Underground Construction - January 2020 - 15

are that by 2025, over half of all mobile
users will be relying on 5G connections. To
facilitate this, micro cell deployment and
the "densiﬁcation" of the current network
is a necessity. The underground segment
will beneﬁt, as ﬁber is the backbone that
makes the small-cell network function.
Emerging 5G wireless technologies
mark the next great shift in telecom
infrastructure (i.e., from wireline to ﬁber).
Multi-year initiatives led by telecom
service providers will create ﬁber installation, small-cell deployment and ongoing
maintenance contract opportunities for
those operators with the requisite ﬁber
construction capabilities. In 2020, the
growth and investment will be centered
around the major population centers.
Rural area growth will require creativity
at the municipal level to implement
high-speed networks along existing power
cooperative infrastructure.

to accelerated replacement of asbestos
cement pipe will encourage spending
at the state and local level. The EPA is
providing billions of funding for some of
these projects and is combining them with
WIFIA loans to create a powerful ﬁnancing
solution for major infrastructure projects.
The Water Infrastructure Act of 2018
provided some much-needed federal
support in the near-term. The new law authorizes $3.7 billion for new Army Corps
of Engineers projects and $4.4 billion for
drinking-water projects. It also reauthorizes the Water Infrastructure Finance and
Innovation Act (WIFIA) at $50 million and
the Drinking Water State Revolving Fund
(DWSR) at $4.4 billion. These funds can be
utilized for loans, loan guarantees, bond
insurance and project reﬁnancing.
While this is certainly a positive
800,000

Municipal water/wastewater

Residential
Nonresidential buildings
Nonbuilding structures

700,000

Millions of current dollars

600,000
500,000
400,000
300,000
200,000
100,000

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019F
2020F
202F
2022F
2023F

FIGURE 1: U.S. Construction Put-in-Place
250,000
200,000
Billions of USD

The water and wastewater segments will
play a critical role in growing utilityrelated construction through the forecast
period. FMI Research projects that both
segments, taken together, will grow at
an annualized rate of around 5 percent
from 2019 to 2023. While water and
wastewater construction spending won't
rise to the level of industry highs in 2008
(just prior to the residential construction
collapse), it is expected to come close by
the end of the forecast period. Demand
in both segments will be driven by the
replacement of aging infrastructure,
population growth, residential and
utility construction, and state and local
government spending.
Reliability risks associated with aging
water and sewer pipeline infrastructure
are the primary reasons for investment.
The renewal rate for water utilities is
expected to increase sharply in response
to recent EPA guidance that it will
implement section 401 of the Clean
Water Act to promote the building of
pipelines, and ensure Americans have
clean water for drinking.
In addition, EPA guidance related

development for the industry on its face, it
remains a far cry from the inﬂux of capital
that organizations like the American
Water Works Association believe is needed
- especially considering the current
administration's expectation that local
water utilities become self-suﬃcient over
time, as a result of increasing deregulation.
Information from the American Society of
Civil Engineers suggests that by 2020, 44
percent of U.S. water pipe will be classiﬁed
as poor, very poor or life elapsed. Because
of this, 20 percent of treated water is lost
each year and nearly 900 billion gallons
of untreated sewage are discharged into
waterways. There is a critical need for
multi-decade investment and improvement of the U.S. water system.
The Utility & Communications
Construction Index (UCCI) presented below

150,000
100,000
50,000
0

2015

2016

2017

2018

2019F

2020F

2021F

2022F

FIGURE 2: Project Capital Expenditures by Utility & Communication Owners*
*

Capital expenditures by publicly traded Utility and Communication owners with greater than $4.9 billion in revenue
from the United States and Canada; sources include Capital IQ, company investor presentations and FMI research

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Underground Construction - January 2020

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