If telecom providers are required to remove decades-old lead-sheathed cable from their networks, the total bill is likely to be in the range of $4.4 billion to $21 billion, according to a new estimate from New Street Research. That’s a big drop from a preliminary New Street Research estimate of $60 billion.
The revised estimate is based on new information provided by TDS Telecom, AT&T, and other industry sources about the extent of lead-sheathed cable nationwide and about likely remediation scenarios.
The telecom industry hasn’t used lead-sheathed cable since the 1950s or 1960s, but the cabling has become a hot topic in the wake of allegations made by the Wall Street Journal. In a heavily researched series of articles, the WSJ argued that the cabling could pose a public health threat when the lead shielding degrades over time, whether installed on poles, in the ground or under water.
In view of the lower revised remediation estimate, the researchers now expect that the cost of any remediation that might be required would be born by the providers. Previously the analysts had speculated that the government might chip in some of the costs.
Nevertheless, the researchers said that the extent of the hit that telecom provider stock values have experienced since the WSJ report is unwarranted.
“[E]ven assuming the situation is as bad as the high end of our worst case, as a group the equities’ moves reflect double the maximum liability associated with lead-sheathed cables,” the researchers wrote.
It’s also important to note that AT&T has challenged the need for remediation, arguing that the WSJ claims are overblown. If the company prevails, perhaps little or no remediation will be required.
Any Rural Remediation Expected to be Minimal
The New Street Research analysts expect any lead remediation costs that might be required for rural areas to be minimal, based on conversations with industry sources, who said lead is less prevalent in rural markets, and based on a statement issued by TDS Telecom yesterday stating that the company believes it has only 10 miles of lead-sheathed cable in its network.
The researchers believe this number is so low because legacy TDS networks were never part of the Bell system and were primarily composed of “local connections rather than the dense circuits that are the focus of WSJ’s investigation.”
AT&T Remediation Estimate
New Street Research points to an AT&T court filing indicating that the company estimates that less than 10% of its two million miles of copper cabling is lead-sheathed and more than two-thirds of those cables are either buried or in conduit. A “tiny portion” of the lead-sheathed cabling is under water and the rest is aerial.
Based on this, the researchers estimate that AT&T has about 126K miles of lead-sheathed cable in conduit, 50K miles of aerial cable, 14K miles of cable buried but not in conduit and 10K miles running underwater.
Based on conversations with industry contacts, the researchers estimate a cost of roughly $5 per foot to remove aerial cabling or cabling buried in conduit. Industry sources said buried cable that was not installed in conduit is difficult to remove and is typically left in place. Researchers used a rough estimate of $15 per foot for removal of buried cable not in conduit.
Using information filed in ongoing proceedings in a lawsuit against AT&T involving Lake Tahoe, the researchers estimate that it costs about $15 per foot to remove underwater cabling.
Based on the above data, the researchers estimated a total cost of $6.5 billion for AT&T to remove lead-sheathed cabling in its network.
Nationwide Estimate
Using the AT&T data and AT&T market share, New Street Research estimated the cost of any lead remediation that might be required for other telecom providers at between $7.1 billion and $14.3 billion, yielding a nationwide forecast, including AT&T and other providers, at between $13.7 billion and $21 billion.
Remediation costs might be as low as $4.4 billion nationwide, however, if buried cabling does not have to be removed, the researchers note.
Industry sources told New Street Research that generally there is existing copper cabling in place that can be used to replace lead-sheathed cabling that is removed. The researchers cautioned, though, that if fiber must be deployed to replace cabling that is removed, the total remediation cost could climb by over $10 billion.
