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2025 telecommunications benchmarking study insights | Baker Tilly
Article
Profitable amid challenges: 2025 telecommunications benchmarking study
July 15, 2025 · Authored by Chris Skidmore, Justin Wardle
The 2025 Telecommunications Benchmarking Study shows the overall profitability of rural communications carriers improved from the previous year. Universal service funding mechanisms remain focused on bridging the digital divide to make modern voice and broadband services available to more Americans and remain a significant component of overall profitability.
The communities served by rural carriers continue to demonstrate demand for reliable, high-speed broadband and other communications services, however, customer growth rates declined for the fourth consecutive year and average revenue per broadband customer increased nominally.
Although profitability continued to improve overall, the results differ for legacy rate-of-return carriers as compared to those on model-based support, such as Alternative Connect America Cost Model (ACAM)-I, ACAM-II, the Alaska Plan and Enhanced ACAM (E-ACAM).
Legacy rate-of-return carriers are showing slightly higher operating and net margins as a percent of total 2024 revenues, however, model-based carriers had higher growth in terms of revenues and net income compared to 2023, thus bringing the two groups very close to parity. Challenges remain for both groups in terms of revenue growth versus operating expenses.
Even amidst these challenges, however, local broadband service providers, including rural telecommunications carriers, still excelled at providing vital services to their customers.
This year’s study provides important data and takeaways influenced by this economic landscape that can empower your business to assess where it ranks against other telecommunications companies in key industry areas. Explore an overview of survey findings below.
2025 benchmark methods
The study compiled 2024 data from over 80 companies.
Participants came from across the country and included a nearly even mix of cooperatives and privately held businesses. Additionally, approximately two-thirds of participating companies were under legacy rate-of-return support, with approximately one-third under model-based support — ACAM I, ACAM II, E-ACAM, or Alaska Plan.
Participating companies
The following table provides a summary of the range of size of the study participants.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
The study defines a customer connection as a physical connection that provides service to a residential or business customer.
Often, one customer connection provides multiple services such as voice, broadband, and video; however, for the purposes of the study, such instances are counted as one connection regardless of the number of services a single customer connection might carry.
This review of the benchmarking data focuses on:
Profitability components
Staffing efficiency
Capitalized labor
Broadband
Universal service funding impacts on profitability
Profitability components
Profitability of companies on model-based support diverged in comparison to companies that remain on legacy rate-of-return, with legacy rate-of-return carriers having higher total profitability from 2018–2023. However, during 2024, this trend inverted, with the profitability of model-based support carriers outpacing legacy rate-of-return carriers for the first time since 2017. The profitability metrics appear to be a result of two factors:
Inflationary and other increases in costs were essentially the same for both categories of carriers, which resulted in increased revenues for legacy rate-of-return carriers but no corresponding increase in revenues for model-based carriers.
Model-based providers continued the trend of steady revenue growth, while legacy rate-of-return carrier growth rates cooled in 2024. Presumably, some of the model-based increases likely relate to E-ACAM support starting in January 2024, which, for many, was higher than prior A-CAM or legacy rate-of-return support in many cases.
Since the first A-CAM election took effect in 2017, companies that elected model-based support have shown historical annual revenue growth rates that are 1% to 2.5% less than companies on legacy rate-of-return. However, that trend flipped during 2024, with model-based support companies showing a higher rate of revenue growth, as compared to their legacy-based support counterparts.
The graph below shows the median year-over-year growth in operating revenue from 2017 through 2024, which illustrates the differing growth rates.
Revenue growth: Total operating expenses
This difference is more pronounced, especially in recent years, by the growth rate in traditional wireline revenues — voice, wholesale broadband, access, and universal service support — as opposed to broadband revenues and other communications services.
Revenue growth: Traditional wireline revenues
Total operating expenses for legacy rate-of-return carriers and model-based providers increased 4.8% and 5%, respectively, from 2023 to 2024, the fourth consecutive year of expense growth of over 4%.
The graph below shows that median operating expense for all companies in the study continued its steady increase as compared to the total annual inflation rate published by the U.S. Bureau of Labor Statistics.
Operating expense year-over-year growth
Getting more granular, staffing costs have long been the single largest cash expense to rural telecommunications carriers, and are certainly impacted by inflationary factors.
Direct labor costs — gross salaries and wages, employee benefits, payroll taxes, and bonuses — historically represented approximately 35% of total expenses and 28% of total revenues.
Regardless of the denominator used to same-size a company’s total labor costs, a notable spike in 2022 of between 3% and 7% occurred, whereas these same figures remained relatively consistent over the previous four years, as shown in Labor Table #one below. 2024 saw a similar event.
Labor table #one
Perhaps most notable is that the median company shows that gross labor costs nearly exceeded 50% of its total operating revenue less Universal Service Funding (USF) — controllable revenues.
On a more individual level, the increase in personnel costs is more pronounced. Specifically, the average compensation cost per employee — gross wages plus average benefit costs per employee — increased nearly 3.6% from 2023 to 2024, 5.8% from 2022 to 2023, and 6.2% from 2021 to 2022, as compared to only a 3% increase from 2020 to 2021.
The following table details the per employee costs for the past six years.
Labor table #two
Given these increases in costs, it’s important to ensure efficient use of staffing resources.
Staffing efficiency
The efficient use of staffing resources is an important management focus. The study traditionally used revenue per employee to compare employee efficiency across study participants; however, USF support revenues and other revenues that aren’t necessarily employee-driven, especially for model-based support companies, can influence that outcome. The metrics below compare the number of employees to customers — essentially answering the question: How many employees does it take to serve 1,000 customers?
The graphic below overlays the median number of employees with the number of employees per 1,000 customers throughout the past seven years. As this number dropped from eight employees per 1,000 customers in 2016 to 5.8 in 2024, the data appears to support that companies have realized some efficiencies in serving customers over the past several years.
Employee usage
Capitalized labor
A portion of a company’s employee costs — gross labor and benefits — are capitalized as part of the costs to construct new network assets.
The FCC’s legacy accounting rules for regulated telecommunications carriers includes a required method for capitalizing labor and benefits to new construction that’s restrictive as compared to other methodologies commonly used. Due, in large part, to this legacy method, historical medians of capitalized labor as a percentage of total labor were between 5% and 6%.
As companies grow outside of their regulated footprints, they can employ alternative labor capitalization methods to fit their individual circumstances. In the past three years, the data shows a slight, but noteworthy, increase in the percentage of labor capitalized to total labor costs.
In 2024, this amount exceeded 10% for the first time since we’ve been tracking this metric. This was up from 9.6% in 2023 and 8.8% in 2022, all well above historical medians. Additionally, as might be expected, the capitalized labor percentage is greater for companies that have higher levels of capital spend, measured as capital expenditures as a percentage of total revenue.
Broadband
The availability and reliability of high-speed broadband continues to be essential to life in the U.S., particularly to people and businesses in rural areas. Retail broadband grew to 34% of total operating revenues, up nearly 20% from just six years ago.
Video conferencing continues to be commonplace, and education, work, entertainment, commerce, and more continue to rely on robust broadband services. Broadband connectivity continues to remove or mitigate barriers to remote working arrangements, remote education, and other opportunities for individuals and businesses to overcome geographic restrictions that previously existed and limited flexibility.
Broadband growth and fiber optics
Circumstances in the rural telecommunications space continue to foster significant customer growth, speed-tier upgrades, and investment in fiber optic network facilities.
The graph below shows that the pandemic-driven broadband customer growth of 2020 and 2021 hasn’t continued in 2022 through 2024, but it doesn’t appear that this growth was given back either.
The median study participant experienced 3.5% growth in broadband customers from 2023 to 2024, which is consistent with growth rates over the previous two years. After experiencing the highest two-year customer growth percentage in the more than 10 years since the transition away from dial-up internet to Digital Subscriber Line (DSL), it appears growth rates have returned to pre-pandemic levels.
Broadband customer growth
Average revenue per user (ARPU) experienced its lowest growth rate since 2014, at 1.8%, ending slightly above $75. This is on the heels of three of the last four years having growth rates over 6.8%, when the industry experienced significant demand during and shortly after the pandemic.
ARPU and ARPU growth
A more detailed look into the customer densities across various broadband speed-tier packages shows continued movement to higher tier broadband products.
Speed package customer density
Continued deployment of fiber optic network facilities made this growth possible — see more on network expansion below. The median company reported that 98.3% of its residential customers had fiber connections to the premises.
This expansion of fiber to the premises not only allows for increased download speeds, but also increased upload speeds — essential for quality video conferencing performance, gaming, and other activities.
Specific to the number of speed-tier service combinations offered by companies, the median company reported offering six combinations, with over 75% of all companies reporting three to 10 offerings. Back in 2020 the median company reported offering 12 speed-tier combinations, with over 75% of all companies reporting eight to 24 offerings.
Voice data vs. Broadband only
Another continuing significant trend in the rural telecommunications industry shows movement away from selling broadband packaged with a phone line, or voice and data, to selling broadband as a stand-alone service, or broadband-only.
Broadband-only customers in the study totaled approximately 63.9% in 2024 and 58.2% in 2023, of all broadband customers.
USF impacts on profitability
Although the median for all participants showed a 2.2% decline in operating margins from 2023 to 2024, they were still able to grow earnings before interest, taxes, depreciation, and amortization (EBITDA) by 1.4% from 2023 to 2024. EBITDA is a metric used to evaluate a company’s fundamental operating performance by excluding the effects of financing and accounting decisions. Although not recognized under U.S. Generally Accepted Accounting Principles (GAAP), it’s commonly used to offer a clearer view of a company’s ability to generate profit from its primary business activities and is regularly used in determining the valuation of a telecommunications business.
The biggest gains in profitability continue to be from non-regulated service offerings, with broadband revenues showing an increase of 6.7% from 2023 to 2024 and other operating revenues, those not considered wireline, broadband, or video, showed an increase of 7.5%.
Specific to USF, interest continues to be high in evaluating a company’s profitability excluding federal and state universal service support — EBITDA-less USF or controllable margins.
Companies want to prepare for a future with less or no USF given the persistence of limitations on federal USF, such as:
Budget control mechanisms
Per line caps on support
Expense limitations
Changes to the programs
Other constraints
Operating income before depreciation and amortization (OIBDA) measures a company’s core operating performance by adding back depreciation and amortization to operating income, excluding non-operating items.
In contrast, EBITDA also adds back these costs but may include certain non-operating income or expenses, making it a slightly broader metric.
Operating margin, on the other hand, includes depreciation and amortization, highlighting how efficiently a company turns sales into operating profit. While all three metrics assess profitability, OIBDA and operating margin focus more strictly on core operations, whereas EBITDA can be influenced by financing and other non-operating factors.
The graph below shows the median company’s profitability figures along with controllable margins for the past nine years.
Profitability
As noted above, the median company continued to report a positive controllable margin after having reported a positive figure for the first time in 2021, however, there was some erosion in 2024.
The following table provides more details including bottom and top quartiles.
Profitability continued
This continued improvement in controllable margins is a function of the focus companies have placed on growing their services beyond the legacy wireline services.
The results of the current year study show the telecommunications industry continues to demonstrate resilience, remaining profitable despite ongoing economic and operational challenges.
This study highlights how leading companies are leveraging cost efficiencies, strategic investments, and core operational strength to maintain solid financial performance. Metrics such as EBITDA, OIBDA, and operating margins reveal consistent profitability even as the sector navigates regulatory pressures, shifting consumer demands, and capital-intensive infrastructure needs.
As the landscape evolves, adaptability and disciplined execution will remain key drivers of sustained success across the industry.
