Funding Distributed Antenna Systems in Commercial Buildings

Increased Public Safety

According to the FCC, over 70% of 911 calls are placed via cellular devices. Cell phone reception is inherently weak in large commercial buildings, such as hotels, office parks, or entertainment venues due to the sheer number of people, the large expanse of space that needs to be covered, and the huge amount of building materials a signal needs to pass through. In fact, in most buildings – regardless of size – elevators, parking garages, interior hallways, and store closets have an incredibly limited cellular signal. 

With these types of buildings holding such a large number of people increasingly relying on their mobile devices throughout the day, ensuring that they have a reliable signal should they need to call for help is a top priority. 

In fact, the National Fire Protection Association’s (NFPA-72) Code (National Fire Alarm and Signaling Code) and the International Code Council’s International Fire Code (IFC-510) mandate both require an indoor wireless infrastructure within buildings. This is to ensure that all inhabitants can make emergency calls and that first responders can use a building’s indoor wireless network to communicate with each other while coordinating their efforts.

Internet of Things Expansion

Now more than ever, building and property managers rely on various automated and connected systems to ensure their buildings’ safety, security, and upkeep. Everything from security systems and POS systems to temperature and environment control can be – and are – tied to indoor wireless networks. The various sensors and devices that make up the Internet of Things that keep a building running require a constant, reliable signal to maintain its connectivity. While most buildings have Wi-Fi networks, these networks aren’t conducive to keeping many devices connected and data flowing consistently because they’re “best effort” services and can often get congested and prioritize the wrong device at the wrong time.

Carrier Funded

As mobile phone usage grew, wireless carriers initially set about deploying their own DAS in very large, high-profile venues, such as airports, professional sports arenas, convention centers, and mega-hotels like those found in Las Vegas. This benefited the building owner and the carrier, who would have happy customers within these highly populated areas. 

In this model, the carrier either completely funds the project and handles the build-out and installation, or it funds the project and works with a third-party installation company to complete the actual work. Suppose the carrier works with a third-party installer. In that case, they will typically contribute a one-time capital contribution and recurring monthly payments for the duration they want their network to be available to that building. 

Today, carriers or operators are willing to fund a DAS if they have a “special relationship” with the building owners, usually defined by multi-year, multi-device contracts involving hundreds or thousands of devices. Companies often leverage these relationships by using the carrier’s services across multiple nationwide locations, resulting in significant device numbers.

Each carrier has its ROI (Return on Investment) model. If funding the DAS aligns with their ROI and profitability goals, they might finance the DAS, sometimes including long-term loyalty in their calculations. Although carriers do not disclose their ROI models, they may fund a DAS for processing only their signal source or even a multi-carrier DAS if their ROI criteria are met. However, carriers are increasingly reluctant to fund DAS projects because previous ROI models fail to deliver the anticipated results.

Build to Suit (BTS)

In the Build to Suit (BTS) model, also known as Third Party Owner (3PO), a third party oversees the project, handling funding, design, installation, activation, and coordinating with carriers to connect to the DAS. Most DAS projects under the BTS model are multi-carrier and can be deployed indoors, outdoors, or as a combination. Building owners or management companies sign agreements with BTS companies, which may or may not include revenue sharing. Carriers must pay both capital costs and monthly rent to add their signal source to these DAS solutions.

Public venues like malls, stadiums, large casinos, hotels, and resorts commonly use BTS-funded DAS.

Venue Funded

In a venue-funded model, the building owner is fully responsible for deploying and maintaining the Distributed Antenna System for their building. Building owners or customers often choose to finance their own DAS for several reasons. Primarily, they wish to avoid being tied to long-term contracts with carriers and prefer to maintain control over the DAS design and implementation, consulting with various parties (OEMs, integrators) but ultimately managing the project themselves. Additionally, owners increasingly view DAS as essential rather than a luxury, recognizing its potential to enhance productivity, safety, and customer service.

For instance, CIOs of large corporations see DAS as a tool to boost productivity, reasoning that if companies can own and manage their IT networks, they can also build and operate their own DAS. In the realm of safety, large universities often fund multi-carrier DAS as part of new construction projects to ensure comprehensive coverage, thus enhancing safety for students and faculty. Similarly, the healthcare industry values robust coverage to meet patient needs and improve physician productivity, prompting some of the largest healthcare providers to build their own multi-carrier DAS.

DAS is often incorporated into the initial buildout for new construction buildings, with those costs simply being rolled into the construction costs and finances by the construction loans. The network’s costs are then passed through to the tenants as part of their lease agreements. 

Incorporating the deployment of DAS into the initial construction of the building results in a much lower-cost solution.

Hybrid Funded

Retrofitting preexisting buildings with a DAS is much more expensive. Building owners who don’t want to be fully responsible for this cost may opt to partner with a third-party installation company. This third-party company would then bear the cost of the installation and deployment, while the building owners would be responsible for paying for services over the agreed-upon length of time. 

In this situation, as in a venue-funded model, the building owners can pass the costs on to their tenants as part of their lease agreements. They may do this either by rolling an even, fixed amount into everyone’s monthly rent or by including it as part of the Operating Expenses or Common Area Maintenance Expenses. If they choose to do the latter, then they would likely charge each tenant an amount based on their percentage of building use as determined by the square footage of their leased space. 
Some caveats to this may depend on how a lease agreement is structured. For example, a lease may stipulate that the lessee is exempt from paying any part of capital expenditures or the cost of new systems installed after their lease has been executed. To preclude this, property owners may opt to work with a third-party installer who would then be providing network services at a monthly rate. The building owner could then interpret the monthly fees as a utility expense rather than a capital expenditure and pass that utility fee on to their tenants.