The telecom infrastructure services (TIS) industry is a $35 billion market that is expected to evolve and expand rapidly in the next 10 years. Government funding is driving network expansion projects by major telcos such as Verizon, AT&T and T-Mobile (as well as their international counterparts), and a whole ecosystem of large, established and interrelated vendors are jockeying for positions on deals.
That dynamic is making competition more challenging than ever. Labor shortages, wage inflation, workforce aging and other trends are pressuring vendors’ ability to stay above water, much less compete with peers.
Challenges Facing Telecom Infrastructure Services (TIS) Vendors
TBR has engaged with hundreds of vendors that provide services related to TIS and with operators and hyperscalers that buy from those vendors. When briefing these companies on our research and sharing our perspectives on the market, we often find ourselves in discussions about their challenges. While the specific challenges differ by vendor, geography and/or TIS service line, TBR consistently hears about four major pain points that are broadly impacting most providers of telecom infrastructure services:
- Wage and benefits inflation: The U.S. Social Security Cost of Living Adjustment for 2022 was 8.7%, and 2022 concluded with a 6.5% annual inflation rate as measured by the U.S. Consumer Price Index. Low unemployment for TIS-related labor, coupled with an expected increase in the demand for labor, points to a need for wage increases to attract workers. General expenses beyond wages are rising for telecommunications vendors as well. They must grapple with this trend by passing along those higher costs to customers.
- Worker and subcontractor shortages: The U.S. Government Accountability Office (GAO) published a report in December 2022 entitled, “Telecommunications Workforce: Additional Workers Will Be Needed to Deploy Broadband, but Concerns Exist About Availability.” The GAO studied Bureau of Labor Statistics data and conducted interviews across the industry to forecast the state of telecommunications labor for a 10-year period. The analysis concluded that the U.S. government, at its peak in 2023, would support 23,000 workers, but that conditions are ripe for a potential labor shortage due to lower-than-national-average unemployment for telecommunications infrastructure services professions. Qualitative factors such as an aging workforce, training requirements and industry competition for this category of labor are also pressuring resource availability. As a result, vendors must figure out how to source their own full-time employees to support build-outs, as well as determine the optimal manner in which to use third-party subcontractor services to augment their own resources and pursue available work.
- Navigating government incentives and stimulus: The GAO analyzed eight programs that fund the deployment of fixed and mobile telecommunications infrastructure. These programs are not an exhaustive list but represent the largest available to support this type of build-out activity. Of these eight programs, the National Telecommunications and Information Administration’s Broadband Equity, Access and Deployment program is the biggest, providing a total of approximately $42 billion for broadband build-outs in underserved and unserved areas across the U.S. Collectively, the eight programs provide over $75 billion in total available funding. Operators must navigate this environment to capture funding, and vendors in turn must position themselves effectively to win related opportunities that operators generate from this funding.
- Ability to differentiate: The available funding to support telecom network deployments is increasing the level of competition among the vendors that provide services to operators in support of these deployments. As noted above, competition for talent is intensifying rapidly, and it is becoming more difficult for vendors to compete on price. In many TIS segments, avenues for differentiation are also inherently narrow, and there is a tendency for many vendors and services to look the same. As many services are heavily based on labor, vendors must compete on talent to win. Talent defines key vectors of competitiveness such as delivery efficiency (time and resources required) and delivery quality. Increasingly, however, this is not enough and, at times, is not a sustainable path to differentiation. Vendors must differentiate in areas such as delivery tools, automation, process rigor, reporting, commercial terms, partnerships and other related factors to optimize delivery efficiency, provide cost-effective bids and stand out in a crowd of RFPs.
Overcoming TIS Market Challenges to Pursue the Growth Opportunity
Taken together, these four difficult challenges can quickly become a heavy burden for telecom infrastructure services vendors. Overcoming a vast industrywide labor shortage while also managing rapidly expanding costs is no small feat. It is difficult to find time, particularly as a Tier 2 or smaller services supplier, to work strategically rather than simply putting out fires. Lastly, there is a competitive dynamic: The top 10 suppliers make up approximately 65% of the TIS market by revenue, according to TBR’s Telecom Infrastructure Services Global Market Forecast.
How can companies begin to address these difficult challenges? TBR believes this process starts with research. Addressing each of these problems both separately and collectively with a rigorous quantitative and qualitative research approach will help build a winning TIS market strategy rooted in competitive and customer insights.
For more information on the TIS industry outlook for 2023 and how to optimize your strategy for telecom network deployment services opportunities, download your free copy of our latest white paper.