Communications - In an environment where communications service providers are faced with an overwhelming supply of work, pressure for 5G deployment is accelerating. Emerging social trends and technologies alike are reliant on 5G and the current US communications infrastructure landscape is struggling to keep up with the growth. Over the next five to ten years, substantial capex dollars from communication majors such as AT&T, Verizon, Dish, and US Cellular will funnel into widespread fiber and 5G buildout.
It is estimated that only 15% of the current population has fiber coverage, but with an estimated 50% of US workers working remote in Q1 2021 and data requirements at all-time highs, it is becoming increasingly clear that fiber to the home and 5G buildout are essential across urban, suburban, and rural America.
Similarly, as the world transitions to a cleaner and smarter paradigm, the growing numbers of electric vehicles, internet of things devices, and similar technologies are more reliant than ever on fiber and 5G availability.
In order to fully support these trends and expand fiber penetration to 90% of the nation, an estimated $70bn of capital will be deployed into the initial buildout. Once the fiber backbone is installed, existing towers will require upgrading and up to 1 million small cells will be installed to support 5G.
In short, the 5G train is coming in at full speed ahead and is creating a massive opportunity for outsourced service providers to expand wallet share, increase pricing, and capture margin expansion.
Electric and Gas - On the other side of the spectrum, maintenance, replacement, and upgrade of existing electric and gas infrastructure as well as investing in renewable power generation assets remain a top priority for asset owners.
As the nation works to upgrade outdated electric transmission and distribution infrastructure, focus is shifting to modernizing the grid to make it harder, smarter, and more resilient. Deployment of new types of infrastructure, technologies, equipment, and controls that work together to deliver electricity more reliably and efficiently are rising to the top of utility budgets and outsourced providers are being called upon to execute the initiatives.
With a high degree of fundamental overlap between communication, electric, and gas infrastructure, this balance of rapid new build, upgrade, maintenance, repair, and replacement is favoring outsourced service providers in every part of the value chain.
Investor Viewpoint: News Cycle
Recent events have highlighted the state of the nation’s utility and communications infrastructure and the vast, long term investment required to upgrade and expand the network.
- California Wildfires, Summer 2020: Disastrous wildfires sparked partly from antiquated utility infrastructure resulted in California utilities pledging to spend $13 billion to cut wildfire risk.
- Texas Freeze, Winter 2021: A once in a generation freeze of Texas and the resulting power outages for millions exposed the state’s vulnerable energy infrastructure.
- Infrastructure Bill, Spring 2021: The Biden Administration recently announced a $2 trillion infrastructure spending bill with ~$300 billion dedicated to utility and communication upgrade and expansion.
- Pacific Northwest Heatwave, Summer 2021: Unusually high temperatures in the Pacific Northwest drove up energy usage and forced utilities to take drastic steps to prevent overloading the substantially strained electric grid.
- Renewable Energy, Ongoing: ESG investment mandates, zero carbon pledges, and rejoining the Paris Agreement are resulting in record US investment in renewable energy projects estimated at ~$40bn between '20 – '22.
Breakdown of ~$300 billion dedicated to utility and communication upgrade and expansion.