Business models in a post-pandemic environment might well require a rethink or at least re-examination of a few business fundamentals by many businesses.
It is not so clear that connectivity providers will face as much change from the pandemic, since the underlying industry dynamics were going to force major business model changes in any event, as a long-term matter.
The short-term impact, though, is likely what executives will be watching.
Some might argue the pandemic created new demand for connectivity services. Others might argue that trend already was in place, and the pandemic simply shifted demand into a one-time, higher-growth posture. The typical way of expressing this is that service providers saw a year’s increase in demand in a couple of months.
On the other hand, while subscription revenue might climb, other revenue sources will decline enough that overall revenue will drop because of the pandemic shutdowns.
Few expected the advent of 5G to change consumer revenue upside very much. The potential for business customer value is viewed as much more significant, but up to this point, it seems unclear whether the pandemic has changed the demand for 5G by either consumers or businesses.
The long-term view always has been considered more important, particularly as 5G becomes valuable in conjunction with edge computing, internet of things or virtualized network features. So far, it is unclear whether the pandemic has made any qualitative changes in those views.
In the case of demand for broadband internet access, it is possible to argue that the business model remains intact.
Telcos and cable operators arguably added new accounts at a faster clip than had been the case prior to the required work from home rules. But some also believe part of those gains was simply shifted forward in time.
Broadband adoption also grew, but that is an on-going trend. In 2020, 86 percent of U.S. households buy an Internet service at home, compared to 84 percent in 2015 and 82 percent in 2010, according to Leichtman Research Group.
Broadband (minimum 25 Mbps downstream) accounts for 97 percent of households with an Internet service at home, and 83 percent of all households get a broadband Internet service – an increase from 81 percent in 2015 and 74 percent in 2010, LRG also says.
Stronger demand for quality broadband at home or on mobile networks; across larger geographies; with faster upstream speeds or capacity seem reasonable enough outcomes. But those trends were already in place.
Consumption geographies could shift. There might be some slower or even reduced demand for capacity at business and urban locations, with more traffic generated in suburban and exurban areas; untethered or even rural areas. But those are subtle shifts which arguably do not change the business model.
Essential stakeholder behavior change might be a bigger issue for retailers, content providers and travel industry participants.
And what does not change? Which behaviors will return to former levels, essentially unchanged? Which patterns will return, possibly with equivalent magnitudes, but with at least some major changed behavior patterns?
Connectivity providers do not seem worried about downside in such areas, since end user demand remained high--or increased--during the pandemic. Longer term changes--such as more remote work or less travel--would simply seem to sustain the new demand patterns.
Most importantly, which behavioral patterns might disappear? ask Dev Patnaik, Jump Associates CEO, Michelle Loret de Mola, Jump Associates strategy director and Brady Bates, Jump Associates analyst.
In the telecommunications business, the pandemic might have speeded up the underlying change processes, but not created new and unexpected demand. Use of the fixed network for voice has been falling for at least two decades. Substitution of demand for broadband internet access has been rising. Mobile communications usage has climbed as well.
The shift from linear video entertainment to over the top streaming was already well in place.
There is a reasonable argument to be made that video conferencing will displace some amount of business travel. Also, conferences that once were based on audio now seem to have shifted permanently to video formats.
But how does that affect the connectivity provider business model? Arguably less than one might think, unless connectivity providers wind up owning the apps that most people use for such purposes.
To the extent that preferences generally become habits, will pandemic behaviors tend to persist? Will product demand shift in some permanent ways, and if so, by how much? For retail connectivity providers, most of the preferences might be fairly subtle extrapolations from underlying trends.
We might assume that new behavior patterns--and the buying choices that match those patterns--will be most sturdy when the new ways are perceived to be better, and also are easy to adopt and maintain.
To the extent that employers broadly support increased work-from-home patterns, connectivity services might arguably acquire higher value, but not necessarily as a qualitative change from prior trends already in place, and probably not in quantities that change the existing business model.
What remains unchanged is the need for business model change for other reasons.
To the extent that mobile voice, then mobile broadband have driven global industry revenues for most of the last 20 years, and to the extent those services reach saturation, the question of “what comes next?” must be asked.
That is why edge computing and the internet of things get talked about and examined so much, or why a growing number of telcos are diversifying into additional and different lines of business.
Some trends in the global telecommunications business are obvious, even if local patterns can vary substantially. On a global basis, the fixed network voice business peaked around the turn of the century, and has been declining since then, according to International Telecommunications Union data.
Use of the fixed network has gradually shifted to support for broadband internet access as voice subscriptions have fallen.
source: World Economic Forum, ITU
Mobile service now is the primary way human beings use communications and mobile networks increasingly are the way humans access internet apps and services as well.
But as mobile accounts have exceeded 100 percent (accounts, not persons), and as mobile broadband (internet access) has climbed above 80 percent, the limits to either mobile subscriptions or mobile broadband as the industry revenue driver seem inescapable.
Irrespective of the pandemic, the global industry still faces a serious search for the next revenue model beyond connectivity.
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