In Some Ways, Covid-19 Was a Non-Story for Service Providers

Over the last six months, as AT&T--like most other service providers--encountered an unprecedented change in end user demand caused by mandatory work from home and stay away from school rules, usage patterns changed, generally in the direction of more data and communications demand. 

source: AT&T 

Two observations are in order. The biggest non-story globally was that the sudden shift in demand would crash networks. That did not happen. Data centers and networks were configured with enough capacity to handle the sudden increase in demand without crashing. 

Observers generally agree that what we saw was a change in one month that might have been expected to take a year. But nobody now believes the demand curve has changed. We simply saw a sudden step change, but on the same growth curve as before.

The second incorrect story is that, with all the new demand, service providers “must” be making more money. In all likelihood, virtually all connectivity providers will report revenue declines. 

If you think about it, that just makes sense. Higher demand, as we all know, does not mean “higher revenue.” Usage is not revenue. No service providers, to my knowledge, actually raised rates. Conversely, many service providers temporarily removed data usage caps. So higher usage could not drive higher revenues.

Also, the sudden shuttering of nearly all businesses in many markets seems to be driving huge numbers of small businesses into bankruptcy. That means lower demand. And while it is unlikely that enterprises cancelled service, if there were revenue-generating services that actually are usage based, that also would put pressure on revenues.

Also, it seems most workers who stayed home already had broadband connections, and did not create a burst of new demand. It is likely that there will be some uplift from customers upgrading service plans to higher tiers of service that do generate more revenue. 

The bottom line is that it is unlikely connectivity providers will get a revenue boost from the pandemic-driven increases in traffic. Virtually all should see revenue declines, or at the very least a less-robust rate of revenue growth. 

Also, many in the business-to-business portions of the business anecdotally are mentioning cancelled deals and delayed deals. Those developments also will depress revenue and growth.