Tom McLaughlin, the recently named president of supply chain and distribution specialist USTC Corp., believes the North American telecom landscape is ripe for opportunity.
Telcos, cable operators and other network operators as well as municipalities are quickly coming to grips with the challenges they'll face with Rural Digital Opportunity Fund (RDOF) buildouts, while others are pushing ahead with other types of fiber and wireless network upgrades.
USTC could also find itself in a prime position for growth in other ways, particularly through M&A, as the region's fragmented market of distributors and supply chain managers looks more than ready for a round of consolidation.
But to be positioned to take advantage of any of these opportunities, McLaughlin, an industry vet who hails from telecom industry suppliers such as CommScope, Arris, Motorola and General Instrument, also realizes there's much work to be done. In addition to trying to become a more well-known player in the North American telecom market, USTC will be busy shoring up its supply chain and distribution capabilities in a way that more closely resembles what it has set up across the pond.
USTC is owned by a larger, global company called ETC Group, which serves about 6,000 customers in more than a dozen countries, with Europe as its largest region. ETC, which launched in Paris about three decades ago and has tight relationships with Altice, started out as a small distributor to the telecom industry, then expanded to serve major operators in Europe. ETC also invested in supply chain expertise, with a focus on solving the different pain points therein, that goes beyond the focus of a typical distributor. In some cases, ETC outsources itself as a supply chain for major operators, consults on supply chain issues and even takes over elements of an operator's supply chain.
RDOF opportunity knocks
McLaughlin said operator activities centered on the multi-billion-dollar Rural Digital Opportunity Fund (RDOF) create a potential one-off supply chain opportunity for USTC. While big operators have supply chains set up for their normal course of business, some will be challenged with expanding their supply chain capabilities for RDOF projects.
RDOF "is emerging so fast that it's underserved," McLaughlin said, stressing that some operators and municipalities that don't have existing relationships in-hand could face significant supply constraints. He also believes that materials management is likely to be an area of inefficiency for some of them in the early going, presenting an opportunity for USTC, a company that's solely focused on the telecom market.
With RDOF and other telecom projects already in the picture or on the horizon, McLaughlin said he is tasked with establishing USTC as a "one-stop shop" for wireline (both HFC and fiber) and wireless (save for the RAN equipment that would come from a company such as Samsung, Ericsson or Nokia) gear, taking on a model that ETC has already set up in Europe and other parts of the world.
"The proposition is that these big telecom operators have to have, say, 1,000 different relationships with different companies to get all the materials they need," said McLaughlin, who reports to ETC Group founder and chairman Cédric Varasteh. "Overseas, right now, they can come to one place and have a relationship with ETC and all of the materials that their people need to build the networks, including test equipment, all available to them in one spot … My task is definitely to grow this [market for USTC] into the maturity that exists over there."
That full capability is not yet there for USTC in North America, but that's part of the plan, as the company looks to help ETC reach $1 billion in global annual revenues. McLaughlin says USTC represents about 20% of ETC's overall business today.
Soothing pain points
Out of the chute, McLaughlin said he will be doing the rounds in the industry to help "figure out the pain points that aren't being solved."
He allows that the market is already full of distribution players, but holds that few, if any, have the added supply chain capabilities to toss into the mix. "If people are happy, I don't want to go out there and just compete on price of distribution," he said. "I want to find a way to solve the new issues and save the customers opex or make their time to market for these fiber builds better."
One potential pain point beneath all of that is transportation. USTC, McLaughlin points out, has invested in its own trucking line to help get materials out to where a fiber of HFC network buildout is taking place. That can come in handy when a hired truck gets redeployed to a competitor or another operator, giving USTC an opportunity to "take up the slack," he said.
At the moment, USTC, which has about 200 employees, is set up to handle supply chain management along with distribution, and currently has about 810,000 square feet of warehouse space split between northern New Jersey and Texas.
McLaughlin estimates that USTC has about half a dozen cutometers in the region, with Altice USA and Vyve Broadband among those on the list. Altice USA, which has a major FTTP upgrade project underway, hired USTC a few years ago to handle its warehousing from the company's facility in Edison, New Jersey, resulting in a reported closing of Altice USA's Bethpage-based warehouse.
Update: Altice USA opted to independently transition its Bethpage distribution center prior to USTC launching operations, Light Reading is told. USTC did consolidate the supply chain solutions in the existing New Jersey warehouse, but all employees in the Bethpage warehouse were offered continued employment with USTC, and most did accept employment.
Some of USTC's current activity, depending on the operator, relates to RDOF and some other types of fiber network builds.
Although USTC's current strongpoint is fiber-to-the-premises (FTTP), the company also has capabilities to support hybrid fiber/coax (HFC) networks using product lines from suppliers such as CommScope and ATX. "There's an opportunity at the cable operators, if we can find a way to bring some value that's unique," he said.
There's no current major focus on customer premises equipment (CPE) for USTC beyond some assistance with self-install kits, but it's in talks with manufacturers about that segment of the supply market too. "It's an opportunity," he said.
Sizing up M&A potential
With McLaughlin now at the helm, USTC is centering on a market with a wide range of competition made up of both big and small players. With that in mind, McLaughlin said he is also keeping an eye on how the market is poised to consolidate, potentially opening up the door for M&A moves.
There are signs that consolidation is already well underway. Earlier this month, Wesco International, a provider of distribution and logistics and supply chain services, completed its merger with fellow industry player Anixter International.
"We're not opposed, as a growth strategy, to doing M&A as well," McLaughlin said.
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- AT&T issues warning on global supply chain
— Jeff Baumgartner, Senior Editor, Light Reading