BIG NETWORK, BIG IDEAS
As a result, Goodman needed to do more than just build and maintain cell towers. That’s when John Goodman turned to Ron Hill for help.
When Hill left Alcatel-Lucent to join Goodman in July 2008, he had to endure a bit of culture shock. He had been in the ranks of upper management for years, with “a large, mahogany desk and a large conference room and so on,” he says. When he came to Goodman he got a smaller desk, no direct reports, no administrative assistants, and the charge to help Goodman become more than a builder.
“I wanted to take Goodman Networks from being an infrastructure builder to what I call being a network facilitator,” Hill says. “We can build a [cellular] tower, but what makes us very, very different is that we can also put traffic on it as well.”
What Hill means is that Goodman Networks could now install a new network element for service providers like AT&T. But he wanted the company to perform the engineering tasks necessary to integrate it into an existing, operating network as well.
“With leadership comes stewardship,” Hill says. “You have the responsibility to do what is right with everything you’ve been given.”
The timing was spot on, since AT&T was in the throes of a very aggressive wireless network upgrade. The service provider was in constant competition with Verizon to see who could provide the country’s most comprehensive 3G wireless coverage, and it soon would be upgrading its 3G to LTE, or Long-Term Evolution, technology—a generational improvement for cellular networks.
From July 2008 to May 2010, Hill held the title of executive vice president of professional services, and his group became one of Goodman’s fastest-growing business units. By the end of 2011, the group Hill started would represent more than 10 percent of Goodman’s overall revenue.
Following his success in creating Goodman’s professional services group, Hill became the company’s president and chief operating officer in May 2010, then was named Goodman’s CEO in January 2012. That’s when Goodman began to remake itself at a more rapid pace—and when it made a big bet on small cells. The next 18 months of change at the company tell a story about how mobile networks have evolved.
MOBILE DATA DELUGE
Smartphones and mobile devices are constantly taking the telecom industry into uncharted territory. It’s not just a trend, though. It’s a massive, destabilizing force that is adding tremendous value to telecom networks and, at the same time, making them much more complex and far-reaching.
In 2012, wireless subscribers spent more money on data than they did on voice. Spending on wireless data rose by a third in 2012, to $94.8 billion, a little more than 50 percent of all wireless services spending in the United States.
During the next three years, wireless data spending will increase by an estimated 94 percent, according to the Telecommunications Industry Association. By 2016, data will comprise more than 72 percent of total wireless services spending.
In the past five years, Dallas-based AT&T says wireless data traffic on its networks has increased more than 20,000 percent, thanks to the processing, storage, and computing power of mobile devices like the iPhone. As noted earlier, all that traffic growth—and the revenue coming from wireless data—changes how networks are designed.
The idea of a few giant cellular towers providing enough coverage and throughput was put to bed once the iPhone took off. Now that AT&T and other service providers have upgraded their cellular towers to handle more data, the next mobile network challenge is making it so that those towers aren’t as easily overwhelmed by all the data traffic coming in. This involves using technologies like small cells, distributed antenna systems, and more robust Wi-Fi connections in more places. Small cells and DAS help boost, collect, and route cellular signals, and Wi-Fi provides yet another option for network access that is closer and often more robust than cellular options.
For example, “The normal cell network is designed for low numbers of intermittent users in any given area,” explains Paul Kapustka, editor-in-chief of Mobile Sports Report, which provides news and analysis about the stadium technology market. “When crowds of connected people show up at a ballgame, the old cellular network designs quickly get overwhelmed.”
THINKING SMALL
“There are only so many towers you can build,” Hill says. “If you’re in a hospital or at a football game or in a subway, there are problems with getting connectivity, and the reason there is a problem is that any of us would like our cell phone to work anywhere we are. I realized that the next frontier for us would be small cell architectures. The network is going to smaller towers and smaller radios.”
Goodman Networks was already subcontracting much its work involving smaller towers and smaller radios. In February 2013, Goodman acquired the Custom Solutions Group of Cellular Specialties Inc. This company was like a mini-Goodman, except that it specialized in building wireless DAS and Wi-Fi solutions. The purchase price was $18 million, with another $17 million possible in future payments if certain goals were met.
Another strategic acquisition came in August 2013, when Goodman agreed to acquire for an undisclosed amount Design Build Technologies, a 100-person wireless network construction firm based in Woodstock, Ga., about 30 miles north of Atlanta. DBT had just started business in 2010, but it already counted T-Mobile as a client.
Hill’s biggest deal to date, though, came later the same month, with the acquisition of Multiband Corp., a Minnetonka, Minn.-based company, for about $102.4 million. The deal is interesting because, as Hill acknowledges, it helps Goodman diversify its revenues even more while taking a well-calculated risk.
“After buying DBT and CSI, we needed feet on the street,” Hill explains. “We needed a technical workforce that had the capability to install microcells. We recognized that Multiband had the closest fit for what we want to do, and they also have a skill set that we can apply to install smaller cells.”
Multiband began in 1975 as a telephone interconnect company, installing phone services for homes and businesses. Through a series of acquisitions from 2008 to 2010, it quickly became the third-largest field service provider for DirecTV, which is the country’s largest provider of satellite TV services. Multiband performed about 1.5 million installations and service calls during 2012 for DirecTV, and its contracts with that provider expire in 2016.
In total, Goodman Networks now has 25 customers. But its top two—DirectTV and AT&T—are responsible for most of its revenue. With the Multiband acquisition, Goodman says that AT&T would go from being 83 percent of its revenue to fewer than 60 percent of its revenue for 2013.
More than that, though, Multiband gives Goodman those “feet on the street”—more than 2,400 full-time technicians that install satellite TV services now, but can be trained in the future to put small cells in homes, businesses, stadiums, campuses, and public spaces.
Industry observers say the time to staff up for small cells is now. “We’re really just at the start of building these networks, and may be underestimating the amount of capacity that will eventually be needed,” says Kapustka of Mobile Sports Report. “With new phones, tablets, and mobile applications emerging each day, capacity demands show no signs of leveling off.”
AT&T, which is still Goodman’s largest customer, expects to be the small cell trendsetter. As part of its multibillion-dollar network investment plan called Project Velocity IP, the company has said it will extend its LTE network to cover 300 million POPs, or points of presence, by 2014. In the process, it expects to deploy 40,000 small cells, making it one of the world’s leading adopters of that technology.
“AT&T’s small cell strategy is aggressive and will include deploying not only LTE small cells, but also small cells across other technologies,” wrote Infonetics Research analyst Stéphane Téral.
Large cell sites will continue to increase in numbers as well. The Telecommunications Industry Association says wireless data growth will result in the addition of approximately 49,000 new cell sites in the United States between 2013 and 2016. Goodman estimates that, at a cost of $150,000 per cell site, carriers will spend about $7.4 billion.
For Hill, the small cell revolution brings his career full circle. He’s worked for service providers as well as for technology companies. Now he’s helping redefine what it means to provide an “always-on” network, at a time when we’re more connected than ever.
But, rapid change and turbulence in the mobile market can only be addressed successfully if there’s stability and a foundation of values to build on, he says. Once again Ron Hill’s thinking in terms of prophets, not just profits.
