The broadband industry is on the cusp of transformative change as BEAD funding reshapes the competitive landscape. With 2025 poised to bring a surge of activity from both traditional and alternative providers, service providers must navigate a dynamic environment fraught with opportunities and risks. BEAD funding is expected to ramp up service provider activity in 2025, and bring additional competition from alternatives to fiber, such as fixed wireless and low earth orbit (LEO) satellite. With the possibility of some shifting sands, what costs and pitfalls await the industry as the scramble for cash - and deployments - begins in earnest? Managing a diverse set of business imperatives - costs, revenue opportunities, competitive threats - will be top of mind for service providers in 2025 as they plan growth and expansion. Here are the top five challenges they will need to manage.
1. Getting costing rightTo accurately assess the cost of network expansion, service providers must incorporate critical construction insights into their planning to make informed business decisions. The first task is to determine the right technology for the target areas and evaluate the viability of fixed wireless and fiber. Housing density, geographic and geologic topology, and potential barriers or obstructions to the line of sight are all critical factors as service providers weigh financial viability.
Where fiber is the preferred technology, the next steps include a comprehensive understanding of utility pole viability, including estimated "make ready" expenses, vs underground construction, and the soil conditions that impact trenching, plowing, or boring and therefore cost; an accurate view of all the locations that could be serviced, both subsidized and unsubsidized, with the new build; economic and demographic trends; and environmental risk factors for each market.
Good data and solid analytics are critical for accurately assessing these costs.
BEAD is not the first government grant program, and over the last 4-5 years, the industry has seen how bidding on grants can go wrong when the bids are not accurate. As a result, there is a lot more strategic thinking during the initial study phase. If a service provider is overly risk-averse, they ironically put themselves at greater risk from overbuilders; conversely, being overly aggressive without solid cost insight, puts the service provider and the community at risk of a project going belly up, writing off the early capital expenditure and leaving customers stranded.
2. Being First to Fiber Where Practical
BEAD is having two major impacts: incumbent providers are looking more broadly at expansion opportunities and vulnerabilities, and the unprecedented level of funding has attracted an influx of investment capital from both start-up service providers and incumbents.
These players are particularly focused on where they can be the first to offer fiber - incumbents from both a growth perspective and to fend off new competition. The new players, of course, see a huge opportunity if they can enter a market quickly. Whoever is first to offer fiber in a given market, gains a tremendous advantage
3. Maximizing sales opportunities to preserve capital
Service providers often operate with incomplete or inaccurate information regarding households in their market. Surprisingly, it is fairly normal for service provider systems to be missing 3-6% of the serviceable locations within their network boundary. These are homes that they could be marketing to today without any incremental capital investment. In addition, unwitting failure to report these locations as serviceable can leave them vulnerable to inaccurate categorization of grant eligibility within their boundaries, opening the door to competitors to encroach on their territory, even though the service provider could already provide high-quality service or achieve it with minimal effort. Utilizing more precise data and analysis enables faster and more profitable revenue growth, fends off competitive challenges, and facilitates positive engagement with the community.
4. Expanding rural broadband
Rural broadband poses significant challenges for fiber deployments even though the need for reliable internet access is critical for economic development, education, and healthcare. Low housing density and aging utility poles are significant barriers to broadband expansion in rural areas. Many broadband providers rely on utility poles to carry fiber-optic cables, and discount the viability of underground, even when poles are old, decaying, or structurally unsound. Facing the challenges of working with utilities to replace decaying poles is time-consuming and costly. Even when the poles are viable, the permitting challenges frequently introduce heavy delays to time to market. These difficulties reinforce the need to better understand the comparative cost and time to market of going underground, as well as the exploration of fixed wireless. When the complete equation of cost and time to market are factored in, an underground fiber deployment may surprisingly prove the most financially beneficial strategy. Government entities and traditionally fiber-based service providers should rigorously model all the options available.
5. Maintaining networks in less dense population centers
Maintaining broadband networks in less densely populated areas poses unique challenges due to geographic isolation, high costs, and logistical difficulties. In rural regions, the cost per user is much higher since fewer customers are spread over larger distances. This means that the revenue generated is often insufficient to offset maintenance expenses. Aging infrastructure, including utility poles and cables, requires regular repairs, which are more difficult and costly to conduct in remote or hard-to-reach areas. Severe weather, like storms or heavy snowfall, can also cause frequent outages, with longer repair times due to the distances technicians must travel. Addressing these challenges requires targeted funding, public-private partnerships, and innovative technology solutions to provide sustainable broadband access.
BEAD funding and the race to offer fiber will present many opportunities for service providers in 2025. Ultimately, the quality of the market, revenue and cost assumptions underpinning their decisions on where and how to bid will be the critical determinant of success.
VCTI helps service providers make better broadband network expansion decisions by delivering more robust and reliable market opportunities, technology options, and construction cost insights early in the planning process. We help ensure their investment dollars are spent as efficiently as possible. Learn more about our AI-powered solutions below.