How much revenue will connectivity providers lose from small business bankruptcies? There are at least two different effects. Businesses that have gone bankrupt will no longer be able to buy connectivity services.
Business mobile revenue might drop 12 percent, according to Analysys Mason estimates. Business fixed network services revenue might drop 10 percent. But Analysys Mason also believes mobile revenue will climb back up in 2021, albeit still declining at least one percent
But there also is the matter of bad debt. Verizon, for example, has set aside a $228 million reserve for expected bad debt.
“Despite the upside from governments and large corporates seeking higher bandwidth for VPN and conferencing facilities, the B2B segment is more adversely impacted owing to potential bad debts, which have primarily arisen from inability of SOHOs and SMEs to pay their bills,” Arthur D. Little says. “Additionally, increased unemployment, business closures and the overall decline in economic activity implies reduced spend by businesses on telecom services.”
It is fairly easy to quantify the revenue impact on businesses. Taxable sales in California during the first two quarters of 2020 dropped $152 billion in the second quarter alone, a 17.5 percent decline from the previous quarter, according to a new study published by the National Bureau of Economic Research.
But the losses were not evenly distributed. Accommodation sector revenue dropped 91 percent), followed by bars at 86 percent. Entertainment venues saw sales drop 83 percent, while full-service restaurants saw a decline of 61 percent. Small shops selling gifts and souvenirs, clothing, or books also were hard hit, according to economists Robert W. Fairlie and Frank M. Fossen.
Pharmacies, liquor stores, supermarkets, agriculture, and building material and garden equipment stores gained, however.
“The number of active business owners in the United States plummeted from 15.0 million in February 2020 to 11.7 million in April 2020,” they say.
P Morgan Chase data shows that small business revenues dropped 30 percent to 50 percent at the end of March and early April and 40 percent into May, they say.
About 60 percent of business owners reported lower sales in April and 50 percent of owners reported lower sales in May.
All of that is likely to depress smaller business communications spending, as some customers will no longer be in business, while others might be frugal with additional spending.
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