By Sebastian Barros, Regional Head of Telco sales at Google
At the time of writing, there have been more than 650,000 confirmed cases of COVID-19 and more than 30,000 deaths from the infection. One third of the world are currently under lockdown conditions and more than 180 countries have reported cases. The scale of the disease is unprecedented and will inevitably spread to all parts of the globe, affecting individuals, business, society and economy.
Despite the fact we are yet to fully understand of in the telecommunications industry, the last twelve weeks already provide us with some perspective on how subscribers, ecosystem, vendors, service providers and technology are coping with it.
An extraordinary challenge for service providers
With nearly 3 Billion people around the globe under lockdown, are under an extraordinary pressure to continue critical infrastructure and services during the COVID-19 outbreak. With business, schools and retails closing to contain the spread of the disease, there’s a drastic shift to remote working, video and teleconferencing. Network traffic in some countries has increased more than 70% during the outbreak
As the crisis deepens, Service providers face the biggest challenge since the inception of mobile services: Keep up with the exponential growth in data traffic while making sure their employees and consumers stay safe and protected.
In this crisis Telcos will play a major role in keeping the economy moving, providing business critical connectivity, supporting remote collaboration applications and keep families together during increasing levels of social confinement.
The COVID-19 impact on Service providers
To fully understand the impact of COVID19 on Service providers, we need to break this analysis in some of the key components that build the telecommunications ecosystem. All these pieces have interdependencies.
Consumers
People’s lives have been disrupted in the most brutal way. With the fear of a global pandemic, very stringent lockdowns and the upcoming economic recession, the outlook looks gloomy at best.
The first effect on consumer behavior is the massive shift to indoor data consumption, and the use of video conferencing. Social distancing and confinement makes mobile data and voice services our only way to communicate with business, schools, friends and relatives.
According to a recent Nokia report, Telco networks are currently experiencing a surge in Internet usage of between 30% and 50% and also an exponential increase in the use of applications which require little transmission delay during normal office hours, with video conferencing tools such as Skype or Zoom seeing usage skyrocketing 300%.
Also, the home entertainment category like gaming and OTT are experiencing traffic growth, with video game usage up 400%.
Besides, Analysts expect an impact on consumer buying behavior due to the upcoming economic recession. Smartphone production and demand will be affected by the virus. Global shipments of smartphones dropped 38% year-on-year in February as reported by Strategy Analytics
This effect could also slow down the transition from 4G devices to more advanced 5G as the replacement phone cycle could be delayed up to 18 months. 5G smartphones, Telcos may not be able to launch 5G networks based on previous timelines.
In addition, the forced closure of stores and dealers is creating a new consumer pattern. Most are reporting 15%-20% calls increase in their call centers. This adds to the challenge that some companies have the risk of closing onshore and offshore call centers in high risk geographies.
As expected, Retail traffic and physical new activations have plunged by 75%, while there is a 30% increase in digital store traffic and 15% in digital sales.
When it comes revenues, most Telcos have experienced a significant decline in net adds due to store closures. For example, Indian Service providers expect a drop of 66% of their monthly net adds during March, with subscriber additions falling by at least 2 Million. On the positive side, they also expect to have a sharp decrease in churn rate and to increase sales of digital content.
The changing consumer behavior will also affect other areas of telecommunication services. Due to severe travel restrictions cause by the COVID-19 pandemic, analysts expect that roaming revenues will plunge as much as $25 Billion USD during 2020.
Industry experts agree that overall Telco revenues will remain stable throughout the crisis, but there could be a significant impact on profitability due free data services provided to their subscribers as part of different supporting programs launched by Service providers. For instance, Vodafone is providing 30 days free mobile data services to their subscribers
Enterprise segment could be severely affected by COVID19 Pandemic
Before COVID-19 pandemic, Telcos were putting a strong emphasis on expanding their business into the enterprise segment as a way to boost their sales growth.
Enterprise segment will also be affected by the crisis creating challenges and opportunities for Telcos:
- Remote working will become the new normal. Enterprises will increase their demand remote collaboration applications, hardware and software.
- The economic crisis will make enterprises delay any non mission critical IT spending.
- SMB segment will reduce their ICT spending and prepare to fight for their survival.
Networks facing their biggest challenge in history
Facing the effects of the first global pandemic during the mobile era, Telco networks will be put to the test. A combinations of exponential traffic growth, network and IT operations under lockdown conditions, supply chain restrictions and vulnerable customers will create a complex scenario.
Service providers have experience important changes in their network traffic
- Larger traffic spikes and busy hours under confinement conditions
- 40% Increase in fixed IP traffic (in part driven by video and gaming)
- 50% Increase in mobile voice services
- 5 times more traffic from instant messaging platforms (e.g. )
- 4 times traffic increase from remote work platforms
Unsurprisingly, the massive strain put on mobile networks in a very short amount of time is creating congestion patterns. A documented example provided by Open Signal analyzes the hourly 4G Download Speeds that Italian smartphone users have experienced in the last six weeks.
According to the study, after the lockdown imposed by Italian authorities, 4G download speed declined by 25%, suggesting that Italy’s mobile networks experienced greater usage and increased mobile congestion.
The study also showed that Italian smartphone users’ time on Wifi has also increased. Italian on average 13 hours a day and yet are also using mobile networks 30% to 50% more.
Despite the challenge, Telcos have no major impact so far in product and equipment availability as inventory is usually planned for 3 months. Neverthless , there has been some impact on their planned network upgrades and the roll out of new technologies like 5G or Open-RAN due to the focus on managing critical.
5G roll out will be badly hit in the short term, but remains bright
There is little doubt that this global pandemic the most significant challenge mobile network and handset vendors have ever faced. It is unavoidable that the disposable income for both consumers and enterprises will fall. Trillions have already been lost from stock markets, and the retail and tourism industry has been badly hurt.
In the short term, 5G will be badly affected. Consumers are not going to stop using smartphones, but most won’t be able to spend on upgrading their smartphones and paying for non-critical services. In this scenario, Telcos will struggle to generate the revenue streams required to justify 5G expansions.
Consumers and enterprises will be focusing on how to survive in an economic recession. Ipsos data showed 37% of US consumers now believe the Coronavirus will have an impact on their personal finances. In their latest analysis, GSMA Intelligence has reduced their 5G forecast for 2020 by more than 25%, with only 150 million 5G connections globally by the end of the 2020.
Additionally, the 5G standardization will face delays as recently reported by 3GPP Standards body 3GPP. The organization pushed back the release of the next two batches of 5G protocols by three months.
The COVID-19 Pandemic immediate effect on 5G plans will contrast with the brighter outlook in the near future. After this global crisis is it clear that mobile networks will be the most critical backbone to sustain business, economy and society. Remote working, video conferencing and new consumer behaviors could help drive a new and stronger business case for 5G.
In this scenario, governments could play a critical role to support this expansion. Most governments are already putting large investment plans to mitigate the effect of an economic recession including infrastructure. It is expected this will include the support of expanding nationwide network coverage and technology across their countries.
Advice for Telco at Pandemic timesService providers are exploring various ways to address several challenges affecting them due to this crisis. The most critical areas to address in the short term are Customers, networks and operations.
Customers and communities
Service providers have an unparalleled opportunity to gain a strong consumer advocacy by supporting them during this pandemic. This could involve different areas like:
- Free data or extra data, especially in affected areas
- Free access to content, with special focus on children’s content
- Free mobile money remittances
- Billing relief to affected areas
Also, new opportunities could arise for service providers to provide mobile data services such as:
- Business critical communication for Hospitals and remote patient diagnostics
- E-learning tools for schools to create virtual learning programs with students
- Remote working solutions for small and medium enterprises
- Work as a service solution
- Flexible financing options
Telco should be ready to help customers upgrade their services to handle with higher bandwidth requirements as workers and their families spend more time at home. The options might include Internet speed-booster plans and enterprise grade mobile data plans.
Operations: Business continuity planning
The pandemic will force to modify front- and back-office operations to be more flexible, fast and A good example is the need to implement work from home policies and relocating staff to better spread the workforce.
The forced closing of retail stores and dealer shops will accelerate the adoption of digital technologies for customer directing customers to self-service channels, AI and digital stores. Virtual agents deployed supporting human customer care agents could be critical if the epidemic outbreak remains for a longer period of time.
Despite customer care and sales activities can be managed using digital channels, network requires physical interactions. Field engineers will remain on the physical front lines during the epidemic, so is critical to provide technicians with equipment and a strict protocol.
Also, some of the onsite network operations activities could be supported via remote video chats which minimize the amount of engineers in the same physical space.
Networks
The key focus is to manage traffic through increased capacity. The use of advanced predictive model to analyze Network’s new traffic patterns can help to make better capacity expansion decisions. Also, there could be a need to consider options for managing network traffic via throttling to keep the support of mission critical services and industries.
Several regulators across the globe have already to provide additional spectrum to service providers in order to help additional network capacity, In the USA, FCC granted Verizon temporary use of additional spectrum for a 60 period.
One important access to consider is the importance of cybersecurity as most employees will be working remotely and using home Wifi networks to access company’s applications and data. Telcos need to revise their cybersecurity protocols and include testing them against 60-70% of their workforce working from remote locations. During this period will be critical to leverage on red teams to identify vulnerabilities and bue teams that can protect Telco’s infrastructure from hackers.