Overbuilds Add to Worker Shortage

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Open the classified section of any major metropolitan daily news-paper, and you'll probably see an ad that reads something like this: "Cable installer/ splicer. Good benefits. Local and remote sites. Call now."

Likewise, cable-system Web sites perennially list openings for trained technical personnel.

Employees have the ability to be choosy because incumbent cable operators have work to offer as they upgrade their plants to deliver digital signals and install cable modems. Add to that trend the fact that telephone companies are speeding deployment of their own high-speed-data products. And municipal governments are also analyzing the financial impact of adding video to the suite of products offered by their locally owned utilities.

Now along come a handful of cable veterans who have cashed out of acquired companies and are taking that money to start kingdoms anew. Markets such as Portland, Ore.; San Antonio and Austin, Texas; and Aurora, Colo., may become hotbeds of wired competition.

The competition may not be just for customers, but for the technically adept workers who will put a new build on the map by getting into the market quickly and, more importantly, with competence.

Contractors happily say they have never had more bid requests flooding their offices. But their enthusiasm is tempered by the knowledge that soon, a shortage in the number of talented workers may drive up the cost of jobs for themselves and their clients.

"So far, nobody has a good idea of what the market will be. Right now, contractors are loving to hear your story, but when it comes time to commit, they have trouble getting people," said Dave Hayrend, vice president of engineering for Western Integrated Networks, one of the most active new overbuilders.

There may be a real crunch in tech jobs, he said-the area where an overbuilder may be most vulnerable. The first provider in a market has a "green field," and consumers have few preconceptions. The second, third and fourth companies have greater challenges.

"We decided going in that once we do pick a market, it's not enough to just operate. If you're a second provider, you really need to do a good job in video, in voice and in data and provide a remarkable customer experience," Hayrend said.

What he didn't mention was speed. Analysts predicted that overbuilders need to capture 15 percent to 20 percent of a market, selling in multiple services, to remain viable. They added that it's unlikely that the third competitor to market-trailing the incumbent and the first overbuilder-will be able to attract enough business to avoid having to sell out to a predecessor.

NOT SAYING NO, YET

No contractor contacted by Multichannel News said it would turn away projects due to technical-worker shortages. But they did concede that it was getting harder every day to attract employees who are ready to be immediately put to work.

Many are hiring underskilled employees and offering training to bring them up to construction level.

Several scour local career fairs and bemoan the lack of technical emphasis in trade schools.

And several stated that they were getting more aggressive pursuing possible candidates for retraining. TCS Communications president Steve Burrows said he sought out cities where local military bases are scheduled to be decommissioned. Honorably discharged servicemen, he figured, would make excellent candidates regardless of their technical training. They are used to putting in a full day's work, showing up every day and on time and taking orders.

The effort was only partially successful, though. A recruiting drive at Fort Hood, Texas, netted the company 14 qualifiers. But the job candidates were used to living in Texas or their hometowns. The job site was Denver; several new hires later confessed that they were homesick.

Lesson learned: Future candidates will be grilled on their attitudes toward long-term relocation, Burrows said.

Another contractor was more bullish on military candidates. "They think 'a little travel' means going to Guam," quipped John Jamar, CEO of Cable Constructors Inc. of Iron Mountain, Mich.

Tapping former military personnel and other employee sources, Jamar has been able to expand his work force 50 percent from 1999 levels, he said. Cable Constructors currently has 1,000 in-house employees working on 60 construction projects.

Like cable systems, contractors have established Web sites to try to attract savvy workers.

Beltway Cable Services Inc.-which recently got the bid to upgrade Cable TV Montgomery in Montgomery County, Md.-uses such a strategy. Technical candidates are brought on board and trained in-house for specialty tasks such as splicing, office manager Laura Mathias said.

Other companies recruited new employees only to be stunned when the candidates balked at outside work.

"A lot of people are out there looking for a job behind a PC," WideOpenWest LLC chief technical officer Mike H. Brody said. Pole climbing in the elements holds less attraction for them.

MERGE AND CONQUER

Like MSOs, contract operations are consolidating to take advantage of economies of scale. Argus Communications Group has absorbed some smaller contractors, such as TCS. The different Argus divisions can then bid on larger jobs and shuttle employees from different regions to match the ebb and flow of work, Burrows noted.

Such a strategy allowed the company to bid for a Charter Communications Inc. upgrade in Sebastian, Fla., and draw on 30 employees from each Argus division to staff the job. The company currently has a contract to upgrade Time Warner Cable's Orlando, Fla., system, and it has 600 employees at work upgrading AT & T Broadband systems in the Denver area, the company said.

TCS also is talking with overbuilders including WIN and Texas-based Grande Communications Inc., both of which have designs on the San Antonio market, among others.

"We want to take on more work," Burrows said, adding that more and more people only want inside jobs.

Contractors also said the manpower situation has been unintentionally aided by the consolidation boom among cable operators. That is because upgrade and rebuild plans in some systems were temporarily shelved after the parent company was sold, idling contractors and freeing up construction supplies.

"I've got five companies a week in here looking for work, [saying,] I've got crews, give us a chance,'" Brody said. His applicants include contractors disillusioned with MSOs that "committed to 20,000 miles, then delayed the project three months. They're tired of getting honked around.they'll sell [plant] to me rather than having it sit around."

But as the market becomes tighter and tighter, employers worry that mobile workers will raise prices for both contractors and operators.

One executive offered this scenario: A major Midwest city is the site of an incumbent upgrade and two overbuilds. The contractor is servicing the overbuilder. The contractor hires undertrained men, trains them and puts them on the job. The overbuilder is impressed by the work of select employees and hires them away from the contractor. The contractor loses its investment in the workers and has to pay to educate other candidates. Training and retraining costs get added to the cost of delivering the job.

"What are you going to do? Tell a good customer, Don't take my guys?'" one executive lamented.

"Our customer tried to raid a couple of good employees," Mathias added.

Both contractors and overbuilders agreed that competition for workers may add to premium rates for contracts. Wages and benefits will have to rise at the top companies to keep employees from jumping ship.

"We'll have to offer higher salaries than the norm. We have to attract them quickly, and it takes something special to attract them over-incentives, career opportunities," Hayrend said.

SUPPLY WORRIES ARISE

Construction companies also expressed fear about the supply pipeline. More than one related a story he had heard that an unnamed overbuilder had been refused hardware by an unnamed major supplier. The vendor allegedly claimed to be pressured by the incumbent. The vendor, fearful of losing MSO business, declined to sell hardware to the overbuilder.

Overbuilders, however, placed that tale in the alligators-in-the-sewers category of urban myth.

"Incumbent pressure could be out there, but since Wall Street has embraced us, competition has become a fact of life. The feds have come close to mandating it," Hayrend said.

"Vendors are vendors. My money is as good as anyone," Brody said. Company executives are veterans with vendor relationships as long as anyone's, he said, adding, "Suppliers know we're not going to burn them."

If there are pressures on equipment flow, buyers will just shift to smaller suppliers, Brody said, adding, "Small guys have a smaller fear factor." But he added that WOW has commitments from major manufacturers.

If there is a supply fear, it is focused on digital-box availability. Overbuilders generally have to stand in line behind incumbents with pre-existing orders.

"The last thing you want to do is build a plant, then have it shut down for lack of material," Brody said. WOW is looking at boxes from vendors other than Scientific-Atlanta Inc. and Motorola Inc. because they are in such great demand from MSOs.

"We need open-standards boxes-let in manufacturers like Samsung [Telecommunications America Inc.], Tatung [Co.] and Philips [Consumer Electronics Co.]," he added.

While contractors expect labor rates to rise, potential clients noted that acceptable inflation will not be infinite.

"There's a premium to be paid for speed to market, but caps will be out there. With skyrocketing costs, the concept of a competitive marketplace just doesn't work," Hayrend said.

Another very real fear for contractors is backlash from their best customers-the entrenched MSOs.

"I have a long history with AT & T [Broadband]. What if we're doing an overbuild and AT & T needs work done? We're a public company, and I have to make a choice to make money. We're not overbuilding any current customers, but it will happen eventually," Burrows predicted.

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