To keep up with the runaway growth in demand - Americans, on average, buy 2,000 cell phones per hour during a regular work day - wireless communications companies need more and more of the transmission towers that pass along the radio signals beamed about by mobile phone users. As many as six wireless phone service providers now hustle for business in each of Florida's major markets, and those companies will commission hundreds of the 100- to 200-foot-tall transmission sites around Florida in the next two to three years. Sprint PCS, for example, will invest some $360 million in licenses and transmission facilities in the state as it launches wireless service in Gainesville, Jacksonville, Orlando, Tallahassee and Tampa, according to Sprint spokesman Dan Wilinsky.
But the towers aren't cheap - whether disguised as palm trees, hidden on water towers or standing in a vacant field. And increasingly, citizens who use wireless phones are objecting to construction of the very towers essential to wireless communication. The headaches associated with building and owning towers have grown so considerable, in fact, that most phone service providers have been only too glad to pay someone else to deal with them. "We're not in the business of building transmission facilities. We're in the business of making sure calls go through," says Pat Collier, spokesperson for BellSouth Mobility in south Florida. As a result, a sub-economy of transmission-tower landlords is springing up. For companies such as Boca Raton-based SBA Communications, Collier's words mean profits.
Founded in 1989 by Steven Bernstein, 38, SBA Communications employs about 400 people around the country, including 80 in Boca. Bernstein, a Florida native and University of Florida graduate, cut his teeth in the Pittsburgh, Pa., office of McCaw Cellular Communications. He launched SBA to handle site acquisition and zoning negotiations for wireless communications providers and moved the company to Boca in 1994. Since its inception, the company has participated in the development of more than 9,000 wireless antenna sites around the country.
In the early days of the cellular boom, dominant players such as BellSouth Mobility and Cellular One had deep pockets and big cash flows; they built and operated their own transmission sites. Congress and technology changed all of that when the Telecommunications Act of 1996 opened up markets to more competition, and the FCC auctioned off more frequencies, opening the door to PCS - personal communications systems. Cell phone service providers such as Sprint PCS, PrimeCo and Aerial Communications entered the market, but they proved to have little stomach for the high costs and the headaches of siting, building and managing transmission towers.
A tower costs $160,000 to $210,000 to build, and the electronics add as much as $300,000 to the price tag. Recurring operating expenses such as site rental costs, taxes and maintenance can add another $8,000 to $10,000 annually. With 200 to 300 sites necessary to serve a major city, wireless providers face major capital expenditures before the first call is connected. With SBA's background in tower development, Bernstein found that the solution was as obvious as the need. The company now builds its own towers, managing the sites and leasing space on them to multiple wireless carriers, paging companies, television broadcasters and specialized mobile radio services. A wireless service pays about $1,500 per month for each transmission site. When a company like SBA can put up to five competing services on the same tower - co-location, in industry terms - the economics of tower ownership swing dramatically in SBA's favor.
SBA now owns and manages more than 300 towers nationwide and has another 400 in various stages of development. The company's growth has been financed by a private equity offering of $30 million funded primarily by four investors: ABS Capital Partners, TA Associates, the Hillman family of Pittsburgh and Chartwell Capital of Jacksonville. The company also received a $75 million bank line of credit in 1997 and a high-yield bond offering of senior notes in 1998 that generated another $150 million. Bernstein remains the majority shareholder. In the past five years, revenues skyrocketed from $6.2 million in 1993 to $64.8 million in 1996, before sliding to $55 million last year. That 1997 decline illustrates changes in the tower business as more companies lease tower space. In 1993, site leasing generated only 2% of revenue. Last year, 14% of SBA revenues came from site leasing, and in the first three months of 1998 that figure was 17% - a trend company officials expect to continue. Meanwhile, site development revenues are under pressure as companies shift away from owning their own towers.
Though a handful of smaller Florida-based companies dabble in the tower business, SBA and Boston-based American Tower Corp. (ATC) dominate the Florida market. ATC operates 171 towers statewide and is developing another 121 sites. A publicly traded company, it reported 1997 sales of $17.5 million, a 500% increase over 1996. It operates more than 1,900 towers in 44 states.
There's plenty of room for growth, too. Though major cities will soon be blanketed with transmission sites, the demand for towers should increase as carriers refine their networks to eliminate dead spots and turn their attention to links between cities, which means towers in the suburbs, in small towns and along highway corridors.
NIMBY
The biggest factor promising continued business for tower landlords such as SBA is the reluctance of cellular phone service providers to deal with towers because of ongoing public opposition to their construction and proliferation. Some citizens fear possible health threats from the radio waves. Others simply object to the towers as eyesores, prompting the tree disguise and placement of towers atop office buildings, water towers, in church steeples and on light towers at softball fields.
The debate has created some interesting public policy dilemmas, with local governments torn between the not-in-my-back-yard (NIMBY) factor and opportunities for easy revenue from leasing land to tower operators. At the state government level, the Bureau of Public Land Administration may soon begin actively marketing state land suitable for towers. On the local level, PrimeCo installed four towers on school property in Palm Beach County and one in Miami-Dade County and will pay the schools $18,000 per site per year for the next 15 years. "Schools throughout the state are dying for money," says PrimeCo consultant Mark Ciarfella. "We thought it made good sense because (most schools) already have towers on them."
Residents in Palm Beach County, however, have put a stop to any further tower construction at their schools. And within the last year Orange County schools have shot down proposals from BellSouth, PrimeCo and Sprint. Seminole County put PrimeCo on hold. Industry spokespeople blame misconceptions for much of the public opposition. A nationwide poll by the TynanGroup, a Santa Barbara, Calif.-based real estate services firm specializing in wireless communications facilities, and Southport, Conn.-based information services company EDR Telecom showed that only 22% of respondents knew mobile phones worked on radio waves, with others guessing satellites, microwaves or fiber optic technology. More than half could not recall ever having seen a transmission tower and only 14% said one was located in their neighborhood.
Despite the fact that most people cannot spot the antennas, aesthetics was the reason most people gave for opposing towers. When told the antennas are low power (typically 25 to 100 watts) and could be disguised as trees, camouflaged on buildings or otherwise made to fit into the character of a neighborhood or the landscape, more than two-thirds of people reacted favorably.
"I can't think of any other industry where you have a product that people have embraced where the infrastructure has to be so near the user," says John Tynan, president of the TynanGroup. "If you want to use it, you have to have it in your neighborhood."