BKD Rural Telecommunications Benchmark Study Results for 2021
20 Years of Broadband Internet Services
The 2021 BKD Rural Telecommunications Benchmark Study (BKD Study) is complete, and when combined with previous BKD Studies and the Telergee Telecommunications Benchmark Studies, we have 20 years of valuable financial and operational information for the rural telecommunications industry.
In the first quarter of 2000, only 1 percent of the adults in the U.S. said they had access to a broadband connection. By February 2021, that percentage increased to 77 percent of adults. Over that same period, the percentage of adults who say they use the internet went from 52 percent in 2000 to 93 percent in 2020.
Every year the BKD Study provides an in-depth look at how the rural telecommunications industry has performed. This year we look at the impact of 20 years of broadband services.
The BKD Study offers important benchmarks this year as rural telecommunications companies track the effects of COVID-19 on their financial results.
The BKD Study answers two main questions:
- How is the telecommunications industry performing financially?
- How is my company’s financial performance compared to my peers?
In 2021, 170 rural telecommunications companies in 18 states participated in the BKD Study. It provides 2020 benchmark results for the balance sheet and income statement and more than 30 other key metrics.
The increase in access to broadband services over the past 20 years has resulted in increased broadband revenues. The following graph demonstrates the growth in internet service revenues and the decline in voice service revenues over the past 20 years. Internet revenues are the second largest source of revenue behind only access service revenues.
While internet revenues have increased significantly over the past 20 years, operating margins have not increased for the industry. The following graph indicates that operating margins have rebounded the past 10 years but are still not near the peak of the early 2000s.
NEW THIS YEAR
New industry peer groups this year include:
- Companies with debt and without debt
- Geographical regions (Midwest, Iowa, & Great Plains)
- Investment income (less than and more than $1 million)
- Employees (six groups)
Existing peer groups:
- Rate of Return/ACAM I/ACAM II
- Revenues (five groups)
- Access lines/connections (five groups)
- All companies
This is the fourth year the BKD Study has been published, and we’ve made enhancements and changes this year that have improved the metrics significantly, including the ability for the participating companies to benchmark the four-year trend of key metrics. With a significant number of rural telecommunications companies receiving income from investments, we added peer groups for companies with investment income of less than and more than $1 million. There are 70 companies out the 170 companies that have investment income exceeding $1 million for 2020. We also added peer groups for companies with long-term debt (92 companies) and companies without long-term debt (78 companies).
The following graph provides the operating income before depreciation and amortization (OIBDA) and operating income percentages of total operating revenues. Companies with investment income exceeding $1 million do have slightly less OIBDA and operating income, but the difference is not as significant as one might have expected.
ACAM II was added last year as a form of regulation. Of the 170 companies that participated in the BKD Study, 91 have elected either ACAM I (48 companies) or ACAM II (43 companies) as their form of regulation. The graph below demonstrates, at least early on, that companies electing ACAM have higher operating income as a percentage of revenues than legacy rate-of-return carriers.
It is interesting to see companies electing ACAM I have declined in 2020 but are still ahead of the legacy rate-of-return carriers. It appears their buildout obligations are having an effect on their operating margins.
2021 Key Benchmark Results Based on Revenues
OIBDA is an important financial metric to measure growth in cash flows and total leverage ratios.
Revenue per employee assists in determining whether your company is overstaffed or understaffed. The graph below indicates a relatively small deviation between companies based on revenues.
One of the biggest effects on profitability is the investment necessary to provide services to customers. All the average amounts invested per access line below are slightly higher than the results in 2019. For 2018 and 2019, the companies in the revenue group ranging from $10 million to $25 million have the highest average gross investment per access line.
The average operating income percentage measure demonstrates how much of the company’s revenue ultimately gets to the bottom line. Revenue growth needs to provide for growth of operating income.
Trends are important, whether it’s your company’s performance or the industry as a whole. The graph below provides a historical trend in operating income for the industry over the last 20 years. While the trend from 23.2 percent in 2001 down to 9.8 percent in 2016 is disappointing for the industry, it does appear the decline has subsided, as the 16.2 percent for 2019 and 15.9 percent for 2020 are the best percentages in the past 15 years.
These are just a few of the key benchmarks available in the BKD Study that will be released soon.
If you participated in the BKD Study, you should have your results. If you want to participate or learn more about the BKD Study and how it can benefit your company, reach out to your BKD Trusted Advisor™ or use the Contact Us form below.