Chipset, workforce shortages could hamstring US fiber bonanza
There are a variety of indications that Americans are poised to get a lot more fiber in their broadband diets. Ongoing fiber network buildouts – which may be supercharged with billions of dollars in additional federal funding – are raising the prospect of a significant increase in the amount of snappy broadband connections around the country.
However, a number of issues have begun to cloud the opportunity. It's unclear whether there will be enough technicians to actually install all that fiber – and it's unclear whether the ongoing global chipset shortage will cut into the supply of necessary fiber networking components.
"The net result is that fiber broadband deployments in rural and underserved communities are likely going to take considerably longer to complete," argued analyst Jeff Heynen of research and consulting firm Dell'Oro Group in a post to the firm's website.
Those concerns come as a variety of major operators commit to extensive fiber network buildouts.
Fiber for the record books
"The next few years could be historic in terms of telcos (finally) committing to FTTH [fiber to the home] upgrades," wrote the financial analysts at Cowen in a March note to investors. They predicted operators would install fiber into a total of 5 million new homes in 2021.
Chief among those operators is AT&T, which recently said it hopes to construct fiber to 3 million new locations this year, and potentially 4 million next year.
But AT&T is not alone. In the coming years, Frontier also plans to upgrade roughly 3 million locations to fiber, Windstream plans to upgrade around 1.8 million locations, and Consolidated Communications plans to upgrade up to 2 million locations with fiber. TDS, Verizon and other, smaller providers are also expected to deploy more fiber during 2021 and beyond.
But those efforts might pale in comparison with the buildouts envisioned by President Biden. The White House recently proposed to "future proof" American broadband networks with up to $100 billion in funding. That wording is widely viewed as shorthand for fiber.
And though Biden's critics have raised plenty of concerns about his overall government spending plans, it appears that there might not be too much daylight between Democrats and Republicans when it comes to broadband. After all, a group of top Senate Republicans released their own infrastructure spending proposal this week, allocating fully $65 billion toward broadband.
Importantly, all that government spending would be in addition to the programs that have already been erected to help finance the construction of telecom networks in rural areas. The first phase of the FCC's recent Rural Digital Opportunity Fund (RDOF) auction totaled $9.2 billion, while its Connect America Fund Phase II (CAF II) auction before that totaled $1.5 billion. Around 85% of the RDOF funds are expected to be spent on fiber network construction.
Fiber vendors are undoubtedly cheering such developments. Nokia, Adtran, Calix, Infinera, Ciena, Corning, Prysmian, Juniper Networks, Dycom, MasTec and Cisco are among the vendors named by the Cowen analysts as potentially benefitting from what they estimate might be up to $44 billion spent on fiber networks over the next five years.
Beware the shortages
But Heynen, of Dell'Oro Group, said that optimism might be tempered by the realities of 2021.
"The bigger problem in the short term isn't one of demand, but of supply," he wrote. "Shortages in semiconductors and other vital components, including capacitors and flash memory, have been well-documented, impacting not only networking equipment, but also consumer electronics, automobiles and other industrial equipment. Meanwhile, demand for fiber cables, conduit and other ODN [optical distribution network] infrastructure has pushed lead times for these components to anywhere from 12-18 months. Lead times for OLTs [optical line terminations] and other active equipment used in FTTH deployments have remained fairly stable despite the disruptions, but have been sneaking up recently as demand has increased, particularly from larger operators who have major strategic initiatives in place to accelerate their home passings."
Those worries have risen into the corner offices of some of the nation's biggest fiber providers.
"Global supply chains now are stressed across the board," said AT&T CEO John Stankey during his company's recent quarterly conference call, in response to questions about the ongoing global chipset shortage. "I'm a little skittish. ... That's why I want to be a little bit cautious."
Those comments are noteworthy considering Infinera, a major component supplier for fiber networks, recently said chipset shortages could cost it up to $10 million over the next few months.
But that's not the only drag on fiber, according to Heynen. "The biggest impediment to getting fiber networks rolled out within a realistic time frame is likely to be a lack of trained workers in the fields of professional services and installation," he wrote. "Nearly all job functions are likely to be short-handed, given the potential demand coming from subsidized projects: Network engineers, surveyors, fiber technicians, all the way to individuals handling permitting and right of way applications both for operators and individual municipalities. Many of these functions require specialized training through community colleges and trade schools. In other words, the workers can't be added fast enough to be able to match the demand expected from ongoing and potential fiber projects."
Heynen isn't the first to raise the issue. Workforce shortages have been a topic of conversation in the cell tower industry for years now.
"The US currently faces a shortfall of skilled workers needed to deploy broadband across the country, to win the race to 5G, and to ensure robust fiber, mobile and fixed wireless networks," a group of telecom industry trade associations, including CTIA, Incompas and others, wrote in a January letter to President Biden.
And while there is some debate as to the extent of that problem, federal legislators have pledged to fund programs aimed at bulking up the nation's telecom networking workforce.
The Cowen analysts remain upbeat. "Vertical Group notes that the US lags a vast majority of countries in FTTH, ranking just 41st globally," they wrote. "However, that seems to be changing."
— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
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