy. We believe these and other tools we have developed assist
our customers in their site selection and deployment of their wireless networks
and provide us with an opportunity to have proactive discussions with them regarding
their wireless infrastructure deployment plans and the timing and location of
their demand for our wireless infrastructure. A key aspect to our sales and
marketing strategy is a continued emphasis on our process-centric approach to
reduce cycle time related to new leasing and amendments, which helps provide
our customers with faster deployment of their networks.
Federal Regulations. Both the FCC and the FAA regulate towers used for wireless
communications, radio and television broadcasting. Such regulations control
the siting, lighting and marking of towers and may, depending on the characteristics
of particular towers, require the registration of tower facilities with the
FCC and the issuance of determinations confirming no hazard to air traffic.
Wireless communications devices operating on towers are separately regulated
and independently licensed based upon the particular frequency used. In addition,
the FCC and the FAA have developed standards to consider proposals for new or
modified tower and antenna structures based upon the height and location, including
proximity to airports. Proposals to construct or to modify existing tower and
antenna structures above certain heights are reviewed by the FAA to ensure the
structure will not present a hazard to aviation, which determination may be
conditioned upon compliance with lighting and marking requirements. The FCC
requires its licensees to operate communications devices only on towers that
comply with FAA rules and are registered with the FCC, if required by its regulations.
Where tower lighting is required by FAA regulation, tower owners bear the responsibility
of notifying the FAA of any tower lighting outage and ensuring the timely restoration
of such outages. Failure to comply with the applicable requirements may lead
to civil penalties.
Australia
Federal Regulations. Carrier licenses and nominated carrier declarations issued
under the Australian Telecommunications Act 1997 authorize the use of network
units for the supply of telecommunications services to the public. The definition
of “network units” includes line links and base stations used for
wireless voice services but does not include tower infrastructure. Accordingly,
CCAL as a tower owner and operator does not require a carrier license under
the Australian Telecommunications Act 1997. Similarly, because CCAL does not
own any transmitters or spectrum, it does not currently require any apparatus
or spectrum licenses issued under the Australian Radiocommunications Act 1992.
Carriers have a statutory obligation to provide other carriers with access to
towers, and if there is a dispute (including a pricing dispute), the matter
may be referred to the Australian Competition and Consumer Commission for resolution.
As a non-carrier, CCAL is not subject to this requirement, and our customers
negotiate site access on a commercial basis.
Competition. We compete with (1) other independent tower owners which also
provide site rental and network services, (2) wireless carriers which build,
own and operate their own tower networks and lease space to other wireless communication
companies, and (3) owners of alternative infrastructure, including rooftops,
water towers, broadcast towers, utility poles, DAS and other small cells. Some
of the larger independent tower companies with which we compete in the U.S.
include American Tower Corporation and SBA Communications Corporation. In addition,
some wireless carriers own and operate their own tower networks, and certain
of such carriers are larger and have greater financial resources than we have.
We believe that tower location and capacity, deployment speed, quality of service
and price have been and will continue to be the most significant competitive
factors affecting the leasing of wireless infrastructure.
Competitors in our network services offering include site acquisition consultants,
zoning consultants, real estate firms, right-of-way consulting firms, construction
companies, tower owners and managers, radio frequency engineering consultants,
telecommunications equipment vendors who can provide turnkey site development
services through multiple subcontractors, and our customers internal staff.
We believe that our customers base their decisions on the outsourcing of network
services on criteria such as a companys experience, track record, local reputation,
price and time for completion of a project.
In Australia, CCAL competes with wireless carriers, which own and operate their
own tower networks; service companies that provide site maintenance and property
management services; and other site owners, such as broadcasters and building
owners. The other significant tower owners in Australia are Broadcast Australia,
an independent operator of broadcast towers, and Telstra and Optus, wireless
carriers. We believe that tower location, capacity, quality of service, deployment
speed and price within a geographic market are the most significant competitive
factors affecting the leasing of wireless infrastructure in Australia.