Revealed: AT&T sending letters to tower owners asking for ‘rents reduced to competitive rates’

AT&T appears to be in the midst of a widespread effort to reduce the rental and leasing rates it is paying to cell tower owners, and in some cases is simply asking for a cheaper price.

“AT&T is instituting a new program to evaluate terms and conditions of all leases coming up for renewal, explore advanced renegotiation options and consider possible alternative site locations,” the carrier wrote in one recent letter obtained by FierceWireless. “Our first choice is to create a new agreement that serves all parties well.”

In its renegotiation efforts with tower owners, the carrier is pushing for a number of provisions including “fair” early termination rights, the ability to modify or upgrade tower equipment at no extra cost, reduced or eliminated price increases, and “rents reduced to competitive rates.”

“A ‘no’ or non-response will trigger AT&T’s review of alternate locations,” the carrier warned in one letter.

Indeed, AT&T executives have hinted that the carrier is looking to improve its tower-leasing agreements. AT&T’s Tom Keathley said in August that AT&T is “frustrated” with the real estate rental model that tower companies have developed over the years.

“There is a fair amount of frustration certainly with AT&T certainly with those business practices,” Keathley said during the recent Cowen Communications Infrastructure Summit. “I would even say it may not be sustainable going into the future. In fact, we’re looking at that pretty heavily. We have a task force already assigned with the task to look at that business model. I don’t have anything to report on that yet, but the frustration is very real.”

Keathley acknowledged the carrier could go so far as to locate alternative, nearby towers and move its equipment onto towers that offer better rental rates. “It’s really about looking at what options we have when the contracts are up, per site, and determining whether or not those options make sense,” he said.

Keathley isn’t alone; T-Mobile’s Dave Mayo in May called for the “industrialization” of the cell tower market. "It's too complicated; it's not sustainable," he said during a keynote address at the Wireless Infrastructure Association’s annual trade show.

When questioned by FierceWireless about the letters AT&T apparently is sending to tower owners, AT&T spokesperson Steven Schwadron said the carrier’s executives are “frustrated with the current tower cost structure and believe it is not sustainable, so we created a team within AT&T to begin looking into alternative models. We’re not ready to get into any more specifics at this point.”

Added Schwadron: “We closely watch unit costs – cost per Gigabyte in the case of our wireless network. Tower costs are part of that analysis. Any cost stream that is rising and putting pressure on achieving better unit costs gets evaluated. We assess what we’re doing and consider questions like, ‘Do we need a different business model or can we change the design?’ and ‘Are there competitive alternatives?’ We do it for all cost streams – tower rents and lease cost being one of those.”

Those in the tower industry said that AT&T’s letters are becoming increasingly commonplace. “I have seen many letters like this addressed to landowners/building owners with AT&T leases. Different verbiage but the same ‘reduce your lease rate or else’ concept,” Ken Schmidt, president of Steel in the Air, told FierceWireless. The company assists landowners, government entities, venue owners and others with cell tower lease negotiations against wireless carriers, cell tower companies and lease buyout companies. “These were pretty frequent in 2005-2010, then they seemed to go away for a while. In the last six months though we have been seeing more of them.”

Check out two of the purported letters below:

Related articles:
AT&T’s Keathley: Current wireless tower business model ‘not sustainable,’ task force is researching options
T-Mobile's Dave Mayo calls for 'industrialization' of the wireless infrastructure space