March 16, 2023
MSOs that Opted to Upgrade instead of Overbuild are Sitting Pretty
By Joe McGarvey, Senior Director, Marketing |
While the productivity of workers in the U.S. in general has risen by roughly 300% since 1950, productivity in the construction sector has trended in the opposite direction, according to a recently published report. Despite tremendous advances in machinery and technology, the availability of prefab materials and other time-saving breakthroughs introduced over the past several decades, a construction worker who may have voted for Harry Truman was likely to have been more productive than his or her present-day equivalent.
Not just an interesting factoid, the steep falloff in construction productivity, a measure of work delivered over a unit of cost, could also disrupt broadband expansion projects that require significant amounts of new construction, such as FTTH buildouts. Though a corollary has yet to be drawn, some service providers are already beginning to back off future fiber expansion targets. And a few analysts are predicting that new broadband construction may turn out to be more costly and complex than previous projections.
Predictability around the expense and complexity of new construction, along with a limited labor pool, incentivized most MSOs in recent years to opt for upgrades of their HFC plants as the primary means for increasing the speed and capacity of their networks, rather than large-scale fiber overbuilds of their coaxial plant. MSOs’ recognition of the time and expense advantage of continuing the evolution of their HFC networks contributed significantly to the creation of DOCSIS® 4.0 in 2019, the cable industry’s first big step toward CableLabs’ 10G initiative.
Oodles of Overhead
New equipment from technology suppliers enables MSOs to upgrade service tiers to multigigabit symmetrical services largely through in-place upgrades that require little if any respacing of components or new construction. Reaching customers with fiber, in contrast, is a massive undertaking that demands a large labor force and administrative overhead to meet increasingly stringent regulatory, environment and zoning requirements.
Experts speculate that all that overhead, including permitting exercises, is a major contributor to the slowdown in construction productivity.
“The work we do today takes hundreds more people in the office to track and bring to completion,” said a construction expert and market analyst in a recent The New York Times online article. “The level of reporting that you have to send to the government, to the insurance companies, to the owner, to show you’re meeting all the requirements on the job site, all of that has increased. And so the number of people you need to produce that has increased.”
Neither the NY Times article nor the cited report mentions broadband construction projects specifically. But the complexity that must be navigated and red tape that must be unraveled in government-funded projects, which define a good portion of fiber construction projects, is often significantly more onerous than obstacles encountered in private projects.
MSOs’ extensive coax footprints, though, provides them with the flexibility to evolve their networks over long time spans, even decades, without falling behind the competition.
Telecom and cable operators both need to increase the speed and capacity of their networks to keep up with customer demand. The issue for telecom operators is that their existing high-speed data networks are based largely on DSL technology, which governs the transmission of data over the same copper wiring used for telephone landlines. That technology has hit a bandwidth ceiling, requiring telecom operators to replace these networks with new, fiber-based networks to meet future subscriber demand.
The edge, or last mile, of HFC networks is constructed of coaxial cable, which is theoretically capable of delivering data at rates of tens of gigabits per second. The superior data-carrying capability of coax provides MSOs with a significant time-to-market and economic advantage, enabling them to update their existing networks without replacing large sections of infrastructure or the expense and complexity of major construction projects.
The reality is that MSOs are also pursuing a migration to an all-fiber access network. They are currently deploying fiber in greenfield buildouts, as well as through selective upgrades. In addition, the HFC network, which is already substantially more fiber than coax, gradually becomes more so as cable operators push fiber deeper into the network as part of routine upgrade events.
MSOs’ extensive coax footprints, though, provides them with the flexibility to evolve their networks over long time spans, even decades, without falling behind the competition. More importantly, a protracted evolution allows them to space out costs, both capital and operational, over time — a de facto pay-as-you grow strategy that produces savings they can pass on to subscribers.
Another advantage of upgrading over construction is at the environmental level. Major construction projects almost always require massive amounts of equipment, which is often powered by fossil fuels. HFC upgrades are almost guaranteed to leave a smaller carbon footprint than FTTH construction. Massive fiber overbuilding of the HFC network essentially amounts to paying exorbitant fees to replace equipment that is capable, at least for the next couple of decades, of delivering the same levels of service as the new equipment.
No matter how you look at it — onerous overhead that is wreaking havoc on construction productivity, illogical equipment replacement or environmental concerns — MSOs who opted to continue to invest in their HFC networks instead of overbuilding fiber plant should be feeling pretty good about their decisions.