Dear Editors,
Is the industry of contractors that builds towers, and upgrades and maintains wireless networks dying? In the opinion of this contractor and others we have spoken with, the answer is yes. And unless something changes in the very near future, the support infrastructure for all wireless carriers, tower owners and smaller operators will not have the support it needs as networks mature.
The heyday of tower contractors was the late ‘80s, ‘90’s and the 2000’s. Cellular A & B 824-896mhz license networks were being built out. There was a lot of variety in the type of site builds, but it was not uncommon to build long new access roads; to erect tall self-support towers or monopoles with deep caissons or a big mat spread foundations; to set ~70,000lb prefabricated concrete shelters on perimeter beam foundations that crews built; and to sometimes install generators and propane tanks on corresponding installed pads; to install and test grounds rings; and lay tons of fabric and top rock in large fenced compounds.
The Federal Communications Commission (FCC) then released four new 1800-1900mhz PCS licenses per market and contractors had even greater demand for work. The entire industry was thriving. Carriers were making money, quickly getting their sites on air and recouping construction costs through substantial daily revenue.
The free market was working well as carriers and their management companies all awarded work by a competitive bid process of pre-qualified contractors. A tower contractor had a very limited potential customer base given there were only so many carriers, tower owners, management companies and various small telecommunication company potential clients to work for, but it worked well. They could control their size and growth by how much work they pursued and won in competitive bids and if they wanted to expand geographically.
There were exceptions as there was a short period in time in the 2000s when a carrier conducted reverse auctions. You would go bid walk a site, work up your bid, and then they would have an online reverse auction. Early on, you would sit there and see a starting price above your bid. You would bid downward until you won or could not go any lower.
As online auctions continued, sometimes the starting prices were lower than your absolute bottom and you would wonder if bidders were naïve to their costs — or desperate to keep workers busy. Some days we would watch these online auction prices go down below the actual hard costs of everything needed to do the project! There were even rumors that the carrier’s employees were participating in the bid process by bidding against those participating! That was never confirmed, but the reverse auctions eventually stopped after little success and contractors not embracing the process.
The major shift
A major shift occurred in the 2000s where carriers laid off most of their employees (I was one) and those employees all landed at tower owners, development companies, big management companies. Some of us started our own companies.
The big management companies would offer to finance the wireless carriers’ network for a huge premium, to the benefit of carriers by delaying their cash outlay until the management companies handed completed sites over to the carrier.
At some point in the late 2000’s and early 2010’s, us contractors started seeing the bombardment of matrixes and requests for unit pricing. This made no sense to us. No tower contractor goes out to a site and says, “Oh, that site will require six antennas and 180’-0” of cabling, and I know we do antennas at $xxx each and that cable costs $x.xx per linear foot to install.”
Contractors look at a site based upon tower type, routing, heights, ease, type and other things and say something like, “That entire job will take a three-man crew xx days to complete.” Or like, “That task will take three crew members x hours to complete.”
Contractors assess jobs based on site conditions and crew requirements, not standard units. The unit pricing format also did not work for mobilization as a site four hours away with crew members on per diem would cost more to get to, more time to get back, potentially more time each day to get to a mountain-top site than an in-town site.
It also didn’t work when you were directed to work overtime. When contractors brought this up, the direction always came back to use a blended rate that worked for all scenarios (which is impossible) as the rate that works for all scenarios is the rate that works for the worst-cast scenario, which no company wants to accept.
Soon, these unit prices were no longer sent out where you were asked to work up your pricing. They were just sent out pre-populated. You’d then accept what you could and try to negotiate on the unacceptable and hopefully get close to what you need. The next evolution was unit prices would just be sent to you by a current or potential client, and they were 30-40% (or more) less than they needed to be for a contractor to be healthy. The message was: “You have to accept it if you want to work for us.”
We have even seen prices in recent months that was for one half of a carrier’s national maintenance contract, that literally cannot be done by any contractor that is compliant with insurance, certifications and pays a competitive wage and benefits to quality employees.
I believe that most of us contractors were initially angry at turf vendors [large construction management firms] for the unit pricing they kept pushing down to contractors with no leverage other than to simply say no to the work offered, which most would not because of their need to keep their employees working.
Over time, I slowly changed my perspective that carriers are putting out their builds in a competitive bid to the turf vendors knowing they all will slash each other’s throats to win big contracts.
These turf vendors then adopt a mindset that if they win a big contract, that they can simply cut out their 35-40% margin they need, and know that enough unsavvy or desperate contractors will accept the mandated unit pricing.
A perfect storm
During the past 15 years, it has been a perfect storm of things that have made it nearly impossible to be a healthy and sustainable industry for tower contractors. Below is a summary of the many items that were added to the contractors’ plate that increased internal costs, made jobs take longer and have slowly eroded business health:
Safety
The message in the industry always centers around how important tower contractors are and the safety of the industry and employees is paramount, but the pay to contractors keeps getting cut while the number of certifications for field employees has tripled and quadrupled. Each one of those certifications requires not only fees per each employee cert, but also requires the employer to pay the employee for the time to takes the cert minus the time the employee could be out in the field generating revenue. Add to these requirements, clients have been implementing third-party tools (Compli and others) which also require the contractor to pay to demonstrate their compliance to the client!
Often, when you have taken the substantial time to be fully compliant on their platform, the client will call you and ask for documentation. You respond by saying that the items in question are uploaded in their platform and they will still ask you to submit it directly right then! Why even have the platform and make contractors pay to use it?
These are systems that the client should pay for as they are the ones mandating them and the contractor has already had to accept unit pricing dictated to them with no recourse for these mandated costs or other site variables like travel distance to site.
Bureaucracy
Turf vendors especially added more compliance, more certs, more meetings (sometimes daily hour-long calls), onsite safety review that would stop or slow site progress by hours each day, regular quality assurance calls with reviewers in other countries who were not industry trained, oftentimes difficult to communicate with, and at times would interject site standards that your local contacts never communicated, compliance mentioned below, and repetitive onboarding duplication between mandated platforms.
Compliance
Some time ago, many clients implemented the onboarding and vendor approval process by platforms like Avetta. This can take up to 50 hours at annual renewal and many hours each month to stay compliant. Then, you find the actual client sends you a request for items that are in your Avetta approval and now duplicated! Ironically, clients make the contractor pay for the membership in Avetta and the more clients you have attached, the more you must pay!
This was brilliant by carriers, tower owners and turf vendors to not only make their contractor comply with what you require, but to pay a membership for the express privilege of being qualified. These are systems that the client should pay for as they are the ones mandating them. Plus, the contractor has already had to accept unit pricing dictated to them with no recourse for these mandated costs or other site variables like travel distance to site.
In addition, in just the past year, two major carriers and one turf vendor initiated new annual comprehensive compliance initiatives that required anywhere from 10 to 80 hours each where tower contractors are asked to provide standards documents for their Diversity, Equity and Inclusion initiatives, as well as high-level IT security protocols that did not even apply to tower contractors that simply receive materials and go out and build sites.
Closeouts
The majority of turf vendors require crew compliance and attendance of virtual site audits (not to be confused with site safety audits) that will occur several times a week, if not daily, to monitor the progress of a build. In addition to this, there is usually a final call that takes place to audit the entire site, and contractors are then given a punch list of items to correct.
You correct those items, submit them and now you can take all your final photos to submit in your closeout, which has requirements that have increased in complexity massively and continue to increase to this day.
Complexity aside, clients are now requiring formal submittal of closeouts much quicker than previous, but is almost always initially rejected, sometimes multiple times. These rejections require re-mobilizations of crews to correct “deficiencies” and take pictures; sometimes requiring the re-delivery and rental of manlifts with no additional compensation. In many cases the “site acceptance or virtual acceptance” was completed, so you return your aerial equipment as to not incur additional cost, only to later have your closeout rejected for some arbitrary standard, and then you have to re-incur rental charges.
Troubleshooting
In the first 15 to 20 years of site builds, the contractor was just that: a contractor that would build a site or upgrade it — handing off the site to the carrier who would use a radio installer, a separate integration team or their own in-house technicians to bring the site on air. In recent years, the integration, turn-up and troubleshooting has been added to the contractor. These additional responsibilities can often take days and sometimes weeks and there is no additional “unit price” for ongoing crew labor or additional aerial lift costs on such troubleshooting.
Delayed and deducted payment
As time goes on, these same clients have slowed payments via a variety of means. Contract payment terms have moved from what once was net 30, to 45 being favorable, 60 being common — and recently I have seen net 90 offered by a television station.
Combined, the delay of closeouts, the additional troubleshooting (both of which massively increase costs) and delay of closeout approval to submit final invoices put a huge cash-flow burden on the contractor to pay their employee payroll every two weeks with clients paying you 60 days after you manage to get your site approved.
Add in massive recent inflation and you are borrowing against a credit line or an owner’s own finances at 9-10%, which further erodes the ability to make a sustainable income.
To compound all of this, many clients have implemented a third payment platform (Ariba, Paymode-X) that the contractor HAS TO pay either for a membership based upon the volume they use the processor OR a flat fee of around 1.5% additional to process through the platform!!!
These are systems that the client should pay for as they are the ones mandating them and the contractor has already had to accept unit pricing dictated to them with no recourse for these mandated costs or other site variables like travel distance to site.
Inflation
All of the above collides into a perfect storm as prices offered continue to be cut, while safety, compliance and bureaucracy requirements have increased time to comply while also slowing project work. The cost of retaining experienced field people and retaining them against moving to other more steady work trades has risen exponentially. At the same time, the cost of employee benefits goes up ~20% per year, workman’s compensation and insurance rates going up every year, fuel costs go up, fleet maintenance costs go up, and general inflation and bank interest rates have all been at recent decade highs.
One 20+ year-old-company with field offices in multiple states has lost about $4.5 million in the past two years. I spoke to another competitor last week who does greater volume who confirmed a similar loss over the same time. Last month, a competitor of ours had their Monday morning staff meeting and when everyone showed up, the management told their crews to clean out their trucks, to get their personal belongings and turn in company assets, as they were closing THAT DAY with no notice to clients or employees!
I love this industry. I love our employees. This is not sustainable.
The changes being made by the clients in our industry are killing contractors, pushing employees to other trades, and making contractors chose between inevitably going out of business or cutting costs in a field where safety is paramount and preached by all those cutting offered pricing!
If this industry is unsustainable, then us contractors, continuing without protest or change, is only enabling an industry that is taking advantage of important resources that build, maintain, and upgrade the networks that almost every consumer uses on a regular basis!
With no leverage other than to say no, what is the answer for things to change other than my fellow tower contractors saying no when offered pricing doesn’t make sense?
Is it a collective voice that negotiates on behalf of all the industry contractors? I don’t have the answers, but I do know that today’s tower business climate is not sustainable and the trajectory we are all on is only getting worse.
I have been a lifelong supporter of the free market and a merit system, as I believe companies should be successful via competition and individuals should be rewarded via merit. That being said, all of us tower contractors have no leverage nor any collective voice to stand behind ALL of us to get tower contractors and field workers properly paid and supported in a super critical and safety dependent environment.
My 15-year-old self would marvel that I could even be saying this now, but our industry is broken.
I hope you will considering sharing your thoughts with me at: [email protected]. Together, I would hope we all could work toward a better future for tower and wireless contractors.
— A long-time tower and wireless contractor
Want to send a letter to the editor? Send it to [email protected].