What’s the deal with telecom layoffs?

There’s a bit of mixed messaging happening in the U.S. telecom space these days. On one hand, operators have been complaining about labor shortages, in some cases issuing dire warnings about how these could slow broadband deployments across the country if not addressed. But on the other hand, many have hopped on the layoff bandwagon, citing economic pressures. So, which is it? Do they need workers or are they tightening their belts? The answer, it seems, is kind of….both.

Sean McDevitt, partner at telecom consulting firm Arthur D. Little, told Fierce that when operators are talking about labor shortages, they’re referring to the actual field crews needed to build fiber and cable infrastructure. He noted that a lot of those crews were already busy during the pandemic and since then many operators have accelerated their build plans. So, with that rising demand, skilled labor has become both more scarce and more expensive.

On the flip side, McDevitt said there’s no shortage of labor in terms of corporate staff. And given telecom companies have long been working to thin out their ranks, that leaves these employees as the prime target for cuts. Recon Analytics’ analyst Roger Entner agreed, telling Fierce layoffs won’t be focused on the deployment side but instead on staff positions across divisions such as accounting, finance and marketing.

As McDevitt noted, the telecom workforce had been shrinking for a long time before the pandemic hit. According to data analyzed by the Economic Policy Institute, the number of telecommunications employees as a percentage of the overall U.S. workforce fell from 1.4% in 1983-1986 to 1% in 2003-2006 and just 0.6% in 2016-2019. Or put another way, the number of telecom employees in the country dropped from nearly 1.4 million in 1983-1986 to just under 894,000 in 2016-2019.

Looking at individual operators, financial reports show AT&T’s workforce shrank from 281,000 employees as of January 31, 2016 to 203,000 as of January 31, 2022. Meanwhile, Comcast Cable went from 88,000 employees as of December 31, 2015 to 79,000 six years later, while Verizon’s workforce shrank from 177,700 to 118,400 over the same period.

Entner and McDevitt both said this has, in part, been exacerbated by a shift from a traditional equipment-based model of operating the network to a more efficient model reliant on software, the cloud and automation. This shift, of course, reduces the need for hands on deck. Entner added it also requires workers with a different skillset.

McDevitt said there was a slowdown in workforce shrinkage during the pandemic since operators experienced a bump in traffic and consumer demand. But conditions have started to normalize again, and operators are now staring down a future full of economic uncertainty and fierce competition. With more competitors fighting for subscribers, it will become increasingly difficult for incumbents with the highest market share to avoid losing a portion of their position. “None would admit they plan for that but it’s simple math,” McDevitt said. Stir in macro concerns about the economy and potential war and you have a perfect storm for layoffs.

Indeed, operators have gone back to work “getting more efficient and having fewer workers per unit of revenue," he added.

Over the past several weeks, Verizon, Comcast, Zayo Group, Cox Communications, Starry and others have all laid off workers. And earlier this week, Altice USA announced a hiring freeze.

“There’s a confluence of these things that are I think making people bite the bullet,” McDevitt stated.

But Entner argued that to a certain extent layoffs are a knee-jerk panic response to perceived economic threats, and operators in fact could be contributing to the creation of the recession they fear.

“Demand is still strong. Telecom is a recession-proof business. But they’re under pressure to raise profits and one way to do it is cut on employee costs, especially when these employees suddenly cost 10% more a year,” he said. “They don’t want to be flat-footed, so they lay off more people than they should and they’re blissfully unaware or ignorant that what they’re doing is causing a recession. It’s when perception becomes reality.”