Some specialized national contractors are seeing big results from new fiber-optic work aimed at the design and construction of superfast, gigabit-per-second broadband networks across the U.S. Mastec says it has become the biggest gigabit-network contractor in the country on the back of a race to build out the next generation of internet hardware. Dycom Industries can boast of a record 12 months for revenue and backlog numbers that are driven by “a broad increase in network upgrade demand from several top customers,” including AT&T, CenturyLink, Comcast and Verizon.
The new market carries risks. Legal disputes between internet service providers (ISPs) and tension between the public and private sectors over legacy ownership of networks means gigabit construction has turned political. Public officials are pushing high-speed, low-cost internet access as a necessity, not a luxury. The public should own networks, like other utilities, they add.
Because of the complexity and expense of large-scale gigabit-network builds, many projects could end up with contract structures similar to P3 projects in the transportation sector, in which networks and other communications infrastructure are built, owned and operated by a partnership of public and private-sector entities.
Louisville, Ky., passed an ordinance that provided Google Fiber access to AT&T’s utility poles in the city, but AT&T demanded that Google pay a license fee for use of the poles and has sued to revoke the ordinance. It’s just one example of lawmakers trying to foster competition by breaking legacy companies’ infrastructure stranglehold.
The tension comes from telecoms and ISPs neglecting U.S. infrastructure, says Jim Hayes, president of the Fiber Optic Association. “Google’s cherry-picking, and it makes sense,” Hayes says. “They’re going into places where AT&T was—dense populations where there have been a lot of complaints of poor telephone and internet service—and upgrading the network. AT&T neglected their networks for years, and now they’re mad that somebody else wants to do it.”
The dispute could go on for years, but, for now, competition among ISPs is driving major capital investment in network builds. Dycom calls the gigabit “a new industry standard,” with customers outlining multi-year construction plans for asset expansions and upgrades.
Deloitte Global in March released a market forecast that said the number of gigabit internet connections will surge to 10 million by year-end, a tenfold increase—70% will be residential connections. “Looking further ahead, we forecast about 600 million subscribers may be on networks that offer a Gigabit tariff as of 2020.”
The demand is massive and could be for years. In 2015, Mastec was in two gigabit markets. “For 2016 and beyond, we have now secured work in 14 markets in nine states for multiple customers,” said MasTec CEO José Mas.
“Engineering contractors bring a professionalism to networking,” Hayes says. “Webcor, Hinckels and McCoy, Bechtel—they’ve all been doing fiber-optic networking for years. During the dot-com boom, everybody was laying cable.”
These days, most of the construction work associated with gigabit work has become routine, Hayes, says, adding, “It’s union electricians doing most of the gigabit work. There are 128 International Brotherhood of Electrical Workers training centers for fiber work in the United States, and we’ve helped train over 60,000 people.”
Gigabit builders need contractors that are familiar with gigabit passive optical network technology. This system uses beam splitters, instead of electrical components, to broadcast signals to various points from network terminals. “What we really need from the engineering community are people to design these networks,” Hayes says. “We need out-of-the-box thinking [and] different ways to get cable underground or overhead.”
ISPs tend to neglect rural areas and small towns, but Kevin Richter, program manager for Cannon Construction, says there are big opportunities for local and regional contractors serving areas outside big cities. Cannon is partnered with a small ISP, GigabitNow, to build a “family of fiber networks” through the Pacific Northwest.