The global telecoms industry is changing faster than ever. Over the past few years, we have seen a shift in revenue streams for telecom operators forcing operators to consider new ways of retaining their customers. And 2020 is expected to be no different, ushering in many changes and reforms for the industry.
While the whole industry is talking about 5G, Deep Dawar, our telecommunications expert, says that in 2020, 5G retail penetration will be limited given the technology faces civil engineering challenge to deploy small cell networks not to mention the fibre backhaul support it will need. More on this and Deep’s other predictions for the sector, below:
Is 5G only for London?
5G in the UK is here. Or, at least, it is in a few places. We know it will be in many more places soon, but the question is when?
Making 5G a reality for the end consumer has met with several challenges – hence, we predict, in 2020, 5G will witness limited growth for consumers outside of London. This can be attributed to:
- Insufficient civil engineering planning that needs to cover the countryside with small cell networks (given inherent propagation loss of signal for mm waves used for 5G)
- A need for fibre network backhaul
- A need for investment in 5G vs utilisation of current 4G network
- Not enough network sharing frameworks due to lack of industry standards for the same.
Though Ofcom has announced the plan for auctioning low and mid-level spectrum in 2020, we feel it will be interesting to see how the industry will overcome the existing challenges for better services to end consumers.
5G competes with satellites
The evolution of broadband infrastructure in the UK has traditionally involved upgrading cables that bring it to our homes. Now in 2020, 5G is set to witness competition from satellite technologies that can provide broadband connection. In 2020-21 the market is expected to see a shift due to disruptors like SpaceX, One Web and other similar disruptive businesses pledging to connect the world like never before, entering the race is on to build a global communications networks powered by low-earth-orbit satellites. Therefore, we predict that these satellite technologies will aim to support the underserved regions, hindering the expansion of 5G beyond urban areas or at least living in harmony with each other
Data revenues will continue to grow whilst voice will continue to decline
Customers have now completely changed the way they consume communication services, from being a tool to stay in touch, we now depend on this industry for almost everything we do.
We are increasingly seeing a number of mobile providers selling unlimited data plans and different services. In 2020 we expect the ARPUs to continue to shrink while data consumption continues to increase, hence expecting 2020 to be another difficult trading year.
Competition to traditional communication providers now comes as mobile virtual network operators (MVNOs) which are being backed by large groups, Vodafone-Voxi, 3-Smarty, Carphone Warehouse – iD and almost all big supermarkets providing their version of mobile services. With these new players, the big telecom providers are faced with extreme competition, driven by single-digit margins, price-sensitive markets, pressures to keep the network estate running to offer the latest technologies.
The fight to understand customer behaviour
The one segment that owns vast amounts of rich customer data is the search, map and marketplace functions in the apps we use daily, including Google, Facebook, Amazon. These service providers invest vast sums of money into R&D and have an in-depth understanding of customer profile and usage patterns. Then there are the new age MVNOs like iD mobile, Voxi and Smarty, differentiating themselves and targeting the youth with offers like unlimited data at no extra cost.
So, we predict that the competition for the large MVNOs in 2020 will no longer be from other big MVNOs but from new-age MVNO competing in offers and apps that own and use customer data to impact the brand loyalty and choices of the end-user.
Expect more government investment and regulation
There are multiple facets of regulation and Ofcom, at the centre of it all, is looking at regulation around customer services, competition, pricing, investments and distribution of services among many other issues.
Over the years, with the introduction of many MVNOs, the customer has no dearth of choice. These MVNOs offer competitive pricing and go a step further by combining contracts and handsets in deals, to lure customers. Given that the telecom market is very price-sensitive, and the end-user usually has no brand loyalty, any new entrants seek to play only on price and not make the customer experience better. This, in turn, impacts the other MVNO’s business in a big way. Large telecom players will ask regulators to create a framework for new players entering the market in 2020, to ensure these new entrants cannot disrupt the market basis competitive pricing but will seek to make the customer experience better.
Another aspect of regulation that Ofcom will undertake in 2020 will be around 5G – super-fast broadband connectivity in underserved areas. Under this, Ofcom will incentivise telecom operators to make additional investments in infrastructure.