It is easy enough to predict that consumer, smaller business and enterprise spending will fall if the world falls into recession in 2020. That would be in line with findings that consumption and consumer spending fell virtually across the board in the Great Recession.
But that does not directly translate into consumer, small business and enterprise spending on communication services and products.
Telecom service provider revenues did not change much in the wake of the Great Recession of 2008. In fact, according to some studies, U.S. consumer spending on communications actually grew, overall, in the wake of the Great Recession, for example.
Some surveys found that device purchases slowed during the Great Recession. But some surveys also found consumers willing to make other tradeoffs to keep their broadband, mobile and video subscription services. There was, in other words, less willingness to cut high speed access than other services, for example.
In fact, some surveys found consumers would rather abandon their mobile service than give up fixed high speed access. Consumers have indicated they would give up other products as well to keep their broadband access.
If they had to give up one service (video entertainment, mobile, broadband), U.K. consumers would ditch video (49 percent) or mobile (30 percent) before their fixed network broadband connection (two percent), a survey of more than 10,000 U.K. consumers found, for example.
The point is that high speed access arguably is highly resilient in a recession, and arguably the most-valued service, perhaps even be more valued than mobility. But mobility likely would rank as among the next most important service.
By some studies, consumer spending on mobile devices increased during the Great Recession of 2008 and spending also increased for communication services. That pattern hasn’t changed.
It does not seem that there was much recession impact on subscription video entertainment spending, though some consumers might have dropped a premium channel in favor of expanded basic service.
So despite fears, it is likely that overall revenue will not change that much in the wake of the expected Covid-19 recessions, either.
One reason is that consumer spending on communications is relatively fixed. As data gathered by the Organization for Economic Cooperation and Development suggest, developed nation spending by consumers was remarkably consistent in the few years after the 2008 recession.
Still, operators will be prudent, given growing expectations that the global economy now appears headed for negative growth in 2020 because of the Covid-19 pandemic, according to the Economist Intelligence Unit.
Three years after the 2008 Great Recession, many still were noting reduced revenue growth in some regions. The caveat is that those areas arguably also had secular revenue issues that might have been masked by the effects of the Great Recession. It is likely that revenue trends were shaped by both consumer and enterprise spending, arguably benign in the former case, but more pronounced in the enterprise customer segment.
The last two big recessions of note happened in 2001 and 2008. The issue now is whether the recession caused by economic shutdown for health reasons because of Covid-19 is going to be better, the same or worse than the great recession of 2008 or the collapse of the internet bubble in 2001, for example.
The “same as” or “worse than” scenarios would be multi-year, perhaps half-decade long events.
In a 2014 analysis, EuroMonitor noted that “the speed of the recovery from the 2008 global financial crisis has been unusually slow,” compared to recoveries from previous recessions. In the U.S. market, for example, gross domestic product per person did not recover to 2007 levels until 2012, four years after the 2008 great recession.
GDP Per Working Age Person in Advanced Economies since 2007
No comments:
Post a Comment