Retrenched Fiber Build Plans for '23

An inflated list of fiber providers set new household passing records in 2022 as the industry chases marketshare and subsidies while bridging the digital equity gap.?

Despite challenges with labor availability and supply chain issues, 7.9 million new US homes were passed, according to a joint Fiber Broadband Association and RVA LLC survey. More than any other year.?Sounds like the nation's fiber buildout is finally in full swing??Maybe not.

2022 Highlights - 7.9 New Passings

• 68 million US homes are passed by fiber broadband providers
• 63 million unique locations excluding homes with 2 or more passings
• This represents nearly half of primary homes and 10% of second homes
• 13% year over year increase
• 27% increase over the past 24 months

2023 Planned Build Revises Down 40%

With record 2022 build metrics behind, top providers initially committed to expanding their coverage footprint to more than 8.5M US homes in 2023. Subsequently, each provider has downgraded their new coverage ambitions for 2023 to 5M passing, nearly 40% lower than initial guidance. Broadly,?escalating construction and supply chain costs, the macro economic climate, changing residential demographics and capex considerations were cited as primary reasons for the shift in ambitions.

ROI Changes With Competition

We view the primary driver as a broad-based concern that too much competition will result from current and planned expansion into markets that historically have been deemed economically less desirable for upgrade.?In short, the planned ROI calculations legacy and new providers relied upon from 1-2 years ago could potentially lead to undesirable, non-accretive results in an enhanced competitive environment.

The Selective Impact of Subsidies - Competition Will Be Enhanced From 2024

Although significantly higher levels of FTTH deployments based on Subsidy Funding programs such as BEAD, RDOF and ReConnect are expected over the next 5 years, the target of these programs focuses on specific markets and demographics as opposed to mainstream broadband provider footprints.?

Significantly more public and private equity providers, in addition to nearly $200B in aggregate federal subsidies, will bring a disruptive level of competition to many cities beginning as early as 2024.

Metrics to Watch

With more than 45% of US households now covered by fiber, key metrics to watch from an investment perspective will centered on tracking the increasing percentage of multiple household passings by not just fiber, but also high-speed cable and fixed wireless access.

About Telecom Partners Group

TPG, founded in 2002 a technology, media and telecommunications research firm based in New York City is led by 40 year telecom veteran Bill Stueber. TPG provides institutional investors with proprietary data trends, metrics, research and differentiated insights. We can be reached at [email protected] or through all major expert network providers.