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What affects a point-to-point antenna? Mountains, other wires, etc? Why do you need to build towers for antennae?

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Dirt, mostly. Trees are also bad, being essentially vertical accumulations of water, and water being bad news for 2.4 and 5 GHz (and several licensed bands as well) propagation.

One aspect not mentioned so far is the Fresnel Zone, a roughly cigar-shaped area between antennas which means that you can have "line of sight" between two antennas and still get a lousy connection (or even no connection) due to excessive intrusion into that zone of radio-dense objects (commonly trees, dirt, and the more-or-less-equivalent to piles of trees and dirt things we call buildings.) Towers allow the elevation of radios to the point where an adequate amount of the Fresnel Zone is clear.

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You have tagged this with 802.11, but you don't normally find towers associated with Wi-Fi.

In general, many things can block radio waves, and higher frequencies are more affected. Water is a big problem, and trees are full of water. Also, concrete and steel effectively block high frequency radio. Antennae are put on towers to try to get over many obstacles.

The higher the antenna, the longer the effective range. Not only do you get higher than many obstacles, but radio waves spread out over distance, and there will be more power left for a longer period of time/distance with more vertical distance above the earth. At ground level, half the radio power goes into the earth immediately. The higher you get, the longer the radio waves can go before going into the earth.

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You need tower to increase coverage within area. Antenna located on tall tower would have much better coverage. Each object in line of sight between antenna and client would affect signal in few possible ways, listed below:

  1. Reflection A wireless signal is just radio waves. Just like light, it can bounce off of certain surfaces. Metal, for one, is a highly reflective material. This is a common occurrence for offices since they are generally in complex and intricately designed structures. If a large amount of reflection occurs, signals can be weakened and also cause interference at the receiver.
  2. Refraction Refraction is the bending of a wave when it enters a medium where the speed is different. For example, glass or water can refract waves. This can play into consideration when you’re carefully placing APs. Different media have different refractive indexes. It’s important to track possible refraction when designing your wireless network because if a signal changes direction in traveling from sender to receiver, this can cause lower data rates, high retries and lead to an overall lessening of capacity.
  3. Diffraction This is when waves encounter an obstacle and travel around it — the wave’s direction and intensity both change. In fact, diffraction can even be more pronounced or introduce a shadow zone depending on the size and shape of the obstacle. Hills are known to cause diffraction to wireless signals.
  4. Scattering While this phenomena is similar to refraction, it’s more unpredictable. Dust, humidity, unevenness and other qualities in a material can cause a signal to scatter in all directions. This can have a significant impact on signal integrity and strength. Chain-link fences and even smog are notorious for scattering RF signals.
  5. Absorption This is one of the most common reactions we see wireless signal have to materials. Basically, a material is converting the signal’s energy into heat. This occurs largely due to the molecules in the medium being unable to move fast enough to “keep up” with the RF waves that are trying to pass through it.

source

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It's a matter of physics really. WiFi antenna's come in different flavors, each having unique characteristics.

Line of sight is said to be required for WiFi bridging where a directional antennae are typically deployed. That's why these are often mounted high up above the tree line.

In terms of omni coverage antennae often found in access points, Cisco's, for example, Aironet 9.5-dBi Patch Antenna Installation Guide tells us about WiFi signal degradation through various materials. Mounting the AP too high up has a negative impact on signal quality.

The density of the materials used in a building’s construction determines the number of walls the signal must pass through and still maintain adequate coverage. Consider the following before choosing the location in which to install your antenna:

  • – Paper and vinyl walls have very little affect on signal penetration.
  • – Solid and pre-cast concrete walls limit signal penetration to one or two walls without degrading coverage.
  • – Concrete and wood block walls limit signal penetration to three or four walls.
  • – A signal can penetrate five or six walls constructed of drywall or wood.
  • – A thick metal wall causes signals to reflect, causing poor penetration.
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