BEAD-Driven Fiber Demand Pushing Increased Production; Shortages Not Expected

The fiber industry faces supply chain issues, but "we feel comfortable the industry has really rallied, that they understand demand” and are expanding to meet that demand, said Fiber Broadband Association (FBA) President Gary Bolton, noting Corning's plant underway in Arizona (see 2208300010) and its plans announced last month for a fiber plant in Poland to help meet European demand. Corning didn't comment. Other manufacturers are similarly ramping up production, Bolton said.

All the various federal programs targeting the digital divide, including BEAD and the Rural Digital Opportunity Fund, total more than $100 billion worth of fiber, Bolton said. That money will allow manufacturers to build more facilities, and more than $500 million in plant expansions have been announced in the past 18 months, he said. Citing federal and state spending on broadband connectivity, Prysmian Group announced this spring it was putting another $30 million into fiber capacity at its North America plants, atop the $85 million in additional investment there announced in 2021.

Fiber supplies currently are "tight," said Philippe Vanhille, Prysmian executive vice president-telecom, in an interview last week. "I wouldn't use the word shortage," he said. With the U.S. being a high-priority market and one expected to grow over the next five to 10 years, Prysmian is planning further investments atop the $115 million being put into its Tennessee and North Carolina plants, he said. "We understand we need to produce" bigger volume, he said. "People shouldn't be concerned about the availability."

Boosted capacity doesn't happen quickly, Prysmian's Vanhille said. Investment lead times typically are 12-18 months, but the global semiconductor shortage pushed that to 18-24 months, he said. Semiconductors are used in the machinery producing fiber and cables. He said there also are availability constraints with some raw materials such as helium used in the fiber manufacturing process.

At least short term, there's "definitely going to be a shortage" due to supply chain issues impacting fiber, conduits, waveguides and other equipment, said Dell'Oro Group analyst Jeff Heynen. Some BEAD and RDOF projects could see delays, but Corning and Prysmian capacity increases could alleviate some of the problem, he said.

Government spending on the digital divide "changed the dynamic" of fiber demand, Heynen said. Fiber plans that might have been years in execution have been sped up, there are more market entrants, and cable operators are having to respond to fiber overbuilders, he said. A reduction of manufacturing capacity in 2020 and 2021 due to the COVID-19 pandemic "certainly didn't help," he said.

Tier 1 ISPs are less concerned about shortages due to their bulk buying, though they also face the risk of spooking investors if they miss committed goals of homes passed in a certain time frame, Heynen said. Smaller operators typically don't have those public commitments hanging over them, he said.

Domestic fiber demand in 2021 was for about 72 million miles, and domestic production exceeded 100 million miles, with the end result being about 34% of the U.S. capacity ending up being exported, FBA's Bolton said. He said other components needed for the cabling such as the polyethylene jacket could also experience supply problems. Those supply chain issues "are not going away anytime soon," he said. BEAD has a buy-American clause encouraging that, but Bolton said FBA's Trusted Fiber Working Group is pushing for more definitive rules ensuring service providers know the sourcing of the fiber used, so gray market fiber -- particularly from Chinese manufacturers -- doesn't end up in projects.

COVID-19 "created a perfect storm of challenges" for the fiber broadband industry, the FBA said in a white paper last month about supply chain issues. Globally, there are shortages of skilled labor and raw materials and "significant complications and delays in the supply chain for even those materials and services that are in abundant supply," it said. Pandemic shutdowns, extreme weather conditions and military conflicts slowed production of components and raw materials or halted and complicated the shipping process, resulting in price hikes of 40%-100% and big delivery delays, it said. As of this summer, lead times for fiber cable were 52-60 weeks, fiber cabinet and splitters were 10-20 weeks, and fiber multiport terminals were 20-35 weeks, it said, urging various actions to mitigate the supply chain problems, such as product substitution, supplier diversification and moving away from just-in-time delivery.

Project management is going to be key for broadband providers as they make fiber investments in coming years, Bolton said. That entails working closely with fiber manufacturers, consulting engineers and distributors and putting in credible forecasts in feasibility studies so the fiber and related components are ready, he said. "You can't just wait until you're ready to deploy and say 'where's my fiber?'" he said. He said projects of smaller broadband providers can get aggregated if they're all working with a consulting or engineering group doing multiple projects, giving those individual smaller providers more purchasing power and influence in procuring fiber.