The Worsening Labor Supply Chain

I’m not sure what other people are seeing, but I’m starting to see situations where a shortage of construction labor is causing problems for some ISPs. Everything I’m hearing says that the supply chain issues for materials have largely been solved but that the supply chain for construction contractors is a worsening situation for many ISPs.

To give an example, I know an ISP with a long history of building networks that recently went to bid for two projects that are being funded by local ARPA grant funding. The ISP went to its normal pool of fiber contractors, many that it has worked with for many years, and got zero responses. Nobody was willing to even bid on the projects. The ISP called and talked to a lot of contractors and then reissued the bid package a second time. This time the ISP got two bids – one that is 50% higher than rates it has been paying for fiber construction and one that was almost double.

When the ISP talked to the two bidders and others that didn’t bid, it was told that contractors already have their construction schedules filled for the next two years. The two contractors that bid a high price would only take on the work if this ISP was willing to pay more than other projects. The ISP was also told that its projects were too small and that it would have gotten a much better response if it had a project that guaranteed several years of solid work.

Another story comes from an electric cooperative. Its strategy for its electric grid, and now for its fiber network, has always been to minimize the amount of contractor labor needed by doing a lot of the work inhouse. For example, with fiber construction, the coop planned to tackle all of the make-ready and drop construction and only bring in contractors to hang fiber on poles or to bury fiber.

The coop never had a hard time finding qualified technicians because it offered decent wages for the local economy and the stability for technicians to be able to stay home with their families. It always had seen a steady stream of technicians asking if there were openings.

But over the last year, the coop has lost a number of its most experienced technicians who were lured away to higher-paying jobs. The coop also found itself suddenly unable to attract new technicians. Over the last year, there has been a total flip of the technical workforce situation. The company doesn’t know how it’s going to stick with its original plans.

At first, I thought these were local situations – but I’m starting to hear similar stories across the country. I know a bunch of ISPs and contractors who are struggling to hire experienced technicians. I haven’t seen any other bids that were double what was expected, but I’m hearing that the cost of projects is increasing steadily.

Not all ISPs are having a problem. There are many ISPs who have locked down construction firms for large grant projects or other major upgrades. It seems likely that the biggest ISPs all have multiyear contracts with contractors and are mostly able to find crews. However, even AT&T cited labor shortages as one of the reasons the company trimmed the planned fiber passings for 2023.

The ISPs most at risk for not finding construction crews are ones with small projects or ones that haven’t built fiber in a while. These are the companies that are going to be quoted the highest prices for getting a contractor if they can find anybody at all. How will these ISPs handle the cost overruns compared to the original budget?

The other concern for a lot of ISPs is the ticking clock of grant timelines. For example, many state grants require that projects get built within two years. The date for finishing ARPA-funded projects will be here in a few years. It’s looking like a lot of ISPs will be asking for waivers to extend construction timelines – but in many cases where the money was guaranteed by legislation, extensions might not be possible.

I don’t know if it is time yet to call this a crisis since there are ISPs that say they have the construction crews they need. But I think there is a growing list of ISPs that are seeing real problems arising from a shortage of technicians – and this is likely to only get worse when BEAD money finally hits the market.


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