Systemic Risks in Gigapower: Assessing the Downside of Corporate Overreliance in Telecom Infrastructure

The AT&T and BlackRock Gigapower joint venture, launched in May 2023, represents a bold experiment in infrastructure expansion. By combining AT&T's telecom expertise with BlackRock's financial muscle, the venture aims to deploy fiber to 1.5 million U.S. locations by 2025, leveraging open-access models and public funding through programs like the Broadband Equity, Access, and Deployment (BEAD) initiative. While the project's ambition is laudable, its execution has exposed systemic risks inherent in overreliance on large corporate clients in the telecom infrastructure sector.

The Gigapower Model: A Double-Edged Sword

Gigapower's reliance on a sprawling network of at least 35 subcontractors—many of which lack licensing, training, or labor compliance—has sparked widespread criticism. In cities like Mesa, Arizona, and Bloomington, Minnesota, contractors have caused at least 40 underground utility strikes and nearly $135,000 in infrastructure damage in just 18 months. These incidents are not isolated but symptomatic of a broader issue: the prioritization of speed and cost-cutting over quality and safety.

The venture's workforce model, which eschews direct employment in favor of non-union, independent contractors, further exacerbates risks. Many workers are classified as 1099 contractors, denying them basic protections like overtime pay and workers' compensation. This creates a precarious labor environment where safety protocols are often neglected, leading to preventable accidents and reputational harm.

Systemic Risks for Investors

The Gigapower case underscores a critical vulnerability in the telecom sector: the overreliance on large corporate clients like AT&T and BlackRock, who outsource labor to low-road contractors. This model, while profitable in the short term, introduces several systemic risks:

1. Infrastructure Quality and Public Safety: Poorly trained subcontractors increase the likelihood of construction errors, utility strikes, and long-term network instability. These risks could lead to costly repairs and regulatory penalties, eroding investor returns.
2. Labor Compliance and Reputational Damage: Gigapower's labor practices have drawn scrutiny from the Communications Workers of America (CWA), which warns that the venture undermines decades of progress in telecom labor standards. Regulatory backlash or litigation could disrupt operations and tarnish brand value.
3. Regulatory and Policy Uncertainty: Local governments are increasingly wary of projects like Gigapower, which bypass traditional oversight. In Phoenix, Arizona, proposed code changes to allow non-union contractors in public rights-of-way have been met with fierce opposition from labor groups. Such policy shifts could delay deployments or force costly revisions.

Implications for the Telecom Sector

Gigapower's approach may set a dangerous precedent. If successful, it could encourage other telecom providers—such as Frontier Communications—to adopt similar subcontracting models, prioritizing financial efficiency over workforce quality. This could lead to a race to the bottom, where companies compete on the lowest labor costs rather than innovation or service reliability.

For investors, this raises a critical question: How do you assess the long-term viability of a sector increasingly dominated by corporate ventures that prioritize short-term gains over sustainable practices? The answer lies in scrutinizing not just financial metrics but also labor practices, regulatory compliance, and infrastructure quality.

Investment Advice: Mitigating the Risks

Investors should approach telecom infrastructure projects with caution, particularly those relying heavily on large corporate clients like AT&T or BlackRock. Key considerations include:
- Due Diligence on Subcontractors: Favor companies that prioritize direct employment or transparent subcontractor vetting.
- Regulatory Engagement: Support investors who advocate for stronger labor and safety standards, as these can mitigate long-term liabilities.
- Diversification: Avoid overexposure to ventures with opaque supply chains. Instead, allocate capital to firms with proven track records in infrastructure reliability and workforce management.

Conclusion

The Gigapower joint venture exemplifies the allure and pitfalls of corporate-driven infrastructure expansion. While its financial backing and open-access model are innovative, the systemic risks—ranging from labor exploitation to infrastructure fragility—cannot be ignored. For investors, the lesson is clear: overreliance on large corporate clients in the telecom sector demands rigorous scrutiny. The future of infrastructure investment hinges not just on speed and scale, but on sustainability, accountability, and the protection of both workers and communities.