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Telecoms: Navigating COVID-19
The impact of COVID-19 on telecom operators and how they are responding
How has the COVID-19 crisis impacted the telecom operators? And how are they responding to ensure that their vital fixed, mobile, TV and entertainment services keep connecting communities and businesses? Deloitte’s global network of industry experts, working with telecom and media companies, have assessed how the telecom industry is responding to COVID-19.
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- Direct impact and response
- Economic impact
- Telecoms response to the Coronavirus crisis
- Providing data to monitor and contain COVID-19
- Opportunity to thrive after the crisis
Deloitte believes that the way to consider a crisis of this magnitude is to identify three phases: Respond, Recover and Thrive. Furthermore it is our current view that after the initial lock-down, where the aim is to ‘flatten the curve’, society may continue to see new, potentially smaller outbreaks of the virus until a vaccine is widely available. After the initial response the telecom sector, like other sectors, will have to be prepared for a new normal.
This first blog post about the telecom sector navigating COVID-19 analyses the typical impact that the Corona crisis has on the telecom sector and how the sector responds. Future blog posts will examine how to prepare for the new normal with potential new outbreaks and lock-down situations.
Direct impact and response: Fixed networks coping – mobile data usage mostly decreasing – voice services on the rise
Depending on the penetration levels of high-speed fixed broadband to homes, the effects of large numbers of people moving to a ‘stay home/work from home’ situation are different.
Markets with high penetrations of high-speed fixed connections and in house Wi-Fi networks actually experience a decrease of traffic on the mobile data networks. As fewer people travel around the country by car or public transport, the load on mobile data networks is reduced.
Meanwhile, fixed broadband connections show a heavy increase of traffic due to remote working, family members streaming video, and kids attending video-classes hosted by their schools. As one operator noted, however, the current load on the fixed broadband networks doesn’t surpass the load of a typical Sunday evening when people watch or re-play major sports events.
Telecom networks by default are dimensioned for peak-loads. The gap between peak-load capacity and the average load is quite substantial. In almost all cases, telecom operators have enough ‘headroom’ in their networks to deal with the current situation of remote- and home working.
In countries with limited high-speed fixed broadband connections, the mobile data networks are experiencing heavy loads. Operators that have already phased out 3G and operate fully on 4G, and even 5G, are clearly best placed to ensure full capacity while benefiting from a simplicity of network topology and operations. Even in Italy, a developed country, 11 million households do not have high-speed fixed broadband connections. These households are relying much more on mobile data/4G during this crisis.
Mobile voice services are impacted heavily as people are reaching out to their loved ones, their colleagues or their customers using a voice call on their smartphones. Nowadays, voice services are also delivered over the 4G mobile data network, using speech coding algorithms for different levels of voice quality, depending on capacity. At the same time, in-home WiFi networks are used for so-called voice-over-WiFi services: some telcos say they have seen a 300% increase in the use of these voice-over-WiFi services. As a result, at the start of this crisis, many telcos were forced to switch to lower quality speech coding. And voice service capacity had to be expanded swiftly. Operators that have made the switch to virtualized network functions are well placed, as they can easily spin up further voice service and speech processing capacity. Telcos who have made their ‘journey to the telco-cloud’ can flexibly scale up for today and scale back down once the crisis subsides.
Economic impact: loss of roaming revenues, risk of bad debt
One might think that the COVID-19 crisis may not hit telecom operators that hard economically, given the higher than ever need for their vital fixed, mobile and TV services. But that’s not entirely the case. The following factors impact the financial performance of operators:
- Loss of roaming revenues, both for mobile voice and mobile data services. As people don’t travel at all, roaming revenues have dropped to virtually zero. And although in the EU region roaming tariffs have been cut back to the level of home-country usage, still the roaming revenues from people traveling beyond the EU averages 6% of an operator’s total revenue. This is the average, so for some operators this is substantially more.
- Risk of economic crisis: As a deep economic crisis is likely on the back of the initial pandemic crisis, telecom companies will get hit. Enterprise customers may suffer liquidity issues or go bankrupt and bad debt could become an issue. This could be an even bigger challenge for consumer customers who may be suffering job loss.
Yet there also will be upsides as a result of this crisis situation, such as an increased demand for corporate network services and an expansion of corporate mobile networks (also promising for 5G), leading to further revenue growth opportunities.
Telecoms response to the Coronavirus crisis
Operators have focused initially on maintaining the vital fixed, mobile and TV infrastructures that they operate. Next to the increased load on several parts of the networks and the increased demand for capacity and speed, they themselves also had to cope with putting employees into remote-mode. Telco’s and their outsourcing parties have moved thousands of customer service contact centers agents to their home environment. A key challenge is to achieve a seamless integration of the agent’s home working environment with the call center systems and processes.
Another typical and key measure in the crisis is the re-scheduling of maintenance and product software updates, postponing them to avoid unwanted disruptions of services in homes, neighborhoods or office buildings. At the same time, it’s hard for telco’s to build out their core infrastructure: it can be difficult to get approval for site-visits and licenses to dig for cables during the corona crisis.
Telecom operators have stepped up their support for national healthcare systems, national and local governments, corporate customers, communities and individual consumers. In China, the three telecom operators worked with the government and healthcare system to build emergency 5G networks in three days for the Wuhan emergency hospitals. In many countries, we see telecom operators responding to government requests to provide location data within the boundaries of what’s legally possible. Many telcos have prioritized corporate network traffic in order to facilitate remote working and keep vital processes going.
Telecom operators have also realized that they can do more to support their consumer and enterprise customers during this crisis. Many are temporarily offering greater value, such as free pay-TV channels, doubled mobile data allowances or, even sometimes, unlimited data services. Finally they have accelerated the build out of corporate networks to swiftly deliver the necessary capacity and speed for work-from-home situations.
It is interesting to note that the large streaming services, such as Netflix, Amazon Prime Video and Disney+, have all cut back on video streaming quality, offering standard definition (SD) instead of high definition (HD) video streams temporarily. This decreases the impact of large amounts of video streaming on the telecoms networks.
Providing data to monitor and contain COVID-19
One of the lessons of this Corona crisis is that society can harness the location data of individuals, combined with COVID-19 testing data, to monitor how people and crowds are spreading the virus. In order to reduce the load on healthcare systems and to save lives, governments have taken drastic measures, limiting the movement of individuals (lock-down). This is a massive (and extremely impactful) measure to contain the virus and slow down its spread.
For today’s crisis, and even more so for future outbreaks, there will be huge benefits in having telecom operator location data available during the early stages of outbreak, and to combine this with other datasets to support solutions that can contain the virus spread in a much more effective way.
Here telecom operators are faced with a dilemma. On the one hand they need to protect and respect the personal data of each individual customer and comply with, for example, GDPR regulations. On the other hand, they are subject to telecoms legislation in their countries where governments can try to force them to provide data and information from their networks. One way or the other, it is clear that by providing network data showing the location of individuals, the telecom operators can play an important role in virus containment now and in the future.
Opportunity to thrive after the crisis: Accelerated digital telco transformation
An accelerated shift to digital operating models is now definitely an opportunity. Telecom operators, like many other companies, due to the crisis have swiftly transformed to operate in a much more ‘digital’ mode. They have shifted a lot of the customer interactions away from the physical domains of shops and in-home service and repairs into the digital and online domain, for consumers and, even more so, for enterprise customers. We have seen telecom operators doubling or tripling the amount of interactions with customers in the digital domain.
This crisis has also demonstrated that telecoms retail and service channel strategies can be revised, as customers, as well as telecom employees, processes and systems, can work better digitally than one could have imagined before the crisis.
For example, operators could slash the number of expensive field engineer visits to homes or to offices for installations and service by at least 50% or more, by increasing the use of self-install procedures for modems, set-top boxes and other services. Many more chatbot services and robotics process automation (RPA) solutions could be deployed to streamline telecoms sales and service operations.
Finally the telecom operator’s journey to a full telco cloud environment, where network functions and services are orchestrated and automated across a ‘containerized’ network applications cloud landscape, will be accelerated to prepare for the next pandemic crisis and the ever growing need for telecom services. In the words of one the telecom operator we spoke to: ‘ideally we never go back to the way we operated before this crisis’.
Can you imagine the situation the world would have been in if this crisis had happened 15-20 years ago? Back then we barely had 2.5G mobile data connections. Fixed broadband internet connections over cable or fibre were only starting to become available. High performing WiFi connected laptops weren’t widely available, let alone smartphones and tablets. Video communications facilities were only starting to appear and apps, such as Zoom, MS Teams or Skype, weren’t available. Never would we have been able to take the rigorous measures of lock-down that we have taken today and still be able to keep healthcare, society and large parts of the economy going.
You can read more about understanding COVID-19’s impact on the telecom sector by downloading the article or read more on: https://www2.deloitte.com/global/en/pages/about-deloitte/articles/covid-19/understanding-covid-19-impact-on-the-telecom-sector.html.