5G Talent Talk with Carrie Charles (00:00)
Thanks for tuning in today to 5G Talent Talk. My name is Carrie Charles and I am your host. I am thrilled to have with me a guest that I have been following on LinkedIn for years and years and reading his posts. And finally, I just reached out and I said, you've got to come on the show. So I'd like to introduce everyone to Ken Schmidt. He is a wireless infrastructure thought leader.

And again, I think he's a thought leader because as you're going to hear in a few minutes, I mean, he's got just an incredible insight into our industry. And he's also the president of Steel in the Air, which we'll hear a little bit more about in a few minutes. So Ken, thanks for joining me.

So let's, yeah, absolutely. Let's talk about you and how you, you know, how did you get into the industry? Tell us a little bit about your story. Sure. So about 25 years ago, 30 years ago, 1997, I graduated from law school. A gentleman that I went to law school with had started a local tower company and basically brought me into the industry, you know, with a couple of other people from law school to help him.

build what would eventually come a couple hundred tower company down in the Southeast. And through a number of things ended up doing some site acquisition on the side of the tower companies and the carriers and zoning, et cetera. And then I realized around 2000, the year 2000, 2001 that landowners were significantly underrepresented in the standard salt tower lease transaction.

there wasn't a lot of information available to them and that they were making mistakes, both from the perspective of negotiating too aggressively or not negotiating aggressively enough. And so the thought came to me that I needed to start a business. So in 2000 and

before we started Steel in the Air. And so this is our 20th year, providing service exclusively to the landowners. Well, congratulations on 20 years. Thank you. Yeah. So let's go into detail a little bit more about your other company as well. So Steel in the Air and also SteelTree Partners, I believe that's your other company, right? That is correct. Yeah. SteelTree Partners is a company I'm a minority partner in, the majority partner is Bruce Wendt.

around 20 years ago as well, 21 years ago, Ruth started a M&A advisory service for private tower owners. She had been handling acquisitions for a private tower, a larger private tower company and felt that there was a market in terms of assisting tower owners and selling and representing their towers. And since then, we've sold three and a half billion towers on behalf of our clients.

I think think around 3 ,000 plus towers over that time frame across the United States, South America, Central America. So, one of the things that's been, that has given me, as you mentioned early, earlier ability to have a lot of thoughts, whether they're all good or not, I'll let other people make that decision. But the thing that's been able to give us a lot of visibility to all different types of the sector, from tower developers to landowners' perspectives, to doing expert services for...

investors, et cetera. So, you know, across the gambit that we've had a lot of opportunity to work across many parts of the sector. And as a result, you know, I started posting a lot of those thoughts on LinkedIn, which is how you found me. I will share with you that every time I go to one of the industry conferences and, you know, I go up to a booth or I talk to somebody and they're like, Ken Schmidt, Ken Schmidt, I know, I know that from somewhere. And then I'm like, like, then and they're like, my goodness, yes, I follow you as well. So.

LinkedIn has been a great place to meet a lot of people, share a lot of thoughts, and then get a lot of dialogue going back and forth, you know, know, in terms of all types of things that are happening in the wireless industry. You know what I love about you Ken you Ken that you tell the truth and you're real. And like you said, you're in a very unique position where you can do that, right? And it's just so refreshing. And typically, you know, your posts, there's...

There's just a lot of activity. And I love to see that because, you know, the only way that we are really going to, you know, be successful is if we all get real with where we are and where we're going. Right. Absolutely. I fully agree. And I think that, you know, from the perspective of not having a carrier client, you know, we don't have any carrier clients. Yeah. We don't have any large public tower company clients. So from that perspective.

I'm not beholden to them and necessary. I can afford to say things that are on my mind that may not be something that other industry vendors can say at risk of offending one of their larger clients. So that has certainly given us some flexibility. But on the opposite side, though, too, one of the hiccups, too, is that I notice that I don't always have as good information as other people do.

And so one of the things that I've really enjoyed about LinkedIn and meeting people on LinkedIn is they do have good information. And, you know, with the volume of people that are willing to review and respond, et cetera, you know, I get as much information back as I put out there. So here's what we're going to do today. We're going to just go through what we'll call hot topics. Okay. We're not really going to have a theme, but we're just going to hit on all of these topics and just talk about them. All right. So very similar. the lightning round.

Similar to what you do on LinkedIn, but live. So why don't we start with 5G? Where are we now? Where is this going? So I think that, you know, 5G from a carrier perspective has been somewhat disappointing. You know, that, you know, we can't ignore that there was a lot of efficiency that's gained by deploying 5G in terms of operating a network and being able to handle the additional volume and the additional capacity that's necessary in wireless networks today. But simultaneously, there hasn't been a significant growth opportunity.

The industry likes to know we'll be talking about private networking, we'll be talking about 5G deployment, small cells, et cetera. But fundamentally, there hasn't been a substantial increase in terms of the RPU, the revenue per user, that each of the wireless carriers has. And as a result of not being able to generate more revenue through 5G, we're sitting in a position where the carriers had to step back this year or last year, primarily the last half of last year, and say, what are we doing?

Where are we generating? Where is this likely to go? Where are we going to be able to generate revenue? Because so far, that use case doesn't exist that every wireless user has to say, I got to use my phone today, and I need 5G to do it. 4G is more than sufficient. So I think that's where we're at with 5G. And as we'll talk about it in a little bit, the carriers have all taken a step back to say, what do we do with this? How do we really make money?

from developing and deploying this much capital towards spectrum and infrastructure. So companies have really invested a lot in private networks. Are they seeing monetization? I mean, where's the ROI here? The ROI simply is primarily from getting the enterprise to invest in that private networking. From a neutral host standpoint, to being able to go out there and then encourage companies to come onto the

the private network, et cetera, it's not really occurring. It occurs at some of the large venues, the sports venues, et cetera, where they absolutely need that type of capacity and use and that there are must haves for the wireless carriers. But from the perspective of the average size, the middle price, and all these enterprises, there's just not an opportunity there for monetization from public operator participation.

It's primarily the internal use case that is driving those that they need greater security. They need faster throughput to operate industrial infrastructure within their facility. They have very dedicated and specific use cases that are really what we would call private networking as opposed to public operator private networking. So we've had, I mean, it's just been a very interesting.

I will say economy, you know, this last year and moving into this year. But what has been the impact of inflation on tower development? So historically, I mean, you've been seeing, you know, we did a study for it and historically over the last 20 years, you know, inflationary impact was about 4 .5 % per year, you know, exceeding inflation, the typical consumer price index, you know, over that 20 year period, you know, in recent years.

Various tower companies will come out and say that the cost of developing towers has increased by half, by 75%, et cetera, from where it was just five years ago. A lot of that's from the cost of steel, the cost of labor, et cetera. And it's also from MLAs, the master lease agreements requiring additional loading on the tower. So collectively, what it would have cost you $350 ,000 or $300 ,000 to build the average tower.

Five years ago, it's closer to 400 ,000 today. Wow, that's significant. So what about these master lease agreements you just talked about? How do you see this changing in the future? You said it has changed significantly, but it's going to change more maybe. So, you know, historically master lease agreements were formed between the public tower companies and the wireless carriers. And, you know, the public tower companies use their weight and their ability to price.

to really inflate those, to increase the cost to the wireless carrier, and to make the terms of the master lease agreement restrictive so that every time a carrier had to go back and put a new equipment onto a tower, it became more expensive to do so. They were getting charged every time they did that, and they didn't like that. And so there's been a very clear push within the last five, seven years for the wireless carriers to look to alternative private tower company models.

that allow them one, a predictable lease rate at a lower amount, two, the ability to make improvements within a bucket of equipment as opposed to specific equipment, three, reduced escalation, four, improved turns and other restrictions that they did not like within their public tower company master lease agreements. And so what you see is that whereas a...

doing a master lease agreement with a public tower company was the primary way of going out and developing towers. It's no longer. It's all private tower companies. And one of the facets of this that's kind of interesting to me is that the private tower companies, because there's enough of them, and three, five years ago when money was extremely cheap, they were all competing against each other to get these build the suit opportunities with the carriers. It was just a race to the bottom.

to see who could agree to the more carrier -friendly terms. Interestingly enough, within the last couple of weeks, we're starting to see some pushback on that, where some of the tower companies are saying, no, we're not going to agree to these onerous terms that you're trying to enforce with the carriers. But by and far between the average new co -location lease that a wireless carrier is entering into,

It's much more favorable to the carrier than it has been historically. So how? Yeah, go ahead. Yeah. So notably where it pertains to the cost of the tower, some master lease agreements have a requirement that the tower company has to hold 40 ,000 square inches of sale face for the antennas and the equipment that's going to go on the RAD Center. And so, you know, whereas when we started in this industry, you know, you put up 5 ,000 square inches.

Now they're putting it 20 ,000 square inches. All the square inches are wind loading, and that means that the cost of developing the tower and retaining that interest just increases the cost of the tower going forward. And if you multiply that by AT &T and Verizon and T -Mobile, pretty soon you're handling a lot of equipment on the top of the tower that wasn't there before. So I know a lot of people that own

small tower companies, right? I mean, all over the country. How is this going to affect, you know, the smaller tower companies? And is there an opportunity, you know, to get into this world as a tower owner, tower company? Answer the other question, no. So if you're not already in it, if you're not coming from a tower company and you don't have the relationships with the wireless carriers already, it'd be very difficult to jump into the sector and try to make any type of movement, even with a lot of money.

I mean, Tillman Infrastructure tried exactly that. They've had their successes and failures. You know, they'd well, 1500 plus power. So it's by no means a failure. But they're also finding their way. So anybody else that was trying to get into the sector, well, capitalized or not, still have similar issues. What was the other part of your question? is the smaller tower companies, is this going to affect them? Are they, you know, what impact is this going to have on the smaller ones? So I call it the Frankensteining of the master lease agreement.

that the carrier goes back and they say, here's what this company was willing to agree to or this company, and they take all of the worst turns and they put them and bundle them together in a master lease agreement that is just more onerous for the private tower company. There's a give and take, and I don't want to say that some of that's not deserved, that the carriers deserve better master lease agreements than what they were entering into 20 years ago.

The world is a different place. There are a number of private tower companies that are more than interested in doing build the suit. It's just a question of that give and take. And at what point do you push too hard for it? For the private tower companies, it means that to the extent that they're doing master lease agreements with the carriers on anchor builds where they're building, doing a build the suit for the carrier, you've got to give a lot. I mean, there are no shortage tower companies that are interested in doing that.

And so from that perspective, you have to agree to it. Where I find some difficulty is that some tower companies are agreeing to it on their regular co -location leases when additional carriers come onto the tower. And as a result, there's a weakening reduction in terms of the overall value of the towers that they're developing when they agree to these negative terms. So let's talk about the industry, really. Just take a macro view.

You know, we've had, you know, last year as well, like you said, especially the second half of the year. I mean, we felt it really the whole year and every conference I go to, which I go to lots of them, you know, we're all talking about it. So what's the state of let's say wireless today? Will we see it rebound in 2024? Is there no such thing as a rebound coming? Is this our new normal, if you will? Somewhere between both of those. So, I mean, if we're if we're looking at.

the rebound to 2022. Yeah, no, we're not rebounding to 2022. There was an aggressive expansion, you know, aggressive modifications of existing sites, a lot of capex that was being dedicated to the market. That's not going to reoccur. I don't think ever. You know, you want another, you want another hot take here. You know, I don't know that we're ever going to get to back to that point where, you know, we deploy as aggressively as we did with the first round.

5G. Certainly not in 6G to me, but time will tell on that. But from the perspective of what we're seeing, I think that we will see some rebound. I think we're already starting to see it. 2024 has definitely started off more busy than the second half of 2023. And I know that from one of our earlier conversations, you had mentioned that you were getting a lot more inquiries to you about hiring, people looking to hire.

people out there. And I think that's all reflective that we're starting to see the inflection point towards more activity. I think the wild parts here this year are T -Mobile and Dish. What happens with T -Mobile and Dish? Verizon has been steady. They continue to be steady. They're continuing to deploy. They're using a lot of private tower companies to deploy a lot of towers this year. AT &T, we're starting to see the activity in terms of them deploying.

A lot of the equipment, new equipment for 5G, they're one truck roll, if you will, of adding a lot of equipment at the same time to their existing cell sites to kind of catch up with where Verizon and T -Mobile already are. So both of those, we're already seeing the activity very clearly, you know, the beginning of 2024. Not going to be the same as 2022, but it's still good and it's still elevated and it'll keep people busy. Where I don't know,

And you see in the public tower companies earnings reports so far, there's a lot of question in terms of what happens with T -Mobile. What are they really going to be spending this year? And then from the standpoint of DISH, are they going to be spending this year? So far, they've got a deadline next year in June to be able to deploy to 70 % of the PEAs, 416 partial economic areas across the country.

which is going to require another couple thousand, five thousand plus sites, you know, to get to that coverage level. And so far, I don't see anything from them. I mean, we haven't seen anything, a single thing from them this year in terms of new activity. So, you know, when does that turn around? I think I mentioned to you in our pre -call that, you know, some of our private tower companies are seeing, you know, over the last couple of years have seen 50 % of their new colocation activity.

across the board coming from DISH. And if DISH isn't as active as they were when they deployed the first 17 ,000 sites, where does the new activity come from? And so I think there's a big wild card out there in the industry what happens to DISH. And there was an interesting article in RCR just at the end of last week about the potential. One of the analysts coming out and saying there's a potential for DISH to go bankrupt or.

yet the fail is increasing. So it's a wild card for me as to what actually happens, but that's, that's a big mover. And I think that has a more outsize effect, you know, on vendors on tower companies than people would expect. So, you know, it seems like this is the year of uncertainty really. And you know, how do you run a business? How do you lead based on uncertainty? Is there anywhere that

these wireless companies and I'm speaking mostly about the smaller companies, obviously that's because that's who I'm talking to on a day to day basis. But, you know, what should wireless companies do to survive, to thrive? I mean, do we need to pivot? You know, is there, what do we need to do here? Because again, we can't, we can't just sit and wait and, you know, wait for something to happen because we've got expenses. We've got an infrastructure that we built based on 2022, right?

And so we're still paying for that. I mean, there's a lot of factors present. So what are your thoughts? I'd say that realistically, I think that the companies are in that situation that had been relying upon an AT &T. We're not much much on Verizon, but we're relying on AT &T, Dish or Tea Mobile for a substantial portion of their revenue. We say that the industry like Nate NATE whoever has suggested that you need to pivot and you need to look at a like like

electric charging stations or fiber or small cells, et cetera. But I think that realistically, my advice would be to start pairing back, being more selective in terms of the contracts that you take and look for a more sustainable long -term opportunity to continue providing services at fee structures that make sense to you. Those days of where the industry is clamoring and they're willing to hire anybody to get work done because they just have so much work done.

I don't know when we see that, maybe a couple of years from now, maybe 10 years from now. So I think that from a rational standpoint, having been a contractor that went out of business before with a small site acquisition firm that went out of business because of lack of payment, et cetera, it seems to me that chasing the large contracts, especially at the terms that T -Mobile or AT &T are willing to give today, is problematic. So I hate to say it because it's probably not what

some people want to hear, but I think there's a time to step back and to be more pragmatic about what the opportunities are that are coming and to look for opportunities to maximize on -profit as opposed to maximize on -value. I agree. And I think, again, get real. I'm reading this book. I'm rereading it. I think I've read it like 12 times, but it's called Good to Great. And there's an entire chapter on there that's just about facing reality.

And I think that's the most important thing now versus waiting for this magical time to come back or waiting for it to be different or, you know, just, just, we need to get very real with where we are now and, and maybe even look at it like, well, let's say it was going to, it's going to be like this. And this is what it is now. What do we do? Right? So I think your points are important because we do as business leaders need to know the truth about where we are.

Question about the workforce. I mean, are we losing our workforce? Are they going into other industries? I know that there's so many layoffs in telecom, specifically on the wireless side. You know, what is what's happening there in your in your point of view? When if you and I will be candid up front that this is just not, you know, I don't deal with the workforce side as much as you do or others do, you know, from a contracting standpoint. Yeah, so.

My perception, though, is that from a workforce perspective, the carriers have been aggressively pushing that we need more educated workers, that we need to train more workers, et cetera. I posted a query at one point recently on LinkedIn and asked the question. The industry is saying we need more people trained. Is that the case? And it was about, I want to say it was like 40 %

people said, yes, we do need some more trained workers. And 60 % said, no, we've got a lot of workers that aren't active right now. I publicated to you back in the day, in the earlier days of site acquisition, there were a lot of people that would fluctuate between being land and then for the oil and gas industry. And then they'd switch to wireless. When the wireless industry was picking up and oil and gas was down, and then they'd go back and forth, et cetera. And so I suspect that there's going to be more of that where,

yet going forward, you just need to be flexible in terms of the jobs that you're willing to take and the capabilities that you have. So flexible, flexible. I think that's the key right there. And, you know, I'm hearing more and more about people having multiple jobs. And I mean, some of them have multiple jobs during the same exact work hours, which is a whole other story and a problem. But, exactly. Well, let's talk about AI. So and again, I don't know.

you know, how much expertise you have here, but I'm so fascinated with AI and the impact that it's going to have on our industry. Because if you think about it, you know, looking at AI and how it could even reduce the need for, you know, certain roles, obviously increase our efficiencies and so on and so forth. But what are your thoughts on the impact of telecom? I mean, of AI in telecom? So middle management.

you know, a significant impact on middle management, on people that are doing administrative roles, et cetera, such as tracking data, filing, et cetera. You know, we've been using AI in our own business, you know, and learning fairly on an abrupt learning scale, you know, how it's going to fit in or not, et cetera. And, you know, I continue to be amazed at every time we try something in AI and get a positive response back. And...

You know, for us personally, I'm only going to speak for us personally, but we're looking at it as a way of being much more efficient with the people that we have. I've already talked to my staff and I've said, look, I don't intend to fire any of you, but I'm telling you right now that AI is going to be a significant influence in terms of our work product going forward. And in that regard, you need to be prepared where I'm asking you to be prepared to learn to do other tasks. You're good people.

But realistically, you need to be prepared that your role may change going forward. And I think the same thing happens at the carrier levels. There are a number of functions that could be implemented by AI. I think I was reading that Microsoft is really one systematically experts in various industries. And they're using those experts to train their AI on how to replace those experts' job functions in their relative industry.

And so from that perspective, I think it's going to be a scary place because many times the person, the live person is going to be training the AI to be able to do their job for them, which in some cases may end up being a replacement, replacing them eventually or moving them into another sector, et cetera. I think back in terms of some of the jobs that I've done personally in the past, there are a number of parts of site acquisition or zoning, et cetera.

that could be done by AI, but it ultimately needs a live person at the end of the stream. One, to correct it, and then two, to actually go forward and to stand in front of a board or to talk to the landowner, et cetera, that needs that human touch. So going forward, I think the industry starts to adopt AI and that it will catch on very rapidly, and that soon enough, there'll be a race to see whose AI is better than...

I agree. I agree. And I do think as leaders that are even in everyone as humans at the, you know, where we are living today, we all need to understand AI, we need to learn it. And I took it on myself, and I found courses and, you know, books, and I think we all need to take that on. And, you know, and also let our companies and our leaders know, look, I'm very interested in this. I'm learning, I'm taking a course, I'm

I mean, there's all kinds of free courses out there right now, but as long as you are perceived as somebody who is, you know, who's really up leveling your skills and interested in that, you know, I think definitely you've got a shot of not being replaced by robots, right? And so they said that you can find ways to replace parts of your job, you know, in a constructive way while, you know, increasing the value that you have to the company.

You know, I had one of the I had one of my staff members come to me independently and just say, hey, I took an 11 hour course on AI, you know, because I'm afraid that my particular job is one that you won't need going forward. Because of AI, because of what AI can do, I can already see that some of the things that I do are replaceable by AI. And to her credit, that's exactly what she should have been doing was learning about AI, learning how she can do more with her time to become more effective for, you know, our particular company.

Well, yeah, in fact, she may have taken the same one I did because mine was exactly 11 hours too. So good for her. Good for her. So Ken, I could talk to you forever. Thank you so much for sharing your thoughts. And it's just been, it's been engaging. How can we reach you and find out, like follow you and learn more? So LinkedIn cell tower lease expert is my handle. Ken Schmidt on LinkedIn. I'm more than happy to connect to anybody and have discussions with them.

Instead message me on LinkedIn. I am available on SteelInTheAir .com and then SteelTreePartners .com. Both ways you can submit questions either directly to us via email or otherwise. And then I used to use Twitter, but I'm not using it anymore. So at the... Long story there, huh? Long story. It's that you didn't have the value that we needed, but happy to have conversations with people. And yeah, just this...

I invite people to respond to the things that I have on LinkedIn. I post a lot of things. You mentioned you think of me as a thought leader. I'll accept that. But from the perspective, there's always a potential that I just don't know everything. I don't know what I don't know. And I love to have feedback that says, hey, you haven't thought about this. Or here's something else. Here's something additive that I can add to those discussions. And this has been a pleasure. Thank you for your time. Thank you as well. Pleasure. OK, take care.