SellTower Signals

The NFL Labor Dispute: A Wireless Analogy

As a NLF fan, I am following the current labor dispute with great interest and angst.  Of course, I view everything through a wireless industry lens, so I decided to have have some fun and explore the NFL dispute as an analogy for the wireless industry.

The Analogy: 
The NFL Owners and Players have reached an impasse over their respective shares of TV revenues and ticket sales.  Similarly, wireless carriers and tower companies are squabbling over appropriate collocation rents. 

Here are parties:
NFL Owners  and  Wireless Carriers
NFL Players  and  Tower Companies
NFL Fans      and  Wireless Customers

The History:
In the past the owners and players worked together to put a very entertaining product on the field.  Of course the best example would be the undefeated 1972 season by the Miami Dolphins, but there are many other highlights.

Likewise, tower investors put together very attractive deals that allowed the wireless carriers to maximize their proceeds for tower sales by agreeing to correspondingly high collocation rates.  The lever was simple.  The higher the collocation rents, the more cash the carriers could get in the tower monetization deals.

In both cases, the precedent was set and expectations of generous cash flows were locked in.

In both the NFL and the tower industry, early successes led to robust earnings for all parties.  However, the precedents laid a trap.  Some NFL players are overpaid based on performance – especially the high draft choices that do not pan out.  Similarly, rents paid by wireless carriers are out of balance with rents paid for the same property types when used by other industries.

Both the NFL and the wireless market are mature industries with high penetration and limited upside.  Both are seeing their operating costs increase faster than their revenue base.  The NFL fans are starting to abandon high cost tickets to watch the games at home.  The wireless carriers are also seeing margins eroded by price wars and growing network capacity.  Like player salaries, network property rents are one of the largest – and certainly the fastest growing – operating costs

The NFL players need to realize that there are substitutes for their services.  Thousands of college football players graduate every year and would love nothing more than to play in the NFL for a fraction of the average NFL salary.  The quality is not quite as good, but it is probably good enough.

The wireless landlords also need to realize that there are substitues for their towers.  Numerous “small cell” technologies are being released this year.  Again the quality of RF propagation and capacity may not be quite as good with these new technologies, but they are probably good enough.

Let’s hope compromises are reached in both industries.  After all, 2011 is going to be the year for the Miami Dolphins to win it all!