What strategies can operators use to address supply chain-, labor-, and inflation-related challenges for fiber builds?

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Wireline providers have a unique opportunity to expand their fiber networks as the “fiber optic gold rush” continues. Fiber construction is being fueled by federal and state subsidies, and private investments driven by strong demand for infrastructure to support high-bandwidth, high-speed applications. Operators have reason to be optimistic as this demand growth is expected to continue. However, they need to be prepared to deal with the unique set of challenges that accompany this record high demand for fiber.Creating a robust supply chainIn 2022, lead times for vital non-contracted parts ranged from 10 to 60 weeks. Although COVID-era supply shocks have started to ease, material costs are still at record high, driven by high inflation and unprecedented demand. A robust supply chain is key to ensure that there are no disruptions to the construction plan.An important aspect of this is the procurement and inventory strategy. For components that tend to have long lead times like fiber-optic cable, operators should have robust volume planning for timely lock-in of supply and rates. Maintaining buffer stock further helps mitigate disruption risk. Centralizing forecasting and planning integrates demand across businesses and regions to provide an accurate view for improved procurement and risk management. Furthermore, instituting a preferred supplier strategy and developing long-term partnerships provides leverage for securing supply, reducing lead times and costs. Operators should also assess the implications of the Buy American Act on their construction operations. Clear visibility into their cost base and sourcing strategy alignment are key for this.Vendors are the key to successThe telecom construction value chain is highly fragmented. A few large players are consolidating their footprint and upskilling to capture strategic value. Conversely, the strength of smaller vendors is in their hyperlocal relationships with municipalities, which reduce bottlenecks during the permitting process.Operators should thus consolidate vendors by region to unlock strategic partnerships while retaining local relationship advantages. Reduced volume, standardized rate cards, and large-scale orders with bundled work agreements can help operators increase their negotiation leverage and benefit from turnkey contracts.Labor at the forefrontA shortage of labor is one of the largest issues with fiber construction, with more than 200k additional workers needed through 2026 to support planned construction. A shortage of skilled labor such as OSP technicians and fiber splicers can destabilize the best laid plans. Operators need a multi-pronged strategy to address this. One aspect is incorporating improved construction methods and design changes to reduce labor intensity (for example, plug-and-play products such as pre-spliced cables that reduce need for specialized labor like splicers).The other aspect is for operators to rethink their labor strategy in terms of outsourcing and training. Insourcing key functions can not only help lock in workers and reduce costs but also create a constant talent pipeline via in-house apprenticeship and re-skilling initiatives. Some operators have also established apprenticeship programs at community colleges and via industry alliances. An expansion of these programs can help attack the labor shortages systematically.Maximizing capitalOperators should consider an enterprise-wide approach to strategic cost targeting to tie cost to demand generation plans and strategically manage costs during build phase. Additionally, all network build and improvement planning should be centralized to maximize capital efficiency. Combining fiber builds with network hardening, copper decommissioning, and other initiatives will help allocate capital more efficiently.Increasing investments are enabling operators to build fiber at an increasing pace. A strong backbone, comprised of a resilient supply chain, strategic partnerships, talent pipeline, and an integrated network plan, will determine who wins the race.The authors would like to thank Harsha Patibandla andChai Narula for their valuable contributions to this article.