Post-Pandemic Connectivity Revenue Assumptions Might Change

Many would note that the economic stress created by government shutdown of large portions of the economy, and other public health safety measures, have damaged small business and helped big business. To be sure, those trends were already in place, but were magnified by the government response to the pandemic. 

That impact should be seen in many areas of the communications business as well, where other pressures--especially the growth of competition--were in place even before the pandemic. 

Bharti Airtel, long one of India’s largest mobile service providers, says it has survived several near-death experiences. After three or four crises, Airtel now operates in a market with “2.5 providers.” Just several years ago, Airtel operated in a market with about 10 competitors. 

Big companies with scale are likely to emerge, post pandemic, with more market share than they had going into the crisis, while many smaller businesses will have ceased to exist. Consolidation, of course, is not new in the connectivity business. But the pandemic arguably has nudged the process a bit. 

None of that is going to stop researchers from predicting post-pandemic growth. But markets likely will have been reshaped. 

To look only at the hospitality segment, estimates of restaurant bankruptcies and closures ranging from 30 percent to 60 percent in some countries and areas, the base of potential customers for connectivity services is going to drop. 

Other small and independent retailers likely will face similar pressures, as more market share will shift to giant online retailers and chains. So we will have to be more nuanced in our reading of “growth” forecasts. A return to growth will happen, but on a base of establishments that might be permanently lower. 

source: Analysys Mason 

Unknown at this point is the effect on enterprise connectivity spending as hybrid work patterns are established. Most believe large enterprises will need less office space than in the past, as fewer people will be congregating at such sites. 

That might soften direct enterprise connectivity spending at sites. The impact on employees working from home is not clear, either. Most information workers pay for broadband and mobility service for other reasons than work, and those existing connections can be used for work-from-home purposes, generally with little increased cost, if any. 

So long-term impact on connectivity provider revenues is not clear. Direct demand might be lower in urban areas for a couple of reasons. Firms will downsize. Fewer people will work at offices full time, with ripple effects on other businesses in those areas. 

With fewer people commuting to urban areas, mobile-related behavior will change as well, generally in the direction of less usage while traveling. Less business travel is expected, slowing the growth of roaming revenue. 

Arguably, more international communications will use over-the-top apps and services that limit the growth of carrier revenues from international long distance or messaging. 

Though more people will be working from home, more of the time, the whole point of multi-purpose networks and internet-based services is that the additional work-related bandwidth or capacity might not be very relevant. 

Most consumer bandwidth supports entertainment video, so all work-related additional load will barely be noticed. 

Service providers will have to watch--and adjust--capacity investments. Less capital investment growth will be needed in urban cores, as demand will moderate. In suburban areas, there is likely to be more demand for upstream bandwidth, however. 

Perhaps oddly, in some markets suppliers are pushing “unlimited data usage” plans precisely at the point that work-from-home trends make the value less obvious. More WFH means less bandwidth consumption when out of the home. In the home mobility usage will shift to Wi-Fi instead. 

But bandwidth demand is largely driven by entertainment video, not WFH demands, which are relatively low bandwidth, in comparison. 

The point is that prior assumptions about revenue and growth might have to be revised in light of relatively important shifts in end user connectivity demand.

Survey Finds 58% Believe Covid-19 Pandemic Will be "Over" By 2nd Quarter 2022; Rest Think it Take Longer

About 58 percent of respondents to a survey conducted by Ipsos for the World Economic Forum believe the Covid-19 pandemic will be “over” within a year. Of course, that also means more than 40 percent believe the pandemic will not be over “within 12 months.”

With the caveat that the survey reflects consumer beliefs, and is not a direct measure of what governments will do, and when, that will likely affect any business operating trans-nationally, to say nothing of continued impact within any single country. 

source: Ipsos 

The survey finds that, on average, across 30 countries and markets surveyed, 59 percent expect being able to return to something like their normal pre-COVID life within the next 12 months. So possibly May 2022. That still leaves 41 percent believing the pandemic will not be “over,” with “normal” life reestablished, until sometime in the second quarter of 2022 or beyond. 

source: Ipsos 

More than 70 percent of respondents in Saudi Arabia, Russia, India, and mainland China are confident their life will return to pre-COVID normal within a year. In contrast, 80 percent in Japan and more than half in France, Italy, South Korea and Spain expect it will take longer.

Rogers Acquisition of Shaw is Not Mostly About 5G

The proposed acquisition of Shaw by Rogers Communications in Canada is touted by Shaw as benefiting 5G deployments. As with all acquisitions, participants say what they believe regulators want to hear. 

Some would argue the deal is about revenue growth in a tough market, not 5G. 

Growth in the fixed networks business is slower than that in the mobility business and most of the revenue is now earned in the mobility business, not the fixed business. Revenue growth in the global business now is around one percent per year, with capex tracking revenue, also growing at about one percent per year. 

Global connectivity supplier capital investment (mobile and fixed) is projected to grow at a one percent compound annual growth rate between 2019 and 2022, according to the Dell’Oro Group. Other forecasts call for a decline in capex after 2022, as 5G and fiber investments to support 5G and fixed network broadband projects are completed. 

source: Orange

source: Dell'Oro Group

Shaw is not a player in mobility, nor is its growth upside in the fixed networks segment so favorable, either. There comes a time to sell an asset, and Shaw executives clearly believe now is the time. 

So 5G deployment is pitched by Shaw as the rationale behind the deal. 

The Covid-19 pandemic has generally had a depressing effect on connectivity service provider revenue globally, with a few exceptions in a few markets. But the underlying trends were in place before Covid hit. 

Longer-term trends remain at work, namely slow growth rates. 

source: IDC 

And that is why Shaw executives have made the decision to sell.

AR and VR Will be Used to Support UCaaS

Augmented and virtual reality will be applied to unified communications as a service, says Business2Community, likely being used for data visualization, storytelling, and contact center visual customer service interactions.

source: Statista 

That should come as no surprise as unified communications, then UCaaS came to embrace video conferencing, for example.

Roll Away The Stone

My favorite Easter song, sung by the choir at St. John Neumann, in Reston, Virginia

Huge Revision of Satellite Service Revenues Based on Mobile Backhaul

Some rules of thumb related to connectivity service provider revenue exist simply because use cases are fairly stable over time. In other cases future use cases are not predictable, leading to sometimes wild fluctuations in revenue forecasts. 

The global connectivity service provider market, for example, is relatively stable, growing slowly to about $1.2 trillion euro in annual revenue (about $1.4 trillion) in the 2020s, adding about one percent a year. Satellite service revenues were about $123 billion in 2029, or roughly nine percent of fixed service provider revenues. 

That does not seem to change much, from decade to decade, so the latest forecast of as much as $25 billion for backhaul implicitly includes attrition of other revenues, such as video entertainment distribution revenues. 

Some estimate satellite backhaul revenues will grow to about $25 billion by about 2030, according to Northern Sky Research.  That is a dramatic upward revision since about 2018, when satellite backhaul was estimated to reach something closer to $3 billion in annual revenues by 2027. 

source: Northern Sky Research 

If that happens, it will be because of satellite backhaul for remote mobile network cell towers, it is safe to say. Earlier forecasts had suggested a maximum of cumulative revenues as high as $39 billion between 2019 and 2029. 

Will Common Carrier Precedent Might be Applied in New Ways?

Though the notion stands regulation on its head, we might be nearing a point in U.S. regulation of online media and communications--especially the regulation of platforms--that borrows concepts from common carrier regulation. 

It will not be easy, and might require some new developments in legal thinking. But that happens, from time to time, even in a profession that relies so heavily on precedent. 

Past actions that apply free speech obligations to private actors have used an analogy to a public square, though rarely with much success. The issue now is whether the digital public square argument gains currency.  

Simply, most people might agree that the essence of “free speech” on any major platform for social media, content or even search is that anyone may publish at will, as was among the founding principles of the internet itself. 

We might also agree that competition is a better framework than regulation, but also might agree that regulation is an option if all other frameworks prove problematic. 

For perhaps a century, “free speech” and “common carrier” regulation of industries have been defined largely in terms of the rights of “speakers.” For media, free speech has been viewed as a right possessed by owners of printing presses, TV or radio stations, content studios, other print media, cable TV systems and now internet platforms for search, social media and commerce. 

Customers of “utility” services, on the other hand, have generally been seen as the possessors of the “free speech” right, to the extent political speech is involved at all. “Common carrier regulation” has been the rule for railroad, electricity, gas, water and telecom firms, for example. 

A common carrier. must provide its service to anyone willing to pay its fee, but has not generally applied to the media. 

New communication or media formats tend to be regulated using older and existing models. That almost always poses big issues, as new media and communications formats often cannot--or should not--be regulated using older models. 

Live performance, movie theaters, broadcast television and radio, cable TV and streaming video might provide one set of examples. 

Pamphlets, newspapers and magazines, online media and social networks might provide additional examples. Regarding free speech protections, there are several important distinctions. Jurists must decide whether the “right of free speech” is for the speaker or the listener. 

It is complicated. First, the First Amendment protects “owners of publishing assets,” not citizens, from government prohibitions. What is new in the internet era is the power of private entities (platforms) to silence speech, when historically this problem was seen as a potential problem caused only by government entities. 

Among the new questions is which form of regulation best protects political free speech. Ironically, our older notions may be out of date. 

Historically, the right of free speech belongs to the owners of publishing or communication assets: printing presses, content creation entities such as magazines or movie studios, broadcast stations, cable companies and social media, search or other online media firms. 

Other entities--viewed as platforms--have not been held to have “free speech rights” and have been regulated as common carriers. Railroads, electrical utilities, water supply companies and telecommunications firms come to mind. In other words, “communication” or “public utility” networks have not been considered “speakers with First Amendment rights.” 

“Federal law dictates that companies cannot ‘be treated as the publisher or speaker’ of information that they merely distribute,” Thomas says. To be sure, legal precedent does not regard a digital platform as a “common carrier.” But it remains unclear whether this would remain the case if Congress were to pass laws applying some common carrier principles on digital platforms. 

Even when looking solely at the rights of “speakers,” there is a distinction between the rights of business owners “as business owners” and the rights of “speakers on platforms.” In other words, Facebook has the right to advocate in its own interests. 

That, however, is arguably a different matter from the rights of users of its social media platform to express ideas. 

“If part of the problem is private, concentrated control over online content and platforms available to the public, then part of the solution may be found in doctrines that limit the right of a private company to exclude,” says a ruling by Supreme Court Justice Clarence Thomas. 

 “Historically, at least two legal doctrines limited a company’s right to exclude,” he says. “First, our legal system and its British predecessor have long subjected certain businesses, known as common carriers, to special regulations, including a general requirement to serve all comers.” 

“Second, governments have limited a company’s right to exclude when that company is a public accommodation,” Thomas notes. “There is a fair argument that some digital platforms are sufficiently akin to common carriers or places of accommodation to be regulated in this manner.”

Historically, that argument has been tough to apply; tougher to extend. But precedents sometimes aer overturned. We might be heading that direction.