Interview with Rich Berliner by Jennifer Fritzsche, Senior Analyst Wells Fargo Securities
Rich, you’ve given me like the perfect transition or set up for my next question and that’s about CBRS. How big is CBRS? We know there’s going to be an auction in July of 70 megahertz. How big is this to the commercial real estate world and if I went further how – who do you think will be most interested in buying this spectrum? Could it be the commercial real estate owners themselves?
Rich Berliner: Well, Jennifer, it’s interesting, one of the panels you did with in Florida, you had a gentleman on there from one of the biggest owners of real estate in New York and who’s considered a giant in the business and everybody looks to. And his comment on that panel was, I think Wi-Fi might be the answer for me and for others in the real estate space.
So, taking that further, I think CBRS is a really, really interesting concept and the beauty of CBRS for us, just if I can – I can plug us for a second, was the beauty for CBRS for us is that I have conversations all the time with very senior people in the commercial real estate, what do you think of 5G, what do you think of Wi-Fi, what are you doing about Wi-Fi 6, how does this work? And I – and I can roll around to CBRS, what do you think of CBRS? And I get the answer a lot of times, I don’t know what that is.
So, there is a lot of educating left to do.
Jennifer Fritzsche: Interesting. OK.
Rich Berliner: We think of ourselves as the education arm to get CBRS – the word on CBRS out there. So, CBRS, for the folks who are listening, is CBRS is not a technology, it’s a frequency band. It’s a frequency band that had been used by the Navy very sparsely. Obviously the Navy doesn’t have a lot of battleships in the center of our country, up the Mississippi River or anything like that. They tend to have their fleets on the coasts.
So, CBRS frequencies that they use are basically used around the edges of the country. And a group came forward a number of years ago and said, we think this is under utilized spectrum, we’d like to use it, and we’ll create an approach to this that before – if the Navy is not using the frequencies then we can have this on an unlicensed be used by the public.
And so, the created a way that – a system that basically allowed – allots channels to you and if the Navy needs that channel the Navy can use that channel. If the Navy doesn’t need it at that point in time you can have that channel.
Now, there is also the separation of – there’s a group of unlicensed CBRS spectrum and then there’s a group of licensed spectrum as you mentioned before. So, I do think that commercial real estate will be interested in having licensed spectrum.
The interesting part of this whole thing is that if you buy licensed spectrum, if it’s not being used by you at that particular moment others can use it. If you buy – if you don’t buy spectrum and you’re using unlicensed spectrum and someone who has licenses spectrum can use that unlicensed spectrum too. So, there’s tremendous flexibility in the way this has been done on a front end basis, to create the CBRS network if you will.
So, I do think that CBRS is going to be looked at from a licensed standpoint by commercial real estate folks, but corporate real estate people, by obviously the carriers. The carriers are spectrum junkies and they’re going to want to use whatever spectrum they can get their hands on because spectrum is king. It can be the great limitation or it can be the great beneficiary – you can be the great beneficiary if you have more spectrum.
So, certainly think it is just my personal opinion that the carriers will play in that arena, that there will be a lot of interesting groups that will play. Remember these – this spectrum is being auctioned literally county by county, so there may be places where a carrier feels they’re under-spectrumed, if you will, and they may need some extra.
And there are also landlords, commercial real estate landlords that may feel that, gee, I can – I can actually own this spectrum, have it for myself and use when I need it. And I can own my own system, because CBRS not only will work with communications within the building, but it will give you the ability to run your IOT systems over it.
It will also to give the ability to run 5G over it. So, it’s got a lot of interesting advantages. Again, I’m not a technical expert on it, but I can tell you that there is great interest as people in commercial real estate learn about what CBRS is all about.
Jennifer Fritzsche: And in just last question on CBRS, could carriers actually be – I mean, if we saw that commercial real estate owners buy it, in many ways parts of it, realizing it’s county-by-county, so carriers actually could view that favorably, because it’s essentially taking CapEx off the backs of them. Is that a right way to think of that?
Rich Berliner: Yes, I think – yes, it – my sense is that the spectrum, since its in the same general range as what they already have, especially with somebody like Sprint, who is Sprint, T-Mobile has 2.5, putting 3.5 together with that could be an easy fix.
But what’s interesting is that the spectrum that they’re – the beginning can be used for many different things. It could be used for IOT, it could be used for voice, it could be used for data, it can be fit into their system. But, I think the important thing is that it’s not going to take – just because they win it and others can use it, it’s not going to change their CapEx structure very much one way or the other.
Jennifer Fritzsche: Right.
Rich Berliner: It’s an easy addition to their existing spectrum. Let’s put it that way. I’m not sure that’s answering your question.
Jennifer Fritzsche: Got it. OK.
Rich Berliner: But, yes …
Jennifer Fritzsche: Yes. Absolutely.
Rich Berliner: … it’s an easy fix. It’s not like the need to go out – it’s not like having millimeter wave where you have to do something completely different with it, let’s put it that way.
Jennifer Fritzsche: Got it. OK. So, Rich, if this call was in January or February and we were talking about the need for connected real estate, there definitely would have been a tremendous amount of interest. But, I wonder if can comment on what your (contacts) are seeing now.
Clearly the world has changed. We were talking in our pre-call that a lot of the talking has been (CMBC) and what not, are saying no one’s ever going to go in skyscrapers again. And I’m just curious what you’re seeing right now with this – with this segment of your clients really, and what are they feeling in the wake of COVID?
Rich Berliner: Well, I think everybody’s very optimistic about the fact that commercial real estate is the place where we spent – and I’m going to use that in past tense, were we spent the vast majority of our lives. I personally don’t think that that’s going to change in the medium and long-term.
But, yes, I think there are going to be places where people don’t go back to the same situation, I think we’re all very clear, we don’t go back to the same exact situation we did two months ago.
But, I certainly don’t want to be cooped up in the house never work in an office with other human beings again, and think that we’ll never be looking for commercial space or we’ll never be going to an office with others. And I think the world normalizes when people really get sick of working at home and not seeing other people and not having that contact.
You’re already seeing people taking the opportunity to say, I’m tired of this lockdown, I want to get out, I want to do things, I want to go to work. And so, I think that we return to normalcy when we’ve got medicine to keep us from dying from this thing and we also have vaccines that, I for one, definitely want to go back to an office where there are a number of people and I can have human contact and we can do that now.
Does that mean we’ll do it the same way we did before, or as much as we did before, or in the same kind of groupings we did before? Probably not. But, I think that there is no question that human beings in this country are not going to just stay home 24/7 and work and sleep and eat and do everything they’re going to do at home.
And then once in a while they’re going to go and visit a store that remain open because so many retailers are having issues. I think you’re going to see that the robustness of our economy calls for strong commercial real estate, the ability for us to want to go back and see our colleagues and interact with them.
And we want to all go back and be safe, and I think that’s where commercial real estate folks are going to lead in this. They’re going to have great connectivity, they’re going to have good schemes in place to keep us safe and they’re going to make the most of it. But certainly, and I don’t know about you, we’ve talked offline a little bit about you being home, me being home, and for us being ready to get out and be in the world again.
So, I think commercial real estate is going to be the way. We’re certainly going to put a toe in first before we just run back out and have people in situations like the WeWork or co-workings space. I think those things are going to be rethought in terms of packing that many people into relatively small spaces.
But, in general, I think that we all want to get back to work, we all want to be with our colleagues again and we all want to be comfortable back in our offices. I hope that’s helpful.
Jennifer Fritzsche: That’s – now, can I ask, are you seeing – have you seen any carriers in the wake of this push off wiring a building they may have planned, or anything like just see how this develops? Have you seen any cans being kicked in that regard, for plans that were gung-ho in February?
Rich Berliner: Actually, it’s kind of the other way around. When the buildings are closed and nobody is in there, I think that there is an opportunity to safely have crews come in and do these installations.
There are things I’ve seen being pushed off, but I’ve seen a number of situations where there’s nobody in my building, this is the perfect – I’m not worried about you get dust on some law firm, a lawyers desk at some law firm, because there’s nobody there right now. So, this is the perfect time to do some of this work.
I do see some projects being pushed off because the opportunity to get into certain buildings is not there. But, I think the carrier I would focus on and what they’re trying to do is T-Mobile, the new T-Mobile Sprint. I guess they can drop the Sprint now.
The new T-Mobile has a program where they’re assisting in providing the radios for commercial real estate and others, corporate real estate folks who are looking to put coverage into their spaces. And they’re assisting with that by providing radios and other help, the engineering part of it.
I’m not seeing that from the other carriers. I wish they certainly would look into that and that, because that would be a fabulous opportunity for this to get more robust if the carriers were making it easier to get through engineering and to get their radios to the commercial real estate folks that need it.
I think it would be of big help, especially in the FirstNet situation. If you want me to have FirstNet in my building, that’s wonderful, but if I don’t have an AT&T system, I’m not going to be able to have FirstNet in my building. So, if AT&T were helping out with that, I think that would be a fabulous situation.
So, right now I see leadership coming from T-Mo in that setting, but I do think that the future is going to be cooperative participation in these things. And as we talked about earlier, one of the impediments to getting these things put into buildings, it’s time consuming to get through the engineering department in certain places, in certain carriers and it’s also expensive for somebody to just order radios when you’re not a carrier, you’re not getting the opportunity to buy sort of at bulk prices and volume prices.
So, the opportunity for there to be cooperation with this, like T-Mo’s doing with their build your – bring your own coverage system, I think would be really helpful to everybody in this and I would encourage that to happen.
Jennifer Fritzsche: Sorry, I was muted. Could I just ask (about) exploring a little bit on T-Mobile a little bit more, have you seen that move in urgency since they closed on April (1), or have they been doing this all along even before Sprint?
Rich Berliner: This is – they’ve been doing this all along, it’s been a program…
Jennifer Fritzsche: Yes.
Rich Berliner: …that’s been ongoing and it’s been very well received. Again, when carriers embrace their clients and say we want to help, we want to support, we want to do what we can; the response is usually terrific.
It’s not – we’re all sales people in this world, we’re all out selling, but at the end of the day when there’s cooperation and there’s encouragement and there’s a real bond between the groups, it really plays well. Especially now when commercial real estate, that’s the role we’ve tried to be is we’ve tried to get the groups together to understand one another.
And when the commercial real estate folks see the carriers helping and cooperating, the response is just terrific, it’s really uplifting when you see that kind of help coming together in this situation.
And so I think you’ve got public safety here in this situation where we do need to make sure we’ve got 911 coverage, we do need to have – follow the rules that are being set up now for public safety systems being put in so that when the firemen come in, when the police come in, they have communications amongst themselves.
And FirstNet obviously is an important aspect of that, but I think the ability for not just – FirstNet is really touting the fact that there many, many departments – fire departments, police departments – that are signing on with them.
The question is, when they step into buildings that don’t have an AT&& system, how helpful is a FirstNet radio with priority and that’s an issue, I think, that AT&T really seems like they’re looking at now and hopefully they will be participants in making sure that commercial real estate folks, corporate real estate folks of all shapes and sizes can get what they need to make sure there is FirstNet coverage in these buildings.
Jennifer Fritzsche: What about (inaudible)?
Rich Berliner: So I hope that answers your question…
Jennifer Fritzsche: Yes. What about Verizon?
Rich Berliner: Verizon…
Jennifer Fritzsche: Have you seen them…
Rich Berliner: Yes, Verizon is active, I’ve been on a number of panels with the Verizon folks actually. And Verizon decided they were going to build out their own public safety core and that they would provide the public safety coverage that was necessary using their own core in a little different fashion.
But I think Verizon does have a good strategy and a real desire to be part of the public safety ecosystem in this. And I’m seeing that they’ve been out there, they’ve been talking quite often on this and I do think that there’s an opportunity for people to have choices in these things.
And so I think that it’s really important that this be a topic that we discuss not only with our commercial real estate, corporate real estate folks and the industrial landlords and those kinds of folks.
But I think it’s just a good topic for everyone in terms of now that we’re thinking in the pandemic era about public safety and how to keep each other safe; I think the discussion of public safety is really important.
In a place like Florida; Florida took the lead in setting up some really strong regulations on when people need to examine what they’ve got in their building as a public safety base, public safety network in their building, public safety ecosystem. And they are – they’ve set up some fairly stringent time frames in which you need to do it.
New York City had done that a while back in changing over. New York is unique in that they decided that rather than have all the interference that they would have if they had public safety system in every building side by side throughout New York.
Instead of having it always on system that police and fire could use, they would have sort of an always off system so that when the police or the fire came to that building they would put a key in, that system would immediately go on and they could have access to it. But it wouldn’t be creating enormous amounts of interference system to system, building to building.
So they have something called ACAS in New York that’s interesting; a Las Vegas – after the shootings a couple of years ago at Mandalay Bay have gone into looking at the public safety aspects of what they’re doing very closely and I applaud them for that.
One of the interesting things about the public safety piece, Jennifer, is 20 years after September 11; we still don’t have one unified national public safety system that interacts with everybody.
FirstNet is a motion towards that and it certainly has the potential eventually when there’s coverage everywhere for it to be a national system.
But there are systems – even in Las Vegas one of the problems of the shooting was that the county had one system and the police – the locals – had a different system and the fire folks had a third system and so communicating in these emergencies is extremely important.
And the ability for these folks to communicate – all the different agencies to communicate is critical.
And so I think that from an investors standpoint – and it’s very important that we look at the in building ecosystem, not just as the ability to make and receive cell phone calls, but public safety, OIT, CPRS and all the tossed salad of things that go into this that people look at that as opportunities, because there is a tremendous, tremendous need for this inside buildings; corporate, commercial, industrial around the country.
