Impact of COVID-19 on the Telecom Sector

Mon, 07 December 2020 3:02

The telecom and ICT sectors are expected to be under tremendous pressure in the first two quarters (Q1 and Q2) of the 2020 fiscal year. In light of the outbreak of the COVID-19 pandemic, the corporate sector has shifted to a work-from-home model to slow down the transmission of the novel coronavirus. On the consumer end, the shift has translated to an increase in the demand for better connectivity.

Internet connectivity has become a necessity similar to utility services of gas, electricity, and water. Providing high-quality business telecom services to end-users has emerged as one of the biggest challenges, which is expected to continue over the next two years, with short- and long-term economic implications of digital transformation.

short-and-long-term-economic-implications-of-digital-transformation

Source: Industry Experts and Straits Research Analysis

Disturbance in Telecom Supply Chain Network

Countries, such as Italy, France, the U.K., Germany, and the U.S., are currently worst hit by COVID-19. Nearly 10,000 causalities have brought recession to the doorstep of the remaining 2020. The lockdown in China halted the production of telecom hardware infrastructure at the start of 2020, leading to a disturbance in the demand and supply network of telecom equipment and, subsequently, increasing the demand for network equipment to provide high bandwidth internet connectivity.

The scarcity of hardware equipment is also expected to put tremendous strain on fixed and mobile networks and data centers. The scenario is expected to result in delays in the replacement or up-gradation of components due to restriction on personnel during the lockdown, which would eventually drive the need for even more signal interferences in due course of time.

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The electronics retail stores that are closed due to lockdown, an extension of a six-month lockdown in the U.K. and Australia and few other countries, for instance, restricts the purchase of equipment to provide high broadband services. Also, the current price at which equipment is sold would also impact the overall consumer purchase pattern, further disturbing the supply chain ecosystem in the telecom sector.

Increasing Demand for Video Conferencing & Collaboration Platforms

In the current scenario, corporates are encouraging employees to conduct meetings on unified collaboration platforms, such as Zoom Video Communication, ON24, and Microsoft Teams, which is accelerating the demand for high internet bandwidth. For instance, before the outbreak, on March 25, the Amsterdam Internet Exchange (AMS-IX) expected peak traffic of 8 tetra bytes per second (Tbps). However, on normal days, the AMS-IX processed around 48–50 PB of data traffic daily. Additionally, during the third week of March, Microsoft Teams witnessed a sudden surge in the number of active users from 33 million daily users to 44 million users.

increasing-demand-for-video-conferencing-and-collaboration-platforms

Source: Nokia DeepField

The above figure depicts the adoption of video conferencing applications. Notably, Zoom.com has observed a tremendous growth rate of 700% during the lockdown in the U.S., which is a result of the surge in traffic in Content Delivery Networks (CDNs).

Reduction in Streaming Video Quality on OTT & Social Media Platforms

Economies drastically hit by COVID-19 have witnessed heavy traffic on social media and messaging platforms due to nationwide lockdowns. The figure below depicts the Nokia Networks’analysis of data traffic patterns during lockdown for different time intervals. WhatsApp’s data traffic on the first day of lockdown was at 117–217%, which shot up to 500% on the first Sunday.

Figure 1: Network Traffic of WhatsApp on Day One v/s FirstSundayof Lockdown in Western Europe

network-traffic-of-whatsapp-on-day-one-versus-first-sunday-of-lockdown-in-western-europe

Source: Nokia DeepField

Figure 2: Network Traffic of Netflix on Day Onev/s First Sunday of Lockdown in Western Europe

network-traffic-of-netflix-on-day-one-versus-first-sunday-of-lockdown-in-western-europe

Source: Nokia DeepField

Netflix, one of the foremost players in the online streaming platform business, witnessed heavy traffic during lockdown day one across Europe. The data indicates that end-users started streaming during the morning hours and early afternoon hours. On the contrary, volume during the evening remained within the nominal range. The overall traffic of Netflix increased significantly, contributing to the total network traffic.

Figure 3: Total Traffic Volume, March 8–15

total-traffic-volume-march-8-15

Source: Nokia DeepField

Figure 4: Total Traffic Volume, March 8–22

total-traffic-volume-march-8-22

Source: Nokia DeepField

The above statistics suggest that there is an unprecedented growth in the overall global internet traffic. Also, the coordinates of Content Delivery Networks (CDNs) are expected to have a better prospect over the next few months, allowing Internet Service Providers (ISPs) to ensure that their internet infrastructures offer enough bandwidth and provide a high quality of services (Quos) irrespective of the demand.

Figure 5: Comparative Analysis of Different CDNs

comparative-analysis-of-different-cdns

Source: Nokia Networks

To predict and cater to demand in the coming days and months, ISPs will need to adopt analytical tools, such as network analytics solutions, which provide access to real-time information to help ISPs with better insights into data networks and correlate and visualize data of network speeds. Furthermore, to mitigate the challenges of heavy network traffic, YouTube, Netflix, and Amazon have decided to lower streaming bitrates temporarily. Additionally, OTT platforms have switched their video platforms to Standard Definition (SD), reducing the strain on telecom networks.

Figure 6: Comparative Analysis of Bit Rate Reduction

comparative-analysis-of-bit-rate-reduction

Source: Nokia Networks

Delay in 5GRollOut

The telecom industry was expected to roll out the 5G in 2020. Telecom companies were extremely enthusiastic regarding the rollout of 5G networks; however, considering the current business environment where most telecom equipment manufacturers are in an idle state, the rollout of 5G telecom services is expected to be delayed a year. Additionally, as most consumers are working from home, the telecom companies are focusing on offering better network and connectivity services by strengthening the existing network infrastructure. Some of the key developments regarding the delay are listed below.

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The Decline in the Purchase of Smartphones

As per partner consultants and industry experts, February 2020 witnessed a 14% decline in smartphone shipments, which suggests that consumers have become cash conscious.

Sourcing of Products &Components

Most manufacturing units are suspended due to COVID19, which has disturbed the supply chain of manufacturing sectors, adversely affecting the purchasing confidence of both consumers and businesses in terms of availability of networks and devices, disposable income, employment data, and shutdown of retail shops, among others.

Delay in Spectrum Allocation

  • Spain was among the first European countries to delay the spectrum auction of 700MHz, followed by Austria and Portugal, compelling telecom companies, such as MEO, NOS, and Vodafone Portugal, to wait for frequency rights in the 700MHz, 900MHz, 1800MHz, 2.1GHz, 2.6GHz, and 3.6GHz bands.
  • In Austria, the Telekom-Control-Kommission (TKK) postponed its second 5G auction from April 2020 to further notice. Additionally, In India, the Department of Telecommunication (DoT) also postponed the spectrum auction to October–December 2020.
  • On the contrary, China is aggressively taking measures to roll out 5G. On March 24, 2020, the Ministry of Industry and Information Technology (MIIT) of China published a 38-page document urging domestic companies to accelerate 5G network expansion and applications to reduce the impact of the coronavirus.
  • In March 2020, China Mobile, one of the key telecom network players in China, announced plans to invest approximately USD 14 billion to rollout 5G in 2020, despite the COVID-19 pandemic. Through this investment, the company is expected to build around 250,000 5G base stations for its initial launch in 50 cities.
  • The launch of the 5G enabled iPhone is also postponed to September 2020.

Security & Privacy: An Inevitable Challenge

The adoption ‘work from home’ policy amid the COVID-19 pandemic has increased the risk of access to secured connections. The lack of technical expertise to handle secure connections has significantly increased the risk of data breach cases. For instance, Zoom, a cloud-based enterprise communication platform, witnessed a massive surge in the number of fake registration.

As per CheckPoint’s threat intelligence report, since the outbreak of COVID-19, more than 1,700 new Zoom domains have been registered, with 25% of the domains registered in the past seven days alone. Additionally, the report stated that out of 4, 000 COVID-based domains, around120were found to be malicious and 200 suspicious. Also, coronavirus-related domains are 50% more malicious than other domains registered in the same period.

To overcome such attacks, regulatory bodies released guidelines that protect the corporate sector from phishing and ransomware attempts. For instance, the Netherlands regulatory body, Authority for Consumers and Markets (ACM), has been approached by companies to collaborate in favor of public interest. Furthermore, EU regulators are also working in partnership to safeguard location data and track the spread of the virus. They have ensured that telecom networks operate at their full capacity without interruption.

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Conclusion

The COVID-19 pandemic has hardly any long-term implications on the telecom market, with scope for positive effects. However, the pandemic is expected to slow down overall market developments due to a surge in the adoption of telework and dependence on a virtual communication platform for videoconferencing, chat contact, and cloud/SaaS platforms. This also facilitates corporates to increase investment in network expansion, which could minimize the negative implications of the recession on the telecom sector. Telecom companies, Internet Service Providers (ISPs), and cloud service providers are advised to aid customers in the crisis, which would eventually help during the recession, while customers are expected to persist more with the brand that offers services at crucial times.