A few weeks back, we at Meritage announced our investment in NewPath Networks. I didn’t have a chance to blog it then, although my Partner Stephanie McCoy did. I wanted to share some thoughts here; albeit delayed. NewPath is an operator of distributed antenae system (DAS) networks. NewPath operates these “active” networks on behalf of major wireless carriers, like AT&T Wireless, Verizon Wireless and T-Mobile.
The wireless sector is one of the real bright spots in the network-enabled economy. Despite macroeconomic conditions, consumer demand for data services is really taking off. The recent launches of Internet friendly smartphones like the iPhone, the Blackberry Storm and phones based on Google’s Android operating system have only served to accelerate the pace of growth in demand for wireless data services. The big carriers have a great problem on their hands; how to serve this growth in consumer data demand.
To be specific, the problem for carriers is that their existing networks were optimized for carrying voice traffic. Those of you in the industry know that voice is a remarkably lightweight application in terms of data consumption. Yes, it is highly sensitive to latency and jitter, but it is not a data hog. Data applications are, by definition, highly data intensive, but for the most part, are not sensitive to latency or jitter. If you are wondering if that has implications for carrier network design, you are asking the right question.
The carriers are in fact serving data services out of an infrastructure that is optimized for voice, but not necessarily for data. This creates bottlenecks all over the carriers’ networks, including at the backhaul level and the equipment level. The carriers are making adjustments on both fronts by pulling fiber to their towers and re-architecting their networks for 3G and 4G radios. But there is a more fundamental issue. It turns out that towers, where carriers co-locate their wireless equipment, were also designed to serve voice traffic, not data traffic. So what is the problem with towers? First, they are high (40+ feet off the ground) and height is a disadvantage in data services. Second, towers are unsightly and more and more communities are fighting tower zoning (particularly wealthy communities where there are lots of iPhones and Blackberries). And third, some topologies are not conducive to more towers because of RF interference issues.
So what is a wireless carrier to do; ignore the demand? Not a chance; there are alternatives. It turns out that DAS is the solution that the wireless carriers are increasingly turning to. DAS is a fiber-fed, low to the ground, non-intrusive wireless network that connects to the wireless carrier’s infrastructure. DAS puts radios on light-poles and utility poles. It is ideally suited for driving data bandwidth to ground in areas where tower zoning is not feasible or where the topology is not conducive to additional towers. DAS is not a new concept; it is a proven network toplogy that has been around for decades. Consumer demand for data service is the driving force; and it is causing wireless carriers to implement DAS at a pace never seen before.
NewPath builds these networks for carriers and then operates the networks. Thematically, this is perfectly aligned with the trend toward carriers outsourcing their active networks. Getting into the DAS business is not for everyone. Running an active network on the part of AT&T takes a very high level of sophistication and frankly, a high-level of trust on the part of AT&T. This is not a landlord/tenant relationship like exists in the tower space. It is a long-term operating relationship, where by contract, NewPath will operate a network for AT&T or Verizon on an initial contract term of ten years. That is a long time.
Thankfully, the NewPath team, including Mike Kavanagh and Sean Coopriderare pros. Having been in the wireless sector for a long-time, they have the relationships with the carriers - and frankly the trust of the carriers - that is required to make the business work. I’m excited to have them and the entire NewPath team join the Meritage portfolio. Kudos to my Partners Stephanie McCoy and Jim Dovey for pulling this one over the line.
Filed under: New Investments, Portfolio, Wireless, DAS, towers, wireless data
