Towers and the Starlink Threat

The market appears concerned that SpaceX could emerge as a fourth wireless provider without utilizing traditional tower infrastructure. The concern stems from SpaceX management's comments¹ around deploying large numbers of femtocells, rather than deploying spectrum on macro tower sites or partnering with a carrier through an MVNO (Mobile Virtual Network Operator).

However, a femtocell-centric architecture would require millions of nodes, creating significant cost, power, management, and coverage challenges. In our view, the economics and operational complexity of managing such a network remain largely unproven at scale.

Historical examples of attempts to reduce macro dependence in the U.S., particularly Sprint's efforts to do so through small cells and home-based coverage solutions, ultimately failed to replace the macro network. We believe macro towers remain the most efficient solution for broad-area coverage and capacity, particularly in suburban and urban markets where traffic density is highest.

As a result, we believe future coverage is more likely to come from a hybrid model combining satellites, terrestrial spectrum, towers, small cells, Wi-Fi offload, and potentially MVNO arrangements rather than a complete bypass of traditional wireless infrastructure.

While SpaceX has indicated that it intends to build a terrestrial wireless component, the strategy appears to be in its early stages and there remains considerable uncertainty around the ultimate network architecture and business model.

Impact on Long-Term Tower Growth

The primary long-term risk to towers posed by Starlink is indirect: if the company ultimately becomes a meaningful fourth wireless competitor, it could pressure incumbent carrier economics and modestly reduce future leasing demand.

Conversely, many Starlink scenarios could be neutral-to-positive for towers because these scenarios require additional terrestrial infrastructure, spectrum deployment, and site leasing.

Nearer term, we believe tower fundamentals will be more influenced by carrier network investment cycles, mobile data growth, and future spectrum deployments than by satellite substitution risk.

The bigger challenge today may be the uncertainty itself. Even if the concerns ultimately prove to be unfounded, investors may continue debating SpaceX’s intentions until the company provides greater clarity around its wireless strategy.