Progress on rural broadband is in danger of getting doused by “the perfect storm,” and it could be a while before calm returns.
Electric cooperatives and others trying to deliver internet access to unserved communities are facing unprecedented shortages in the broadband supply chain, including fiber optic cable, electronics equipment and even labor.
The COVID-19 pandemic delivered a one-two punch, exploding demand for reliable, high-speed internet while hampering production as factories were forced to limit shifts or close. At the same time, billions of public dollars were being funneled toward rural broadband projects, most with specific development deadlines.
Fiber cable, largely a domestic product, is in extremely short supply and could stay that way beyond 2022.
Deliveries of semiconductor chipsets, a critical component of the modems or gateways that produce wireless connectivity, are running at least six months behind.
And soaring demand for skilled workers combined with pandemic-restricted training opportunities means available broadband crews have become scarce.
“We have an unprecedented perfect storm that’s contributing to everything,” says Scott Jackson, national marketing manager for Graybar, which specializes in supply chain management. “We are seeing very extended lead times.”
And “no region is immune,” says Nathan Weber, vice president of engineering for Vantage Point Solutions, which designs broadband systems.
“We have clients in more than 40 states, and we are seeing these challenges everywhere.”
Even the global leader in optical fiber is feeling the pinch.
“This extraordinary demand—which exceeded many industry forecasts—has created capacity constraints that have resulted in extended lead times,” says Kara Mullaley, market development manager for Corning Optical Communications. “These demand-driven capacity constraints have affected Corning as well as other manufacturers.”
Jim DaBramo, NRTC’s president for broadband solutions, says trying to close the digital divide amid a global supply bottleneck is like playing “three-dimensional chess.”
“It is a challenge for electric co-ops,” he says. “But they learn really fast.”
Feeding the Frenzy
As the coronavirus spread in 2020, schools, public services and the economy went online, and the federal government threw big money at getting unserved Americans connected.
“The pandemic opened everyone’s eyes to how critical broadband is for schooling, for people being able to work from home, for home health care,” Weber says. “We had a lot of demand pre-pandemic. Since then, demand has only accelerated.”
The $1.9 trillion American Rescue Plan provides $350 billion to states and localities in fiscal recovery funds, which can be used for a broad range of needs including broadband infrastructure. These funds must be obligated by the end of 2024.
That followed about $150 million from the CARES Act for state and local authorities to spend on COVID-19 relief projects, also including broadband, by the end of 2020.
While the financial support is welcomed, “the large amounts of public money for rural broadband is feeding the frenzy,” DaBramo says. “The pandemic just exacerbated an already occurring problem.”
Internet providers are scrambling to meet milestones this year to receive money from the Federal Communications Commission’s $1.5 billion Connect America Fund II. More than $9 billion from Phase 1 of the FCC Rural Digital Opportunity Fund, with build requirements over the next six years, is expected to keep the pressure on.
Amazon, Google and Facebook each plan to deploy fiber to their data centers, and big wireless internet providers and 5G developers are expanding, further squeezing fiber supplies.
“A lot of entities are buying a lot of fiber,” Jackson says. “We’ve never seen this in our industry.”
Even Corning didn’t foresee the level of demand.
“One year ago, operators needed to be convinced fiber was the right choice for their builds,” Mullaley says. “Those conversations have shifted to, ‘We know we need fiber; how quickly can we get it?’”
Across the industry, as lead time sits at more than a year for some types of fiber cable, optical network terminals (ONTs), Wi-Fi routers and core network routers are delayed four to six months due to the semi-conductor shortages.
A freak winter storm in Texas that forced lengthy power outages and shut down petroleum manufacturing is still reverberating in the supply chain. And raw materials such as steel for pedestals and plastics for PVC duct are in short supply.
And even when product is available, a national shortage of truck drivers caused by COVID-created bottlenecks in the commercial licensing process means key finished materials may linger in warehouses awaiting transport.
The situation leads to hard-to-find skilled crews sitting idle or moving to find work.
“I can’t have crews start and stop in two weeks because there are no materials,” DaBramo says. “If you have no work for the crew, they will continue to charge you and go somewhere where is there is work.”
Absorbing the Shock
Strategic planning on the front end may be the best solution to supply chain challenges.
The plan should phase in construction and be “adaptable and flexible when unexpected issues come up,” Weber says. “If you design around a specific product, and that product is difficult to obtain, that could paint you in a corner.”
That’s one lesson from when a tsunami hit Japan 10 years ago and disrupted the availability of certain raw materials and fiber components.
“Now we keep in constant contact with cable manufacturers and situational challenges on a weekly basis,” Weber says. “We pre-engineer plans now so we absorb the shock that may come from delays.”
NRTC agrees that it is vital that co-ops thoroughly plan for broadband build-outs and order materials well in advance to keep on schedule. As kinks in the supply chain emerged last summer, NRTC purchased $15 million of fiber for clients. A similar allocation for chips is under consideration, DaBramo says.
To buffer labor shortages, NRTC certified a program that enables numerous construction crews to work with their design methodology.
Graybar offers staff and inventory software to manage supply warehouses and drives trailers of rolling inventory to jobsites. The wholesale distributor has 290 locations, plus a “branch in a box” for Tri-County Rural Electric Cooperative in Mansfield, Pennsylvania, that is stocked two years ahead of its broadband build.
“We stay in our wheelhouse and work hand-in-hand with the co-op,” Jackson says.
To meet accelerating business and consumer needs, Corning is investing in new facilities and adding and upgrading equipment and ramping up production, Mullaley says. The company is planning a state-of-the-art optical fiber manufacturing plant in Poland set to open next year.
Electric co-ops accustomed to supplying their own materials with advance orders may fare well despite the crunch. Weber recalls one co-op broadband partnership began receiving fiber in June from an order made in last November.
“This unpredictability is why we plan,” he says. “We take the supply chain, a wonderful blend of complexity and efficiency, for granted. When it’s working well, we don’t even see it. When things break down, the intricacies are exposed.”
LREC Fiber Project Navigates the Supply Crunch
Lake Region Electric Cooperative in tiny Hulbert, Oklahoma, decided to deliver broadband internet access to its members when no other provider would. Now, at a time of extraordinary demand and unforeseen supply chain shortages, the co-op is finding a path to get the job done.
“The biggest impact is the construction timeline,” says Hamid Vahdatipour, LREC’s CEO. “Delays in construction increase the cost. It also leads to member dissatisfaction, because we are not able to connect them in a timely manner.”
He says the biggest concern was securing fiber optic cable and electronic equipment, noting one vendor offered delivery “sometime in 2022.”
“We limited our vendor search to ones that had materials on hand.”
Despite the challenges, he expects work to finish on schedule. They now rely on a handful of key lessons to navigate the crunch:
• Know what to take on and what to contract out.
• Pre-order critical equipment early.
• Don’t be afraid to change if necessary.
• Build in buffers.
• Availability often outranks cost.
LREC started Phase I taking on the whole job itself, from buying supplies to labor. For Phase II, they contracted both materials and labor. For the third phase, they’ll secure the materials while contracting out the labor and warehousing to avoid having to let staff go when the network is built, Vahdatipour says.
But will that increase costs?
Provided the project budget is within its feasibility study guidelines, cost increases are tolerable, Vahdatipour says. And they should be balanced by a higher-than-expected take rate, now at more than 60%.
“Members are happy to get it, and they want it as fast as they can get it,” he says. “They wanted it yesterday.”