Ron Mudry, President and CEO, Tower Cloud
Having just raised $49 million during what has been a challenging economic time, Ron Mudry, President and CEO of wireless backhaul specialist Tower Cloud, is confident he's got what he needs to tackle new wireless backhaul opportunities. Taking a hybrid approach to backhaul that incorporates both fiber and microwave, Mudry believes a key differentiator is that Tower Cloud can provide wireless backhaul services in not only Tier 1, but also Tier 2 and 3 markets through a mix of its own fiber and aggregating connections from other local providers. FierceTelecom Senior Editor Sean Buckley recently caught up with Mudry to talk about wireless backhaul trends and how it's attacking the opportunity.
FierceTelecom: There are a lot of options for wireless backhaul these days with a host of incumbent players, competitive players and wireless backhaul specialists like Tower Cloud. As a wireless backhaul specialist, what do you think sets you apart from other players?
Ron Mudry: Wireless backhaul is all we do, and what we look to do is differentiate ourselves by providing the wireless carriers comprehensive coverage of the market or region we are serving. We primarily use fiber to reach these cell sites. Typically, we reach 80 percent of the sites we serve with fiber and we supplement that coverage with microwave to get out to the harder to reach areas. Our company operates in Tier 1 markets like Atlanta, Ga., but we also operate in a lot of Tier 2 and Tier 3 markets like Augusta, Ga. and Montgomery, Ala., and even smaller rural markets in southern Georgia, including some of the interstate highways like the corridor along Interstate 75. The combination of serving Tier 1, 2 and 3 markets in a region allows us to have deep coverage for our carriers and provide them an end to end solution for some very hard to reach territories. I think one of our key differentiators is the customized design of our network to enhance the fiber coverage and make sure that we have an end-to-end service across a very broad region.
FT: Can you talk about your fiber deployment process. Is it a mix of your own fiber with rented facilities from other local providers?
RM: One of the keys to our solutions is to partner with local providers in the markets that we're serving, which have good assets and deep knowledge of the market. We'll utilize existing fiber where feasible from our partners and then we'll build fiber to the cell tower from there. We'll start out with a backbone that we can get from existing facilities where they are available, and where they're not available we'll build our own backbone where it makes economic sense. Then, we're building the fiber laterals out to the cell towers and installing the equipment and operating the network. When you're in a large Tier 1 market like Atlanta, there's a lot of dark fiber providers. In our case, we put together a 600-mile dark fiber network by working with five different dark fiber partners, whereas when you go to a smaller market like Valdosta or Augusta, there's not as much facilities. This meant we had to do a bit more of our own building to get out to the important growth areas like military sites and colleges and universities. We like to target the cell towers around those areas because there are a lot of heavy users in those facilities.
FT: You mentioned there are a lot of opportunities in smaller Tier 2 and 3 markets. How important is to have a diversity of markets to your wireless backhaul strategy?
RM: We think it's very critical because obviously there are a lot of companies that are pursuing the NFL cities, but there's not as many people serving the smaller markets and there's just as important to the wireless carriers and consumers, so we think a balance of those markets makes a lot of sense in our region. The other thing that's interesting is that in many cases the towers in the smaller markets can have higher capacity per site than what you'll find in Tier 1 markets. This is simply because in a Tier 1 market, there's a lot more tower density and the carriers can balance and load a bit more. Two examples of this trend are seen in Albany and Americus, Ga. These are markets where we see 20-30 percent more capacity per site than we see in Atlanta. We think that's a critical component of serving these smaller markets in making sure that we're targeting those areas where you have those high capacity sites. I think that's a balance to our overall strategy by having a mix of the Tier 1, Tier 2 and Tier 3 markets.
The other thing about the smaller markets is that in the Southeast market, where we operate the local telephone varies significantly. There are a lot of rural LECs, so it's not all about AT&T (NYSE: T) and Verizon's (NYSE: VZ) territory. For the wireless carrier to get a regionalized solution they'd have to work with a number of local providers to get that traffic transported back to another market where their switch is or they can work with us and get one solution for the entire region and we take care of aggregating the traffic across those different LEC territories and getting it to their switch.
FT: So in some ways you're like an aggregator that works with these local providers that can then in turn give a simple package to a wireless operator looking for an alternative backhaul source?
RM: An aggregator is a concept in that context, but we are the actual operator. The other thing that's interesting about it is that while you might think these LECs are our competitors because they are serving those sites with T1 circuits today. As we move to Ethernet world and we have to build fiber to those sites, a number of the RLECs look to us as a partner now and work with us rather than act as a competitor. I think that's key to our success in a lot of the Tier 2 and Tier 3 markets.
FT: In the past year, you raised $49 million in new funding. Tell us about that and how it enhances your strategy.
RM: Obviously, building new fiber infrastructure and wireless infrastructure for backhaul is very capital intensive so we we're fortunate to have a supportive group of investors. We were able to raise $49 million of additional equity this year, which in a challenging financial market we think that's a vote of confidence in wireless backhaul market and the business model. What it allows us to do is to be able to bid and expand aggressively with our backhaul solutions for the wireless carriers. We raised that money in order to build out cell towers that we recently won in our backlog that we bring on line in the next three to six months.
This article is part of our latest eBook, Telco Backhaul Strategies
As an example, we just launched the Dothan, Ala. market and we'll launch in the Columbus and LaGrange, Ga. areas shortly. We also just won a large territory in south Georgia that includes a number of markets including Macon, Valdosta, Waycross and the I-75 corridor. I think serving the highway sites is a new opportunity in the 4G world that was really more challenging previously because those typically were more coverage areas. Now you do need high capacity on highways because you have so many people running high speed applications being run by people in cars. We think serving that new territory and part of the equity raised is to continue that expansion, as well as some additional expansion in Daytona Beach and Orlando, Fla.
FT: Traditionally, the service landscape for wireless backhaul was, and largely still is TDM-based T1 circuits, but are you seeing more of an increasing transition toward fiber-based Ethernet?
Mudry: A few years ago it was all T1s that the carriers were ordering, ...with three to eight T1s as the typical range on a tower from a wireless carrier. I would say beginning in 2009 we began to see our first Ethernet orders. I think now in 2010 and now in 2011, it's been the transition with all of the new towers that we're winning backhaul services on are all Ethernet. We do see some T1 orders, but those are typically additions to existing sites that we're already serving where the wireless carrier has not upgraded their services to 4G. Pretty much all the new towers we are seeing are all Ethernet.
Generally, the opening bandwidth for Ethernet-based backhaul service is about 50 Mbps per site, which is significantly higher than the T1 bandwidth that we saw just a year or two ago. We're even seeing some initial orders for 100 Mbps and even 250 Mbps that are now acting as some hubs for us. But even in the smaller markets and in rural areas, we're serving 50 Mbps Ethernet as a baseline, which aggregates a lot of traffic. When you have that much capacity in one market, that capacity has to not only be aggregated off the tower with your metro access network and transported to the wireless carrier's switch in another market, so those intercity facilities are a key part of the overall solution. The bandwidth adds up in even a market like Dothan, Ala. where you'll need 6 Gbps of capacity out of the gate to serve the market. That's a lot of capacity for a market like that.
FT: While fiber is clearly the main and preferred focus of your approach, Tower Cloud also leverages microwave. How does microwave complement your fiber deployment?
RM: We start our market designs with trying to cover as much of the market as we can with our fiber services. Once we have that foundation in place, we actually use the cell sites with fiber as aggregation hubs for microwave and we beam out deeper into the market or outside of the market with microwave. In our case, 20 percent or less of our solution is microwave, but it's an important 20 percent that allows us to expand our coverage. There's just going to be certain sites that are uneconomic to build fiber to and we think that when designed properly microwave is a very good solution. In our case because of the high reliability that we want to maintain as well as the capacity that's required as bandwidth scales, we're typically limiting ourselves to one or two hops off the fiber network ring.
While some people have gone many more hops off the network with microwave back in the T1 days, we think as you move into the Ethernet world where capacity is skyrocketing and wireless carrier's requirements are becoming almost the same as what they would get on a fiber, it makes more sense to use microwave as a supplement. What we end up doing is using it just as a transport pipe and we'll still put our Ethernet electronics at the far end to serve our carrier customer end-to-end through the same means we serve them with fiber.
This interview is also part of our latest eBook, Telco Backhaul Strategies.