Compared to many people, those who work in the communications infrastructure industry have a lot to be thankful for this season. This sector has fared better than most during the pandemic, and is now benefiting from billions in federal funding.
Federally funded efforts to close the digital divide are just getting started. Below is an overview of some of the most significant efforts.
In addition to helping consumers pay for wireless service, the CARES Act allocated $150 billion to state, local and tribal governments. According to the Pew Charitable Trust, states’ efforts to expand connectivity using these federal resources have focused on education, telehealth, public WiFi and residential broadband infrastructure.
Josh Broder, founder and CEO at Tilson Technology Management, told Inside Towers the CARES Act is the federal program that has had the most significant impact on his business so far, but he sees a lot in the pipeline. He said none of the government spending programs will come close to the $1.2 trillion Infrastructure Investment and Jobs Act in terms of industry impact.
The Infrastructure Investment and Jobs Act allocates $65 billion to fund broadband, and $42.5 billion of that is expected to be passed out to states in $100 million grants. States are to use the grants to fund projects that can connect underserved communities, and providers will be required to offer at least 100 Mbps downstream and 20 Mbps upstream.
Fiber is a clear beneficiary, and fixed wireless access may also be an approved solution in areas where it is not feasible to run fiber by each house.
“Let’s let the marketplace determine the right solution in each geographic location,” Verizon EVP and CFO Matt Ellis said this month at the Morgan Stanley European Technology, Media & Telecom Conference 2021. “Does it have to be fiber into each individual premise? Or is it fiber to the cell site and then fixed wireless access?”
Another $14.2 billion of the Act’s broadband funding will go to the Emergency Connectivity Benefit, which is an extension of the existing Emergency Broadband Benefit. These programs can indirectly drive demand for network infrastructure, because they subsidize broadband service for consumers. In September, the FCC reported that more than two thirds of the people taking advantage of this subsidy are using it to purchase mobile service.
Sandwiched between the CARES Act and the Infrastructure Investment and Jobs Act is the American Rescue Plan, which became law in May 2021. According to the Brookings Institution, this legislation included roughly $255 billion that can potentially be used for physical network build-outs. In some instances, the money can only be used to build new infrastructure if broadband service is not already available to grant recipients. For example, schools and libraries receiving funds through the Rescue Plan’s Emergency Connectivity Fund need to use the money to purchase service if it’s available. If it isn’t, they can self-provision by building new infrastructure.
In addition to these mega-spending packages, the federal government has instituted three additional programs specifically focused on rural connectivity. These include the $20.4 billion Rural Digital Opportunity Fund (RDOF), the $9 billion 5G for Rural America Fund, and the $1.3 billion (for 2021) USDA ReConnect Program. Broder reports Tilson’s customers have already engaged the firm to design and build networks funded by the USDA’s ReConnect program and the RDOF.
More dollars are coming from the Secure and Trusted Communications Networks Act, better known as rip and replace (although the order of operations is actually replace, then rip). This act allocates $1.9 billion to carriers that have used federal funding to buy equipment made by Huawei or ZTE. Companies can use the funds to cover the costs of replacing their gear, and need to submit plans to the FCC in order to get the money.
The U.S. government has given the communications infrastructure industry a lot to be thankful for. Now some companies may find themselves stretching to find enough workers to take advantage of the opportunities.
“Everybody who wants to work is working,” said TelForce Group CEO Ron Deese. His staffing agency typically has 150-200 open positions at this time of year; now he has 400. Deese is already seeing upward pressure on wages, and he expects to see more in 2022.
The President’s vaccine mandate, temporarily suspended, is creating the potential for an even tighter labor market, with some workers threatening to quit rather than get the shots.
The combination of wage inflation, massive government borrowing and rising interest rates could indeed cloud the outlook for 2022 and/or 2023. But these issues aren’t unique to the communications infrastructure sector, and this industry is likely to fare better than most in a shifting economy.
Veteran telecom industry editor and journalist Martha DeGrasse is an Inside Towers Contributing Analyst with features appearing twice per month. DeGrasse owns Network Builder Reports and contributes regularly to several publications. She was formerly a writer and editor with RCR Wireless and a TV business news producer.
By Martha DeGrasse, Inside Towers Contributing Analyst