Fiber optic cabling in the US: Why demand cannot be allowed to outpace supply

Jul 25, 2023

Very recently, Mitch Landrieu, senior advisor to president and White House infrastructure coordinator made a statement that says, “Just like president Franklin Delano Roosevelt’s Rural Electrification Act made a historic investment in rural areas bringing electricity to nearly every home in America, president Biden and vice president Harris are committed to leaving no community behind as we connect everyone in America to high-speed Internet.”

With data-intensive activities like video streaming, cloud computing, online gaming, and remote working, the need for lightning-fast and dependable internet connections has skyrocketed. The demand for optical fibre cabling isn’t going anywhere, and according to the latest CRU data, it will outpace supply sometime in the next twelve months, says Paul Atkinson, CEO – optical network business, STL.

Internet service providers (ISPs), businesses, educational institutions, and even residential areas are prioritising the deployment of fibre infrastructure. Government initiatives and funding programmes have been launched to propel the expansion of fibre networks, recognising their pivotal role in fuelling economic growth and innovation. However, it’s vital to keep demand in check and avoid leaving supply in the dust, as it could be detrimental to the nation’s connectivity infrastructure. It is interesting to note that according to IBIS World, the market size of the fibre optic cable manufacturing industry in the US increased faster than the technology sector overall last year.

The demand for new cabling was a whopping 91.3 million f-km (fibre kilometres) in 2022 and is projected to reach 127 million fk-m by 2025. The government’s positive initiatives, like the Broadband, Access, and Deployment (BEAD) programme, are fuelling this demand, especially in rural areas where high-speed broadband coverage needs a boost. As the BEAD programme gathers steam, over 8.5 million households and small businesses find themselves without high-speed internet infrastructure or with, at best, below-par internet services. American citizens, businesses, and households are definitely looking at the Rural Digital Opportunity Fund (RDOF), with a staggering $20.4 billion (€18.59 billion) funding spread over ten years, to close in on this gap.

The latest data from CRU puts North America in the lead when it comes to mid-term cable demand, which is expected to grow by 7% year-on-year between 2022 and 2027. It’s anticipated that initiatives like RDOF and BEAD will add roughly 60-70 million f-km to this demand in the 2021-2028 period.

While other industries may be caught in some economic turbulence, the fibre industry stands tall. But if there’s a shortage of optical fibre cabling, there will be delays in deployments. Timelines will stretch, and unfortunately, fewer homes will be connected despite the best intentions of the government and operators. It’s crucial to strike a balance and ensure that supply can keep up with the soaring demand to avoid these setbacks.

In recent years, the fibre optic cable market has witnessed increased competition between incumbents and alternative network providers (AltNets). Incumbents are large telecommunications companies that have traditionally dominated the market, while AltNets are newer companies that have emerged to challenge their dominance. Both incumbents and AltNets are investing heavily in deploying fibre optic cables to meet the growing demand for high-speed connectivity. Fibre deployment in America is not constrained by intent or capital, but by a limited ecosystem that could fall short soon.

To ensure a reliable supply of fibre optics, it is essential to address various factors:

The demand for fibre optics will be long-term. Labour shortages and high cable deployment costs made carriers re-think their near-term investment plans in 2021-2022. Some even slowed their deployments as they evaluated new federal funding options, opting for a ‘wait-and-see’ attitude. Those federal funding options have now materialised, and the next peak in US cable demand growth is expected to hit in 2025, driven by the new timeline of the BEAD programme.

The logical question that follows is, can US production rise to the occasion and meet this surging demand? Initiatives like BABA (Build America, Buy America) put a premium on bringing optical fibre cabling production back to our shores. However, some industry analysts raise the concern that this approach may be shooting itself in the foot, artificially constraining the amount of cabling accessible for infrastructure projects. In other words, while BABA seeks to boost domestic production, it runs the risk of unintentionally curbing the availability of cabling for crucial infrastructure initiatives.

At present, there are only a few US-based manufacturers of optical fibre. Taking the 2022 demand as a yardstick, which amounted to 92 million f-km, these fibre manufacturers could only fulfil approximately 53% of the required optical fibre for cabling shipments. This indicates that even if demand remains the same next year, the existing manufacturers can only meet half of the optical fibre demand.

That’s precisely why new players in the optical fibre market are urgently needed. These new entrants will not only provide the necessary supply to meet the demand but also stabilise the market, ensure fair prices, and enable the BEAD initiative to deliver on its promises.

Connecting rural America is a crucial piece of solving the country’s connectivity puzzle but achieving this goal will require an open mind and a collaborative market approach, rather than a competitive one.

The author is Paul Atkinson, CEO – optical network business, STL.

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Tags: access altnets and Deployment broadband Connectivity Franklin Delano IBIS World internet service providers Mitch Landrieu Paul Atkinson Rural Digital Opportunity Fund White House