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Negotiating Your State and Local Government (Municipality) 5G Implementation
5G networks are the next generation of mobile phone service delivered at higher frequencies that requires shorter distance between “backpack” sized cell sites. Municipalities are challenged when negotiating with carriers regarding the installation of these small cell sites due to the Federal Communication Commission’s (FCC) 5G Order on Small Cell Siting.
The FCC’s Order limits the dollar amount municipalities can charge carriers for each cell site to $270 per year. The order also places a time limit on approving applications for a new cell site of between sixty to ninety days, depending on if the install is for an existing or new structure. This effectively eliminates the practice of earning meaningful fees based on leasing cell site access to carriers.
Negotiating 5G implementations under the FCC’s order presents many challenges requiring the following items to consider:
- Does the annual lease fee cover maintenance on structure (light pole, billboard, or building) as a result of the added cell site “backpack”?
- Is it in the municipality’s best interest to own the equipment?
- If you own the equipment, consider how maintenance and replacement will be managed in the event of unintended maintenance issues such as a vehicle or storm event knocking out a pole.
- Consider which complimentary or fee-based services will best serve the taxpayers.
As presented above, these are considerable challenges for municipalities to consider.One method for mitigating the risk and challenges to a 5G implementation is to collaborate with your public works department to understand how often the structures such as light poles require planned and unplanned maintenance. This will help you calculate the ROI of the small cell site lease fees.
An ROI formula to consider is:
The total number of light poles divided by the number of unplanned maintenance per year in terms of a percentage of unplanned maintenance.
(TOTAL # LIGHT POLES)/(# UNPLANNED MAINTENANCE EVENTS/YR)
(800 poles)/(18 unplanned maintenance events) = 2.25%
Multiply this percentage by the number of poles containing 5G equipment.
(175 poles * 2.25%) = 3.9 poles with unplanned maintenance.
Then compare the average cost of unplanned maintenance per pole multiplied by total poles forecasted to have unscheduled maintenance. in this case our example suggests 3.9 or 4 poles to the total lease revenue and equipment replacement cost serve if any.
Our Take
Deploy both a quantitative ROI coupled with a qualitative approach to mitigating the challenges of negotiating your 5G franchise or lease agreements. Understand if it is in the municipality’s best interest to own the equipment or not. Taking an extreme and cynical view of the what could happen, how often the event happens to ensure continuity of service, budget favorable or neutral, and prevent from any negative news is essential to a successful 5G initiative.
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