Broadband wireline network operators (telcos and MSOs/cablecos) have cutback on CAPEX with decreased spending for network equipment.  In its latest earnings call, Calix warned that broadband operator spending might not increase until 2025, when BEAD subsidies have been allocated.  However, fiber vendor Corning and others suggested spending might increase earlier than that.

Calix specializes in providing optical network access equipment to smaller broadband service providers and has seen significant revenue growth in recent years, but near-term growth will be challenged.  Calix management’s guidance was that the 2024 fiscal year will be soft for its business. Despite that softness, the company still believes that it has years of growth ahead for itself starting in 2025 due to BEAD regulatory stimulus that should prove beneficial for the enterprise.

The U.S. government’s BEAD program promises to funnel a massive $42 billion in subsidies through US states to telecom companies willing to build networks in rural areas. However, allocation of those funds is taking longer than expected, forcing network operators to stall their deployment plans until they have a better sense of how much funding they might get.

“We have seen a significant broadening in the number of customers interested in competing for BEAD [Broadband Equity Access and Deployment program] funds. Today, nearly all our customers are either assembling a BEAD strategy or actively pursuing funds,” Calix CEO Michael Weening said during the company’s quarterly earnings call, according to Seeking Alpha.

“While they do this, they slow their new [network] builds as BEAD money could be used instead of consuming their own capital, and thus, we’ll slow our appliance shipments until decisions are made and funds are awarded,” Weening said. “At that point, the winners will move ahead and those who decided to skip the BEAD program or did not receive BEAD funding, we’ll begin investing to ensure that the winner does not impinge on their market. This represents a delay but also represents a unique opportunity for Calix.”

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Corning manufactures and sells most of the physical fiber cabling used in U.S. fiber networks.  Sales in Corning’s optical business unit – which houses its fiber products – continued to slide in the fourth quarter of 2023. 

“We anticipate optical communications sales will spring back because we believe and our carrier customers have confirmed that they purchased excess inventory during the pandemic and that they’ve been utilizing this inventory to continue deploying their networks,” said Corning CEO Wendell Weeks during his company’s quarterly earnings call, according to Seeking Alpha. 

“We believe these carriers will soon deplete their inventory and execute on the increased broadband deployment plans they’ve communicated to us over the last several months,” Weeks said. “As a result, we expect them to return to their normal purchasing patterns to service their deployments.”

He also noted that operators are waiting for BEAD funding. “We continue to expect BEAD funding really to start to translate into demand, the beginning of it, sort of late this year. They are progressing with awarding the grants and it will just take a bit for those to turn into real programs,” Weeks said.

Weeks suggested that the company is starting to see the glimmer of an uptick in demand from its broadband operator customers, but nothing definite yet. “We’ll know more in the coming months,” he said in his concluding remarks.

Meanwhile, executives at vendor Harmonic said this week they expect sales in the first half of this year to be relatively soft and then accelerate in the second half of the year as operators start to ramp up network upgrades, including moves to DOCSIS 4.0 technologies.