Far-reaching effects will bring opportunities but also challenges
In an earlier post, I wrote about how telecom networks were proving resilient in the face of surging demand and new usage patterns following restrictions to curb the coronavirus pandemic.
In recent weeks, behaviour has found a new normal. Voice calls and broadband traffic are still much higher than prior to lockdowns, but the huge initial rise has now largely plateaued. This gives us an opportunity to consider the longer-term implications for telecom operators once the dust has settled on Covid-19.
The value of high-quality connectivity has never been more evident. If the Covid-19 outbreak had happened only a couple of decades ago, when our digital infrastructure was far less mature, home working and home schooling would have been immeasurably harder. A lack of connectivity would have almost certainly led to far more-profound impacts on society and the economy.
Once we return to some form of normality, whenever that may be, I expect certain new behaviours to remain permanently: more video conferencing among businesses, greater usage of online shopping, additional e-learning for schools and universities and more frequent use of remote healthcare services. In theory, everything from dating to exercise classes could see some form of lasting change.
Still, it’s easy to get carried away and overstate the near-term implications. I don’t expect companies, given a choice, to all suddenly shift to permanent working from home. Face-to-face contact is hugely valuable and a return to offices will prove essential for most businesses. Constant video calling quickly becomes tiring and when in-person meetings resume I’m sure we’ll quickly realize some of the benefits we’ve missed.
In my view, the most likely outcome is that companies will adopt a greater balance between home and office working; organizations that are able to instil an effective and flexible combination of the two could end up being the most successful. Our recent Insight Report (available to clients here) about the future of collaboration technology and remote working explores these and other issues in more detail.
What is certain, however, is that good-quality connectivity will become an even greater need. On one hand, this should be a positive trend for operators; on the other hand, their perennial failure to generate revenue from growing usage is a leading reason their share prices have stagnated in recent years. Assuming long-term demand to be connected accelerates post-lockdown, so too will the need to invest. In that sense, nothing really changes. The only difference could be to more starkly highlight the need for operators to consider new business models and more adaptable and cost-effective forms of network deployment.
With governments and regulators now acknowledging that mobile networks form a critical part of national infrastructure, I wonder if the pandemic will prompt a more sympathetic stance toward operators. This may be wishful thinking, but it’s clear that operators’ efforts have extended far beyond just connecting homes and businesses. Operators will hope their crucial contributions don’t go unnoticed.
In the UK, for example, BT, O2 and Vodafone quickly provided connectivity to the new Nightingale field hospital in London, and Vodafone also doubled calling capacity for the NHS advisory service, enabling it to handle 2,400 calls simultaneously. In the US, AT&T has deployed about 50 portable cell sites to bolster coverage for the FirstNet network for emergency services. And mobile operators in Europe have been sharing anonymized location data with authorities to help track the spread of the virus.
I admit it’s unlikely, but maybe regulators could finally be persuaded to offer operators greater incentive to invest, something that operators have been pleading for now for many years. This could particularly benefit people living in sparsely populated and rural areas, where network roll-out isn’t economically viable. For these communities, coronavirus will only have served to widen the digital divide.
Another possibility is that authorities temper their draconian attitudes toward in-market consolidation. This is, of course, a contentious subject; not everyone agrees that a smaller number of larger and more-capable operators necessarily leads to better digital infrastructure. Still, perhaps deals such as the merger between Three and O2 in the UK — quashed by authorities in 2016 — could return to the negotiating table.
A regulatory trend I’ve kept a keen eye on is moves to grant emergency spectrum in markets including Ireland, South Africa and the US, to help operators handle increased network demand. Although only a temporary measure, it’s a refreshing antidote to the often drawn-out and overly complex spectrum auctions we’ve become accustomed to of late. We’ve yet to see if Covid-19 has any bearing on the award and release of mobile spectrum in the future, or indeed if the value of spectrum will be affected.
A more likely upshot of coronavirus is that operators’ tarnished reputations receive a welcome polish. Most providers have introduced some concessions, such as waiving late fees, lifting usage caps, providing more-flexible payment terms or offering free content. Swiss operator Sunrise has perhaps gone furthest, upgrading all mobile customers to unlimited data. Telecom operator brands may never be the most loved, but they could start to become a little more appreciated.
It will also be interesting to see which measures continue once the worst of the pandemic is behind us. Operators will need to tread delicately when it comes to reinstating certain charges or informing customers that their broadband speeds or data allowances are reverting back. Of course, they could choose to retain the status quo, but this will lead to further downward pressure on spending.
If operators are clever, though, they’ll seek to harness new usage of different services, features and content to push customers to upgrade their package next time they renew their contract. People trying unlimited data for the first time, for example, may be tempted to one day sign up to it permanently. I wonder, too, if a realization among consumers and businesses that connectivity is of critical importance could offer some leeway to raise prices. In competitive markets, this will undoubtedly be hard, but food will surely become more expensive, and the same could happen with transport, medication and healthcare, so why not telecom services?
A particularly significant implication of the pandemic is greater usage of mobile payment services. African governments have pushed this to discourage people from paying with cash, owing to risk of spreading the virus. A cashless society is good news for governments too, as it increases tax collection compared with a cash-in-hand black economy; never has this been more important than when a country has blown the budget to save its economy. In France, Orange Bank has raised its mobile payment ceiling from €1,000 to €1,500, following 60% growth in telephone transactions. The pandemic could certainly be a driver of accelerated growth in this area.
The most alarming fallout from coronavirus for the mobile industry must be the shameful acts of violence from people wrongly linking 5G to the pandemic. At a time when we need connectivity more than ever, woefully uneducated vandals, acting on a flood of disinformation and conspiracy theories, have set fire to dozens of base stations and antennas in Europe. This reprehensible behaviour calls for a concerted response from the mobile industry and national governments. However, health concerns about 5G had been circulating well before the outbreak. As national media starts to pick up on stories of attacks on 5G equipment, negative publicity for the technology, however baseless, could threaten people’s willingness to adopt 5G. Operators need to act fast to paint a truer picture of 5G and its benefits.
The long-term impact on operators from coronavirus will probably also stretch to a host of other areas. The likelihood of reduced international business travel could affect roaming revenue. The bungled SMS alert from the UK government may trigger vital new investment in emergency messaging. And greater usage of Wi-Fi calling and personal hot spots could help instil new consumer behaviour and invite different types of usage.
Nobody can predict the long-term implications of the Covid-19 outbreak on the mobile industry exactly, but for operators the pandemic is certain to spark both opportunities and threats.