The goal of this research is to understand how telecoms operators’ investment priorities and investments are likely to change as the COVID-19 crisis recedes. To do this, we collected 144 survey responses from participants in telecoms operators, telecoms vendors, and analysts and consultants and other groups. All responses are treated in strict personal and company confidence. Take the survey here.
Background to the telecoms priorities survey – January 2021
The respondents were fairly evenly split between telcos, vendors, and ‘others’ (mainly analysts and consultants). This sample contained a higher proportion of European and American respondents than industry average, so is not fully globally representative. The split of company types and geography was broadly similar to the May 2020 survey, with the exception of the MENA region, where there were less than half the prior respondents – a total of 7. However those respondents were senior and well known to STL.
Who took the survey?
Source: STL telecoms priorities survey, 144 respondents, 31st January 2021
48% of respondents were C-Level/VP/SVP/Director level. Functionally, most respondents work in senior HQ and operational management areas. Compared to May 2020, there were proportionally slightly more senior respondents, and slightly less in product and strategy roles.
What are their roles?
Source: STL telecoms priorities survey, 144 respondents, 31st January 2021
How respondents perceive priorities, as the COVID threat recedes
There were increases in respondent confidence in almost every category we surveyed from May 2020 to Jan 2021.
Telecoms automation and agility remain top priorities across the industry – and transformation has moved up the agenda.
Appetite for 5G investments increased the most of all areas surveyed in the last 8 months.
The ‘consumerisation’ of enterprise continues, although security and work from home (WFH) services have overtaken conferencing and VPNs in priority.
Healthcare remains the most accelerated vertical / application opportunity of all those impacted in the current crisis.
The priority of consumer services has significantly increased yet confidence in making any additional money in the sector is low.
Leadership and transformation: COVID 19 has empowered an industry-wide belief that change is possible.
Transformation and innovation are high priorities, and appetite for sustainability and recruitment has returned, but there are doubts about some telco leaders’ commitment and ability to grasp and invest in new opportunities.
STL Partners assesses the telecoms industry to be at a crunch point: COVID has injected further pace to the rapid evolution of the world economy. Telcos that have been focused on responding to immediate pandemic-induced challenges, will emerge from the crisis faced with an urgency to respond to this evolution – key choices that telcos might have had 5-10 years to ponder are being crunched into the next 0-3 years.
Our findings suggest that most telcos are only partly ready for this disruptive opportunity.
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Notes on interpreting the research findings
The way research respondents perceive any given question is generally dependent on their current situation and knowledge. To get relevant answers, we asked all respondents if they were interested or involved in specific areas of interest (e.g. ‘consumer services’), and to not answer questions they couldn’t (e.g. for confidentiality reasons) or simply didn’t know or have a clear opinion.
We saw no evidence that respondents were ‘gaming’ the results to be favourable to their interests.
Results need to be seen in the context that telcos themselves vary widely in size, profitability and market outlook. For example, for some, 5G seems like a valid investment, whereas for others the conditions are currently much less promising. COVID-19 has clearly had some impact on these dynamics, and our analysis attempts to reflect this impact on the overall balance of opinions as well as some of the specific situations to bring greater nuance.
In December 2020 / January 2021, the worldwide impact of COVID-19 is increasingly well understood and less of a shock than was the case in May / June 2020. Vaccines are beginning to be rolled out but it is an early stage in the process, and new variants of COVID-19 have evolved in the UK, South Africa and Brazil (and possibly elsewhere). There are geo-political wrangles on vaccine distribution, and varying views on effectiveness and the most appropriate responses. Nonetheless, respondents appear overall more optimistic, although there is still considerable uncertainty.
We’ve interpreted the results as best we can given our knowledge of the respondents and what they told us, and added in our own insights where relevant.
Inevitably, this is a subjective exercise, albeit based on 144 industry respondents’ views.
Nonetheless, we hope that it brings you additional insights to the many that you already possess through your own experiences and access to data.
Finally, things continue to change fast. We will continue to track them.
Table of contents
Executive summary: Opportunities are in overdrive, but can telcos catch them?
High-level findings
Research background
Technology impacts: Automation, cloud and edge come of age
Network impacts: 5G is back
Enterprise sector impacts: Healthcare still leads
Consumer sector impacts: Mojo aplenty, money – not so much
Leadership impacts: good talking, but enough walking?
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Related webinar: How will 5G transform transport and logistics?
In this webinar, we share learnings from 100+ interviews and surveys with industry professionals. During the presentation we will look to answer:
How will 5G accelerate digital transformation of the transport and logistics industry?
What are the key 5G-enabled use cases and what benefits could these deliver?
What must change within the industry to unlock this transformation?
What is the role for telcos – how can they work with industry leaders to increase adoption of 5G and build new revenues beyond core communication services?
In October 2019, STL Partners published research highlighting the benefits 5G-enabled use cases could unlock for industries. Our forecast predicted a potential $1.4 trillion increase in global GDP by 2030 across eight key industries.
In this short paper we look to update these numbers and explore new insights and conclusions based on two key factors:
STL Partners has produced new research on the impact of 5G on the transport and logistics industry. This has led to more granular insight on the unique benefits and use cases for this vertical.
COVID has changed the global landscape. It has increased demand for some 5G use cases, such as remote patient monitoring or video analytics solutions that determine if the public are respecting social distancing, but has also brought about economic uncertainty. We reflect these nuances in our updated figures.
5G enabled use cases could increase GDP by $1.5 trillion by 2030 – an increase from our original forecast
Source: STL Partners
5G’s impact on transport and logistics: Fresh analysis and new use cases
In 2019, we deep-dived into the 5G opportunity within two key verticals: healthcare and manufacturing. We have since performed a similar deep-dive on the transport and logistics industry, consisting of primary research with experts in the industry. We interviewed 10 enterprises, solutions providers, and members of 5G testbeds who were focused on transport and logistics, as well as surveying 100+ individuals who work in the industry to test the impact they predicted for three key 5G use cases. We will shortly be publishing a full report on these findings in detail.
We have revised our estimation on the impact of 5G on the transport and logistics industry. In 2019, we predicted 5G enabled use cases could increase the GDP value of the transport and logistics industry by 3.5% in 2030. We now believe the impact could be as high as 6%, though importantly some of these benefits are indirect rather than direct.
New forecasts show a bigger impact to the transport and logistics industry
Source: STL Partners
The three 5G-enabled solutions newly explored in detail in our study were:
Real-time routing and optimisation: Sensors collect data throughout the supply chain to improve visibility and optimise processes through real-time dynamic routing and scheduling;
Automated last 100 metres delivery: Using drones or automated delivery vehicles for the last ‘hundred yards’ of delivery, where the delivery van acts as a mobile final distribution point;
Connected traffic infrastructure: Smart sensors or cameras are integrated into traffic infrastructure to collect data about oncoming traffic and trigger real-time actions such as rerouting vehicles or changing traffic lights.
Benefits from these use cases include fewer traffic jams, more efficient supply chains, less fuel required and fewer accidents on the roads.
COVID has changed the landscape and appetite for 5G services
COVID-19 has caused a global economic slowdown. There has been a widespread fall in output across services, production, and construction in all major economies. Social distancing and nationwide lockdowns have led to a significant fall in consumer demand, to business and factory closures, and to supply chain disruptions. The pandemic’s interruption to international trade has far exceeded the impact of the US-China trade war and had a major impact on national economies. Lower international trade, coupled with a precipitous fall in passenger air travel, has also caused the air industry to enter a tailspin.
Table of Contents
Preface
The 5G opportunity: Updated forecast on value to verticals
5G’s impact on transport and logistics: Fresh analysis and new use cases
Increased productivity through more efficient roads: An impact beyond transport and logistics
COVID has changed the landscape and appetite for 5G services
COVID has impacted the GDP of every country – and outlook for recovery is still unclear
Operators’ 5G strategies and roll out have also been impacted
Appetite for 5G-enabled healthcare services has been accelerated
COVID-19 is accelerating significant and lasting changes in consumer behaviours as the majority of the population is being implored to stay at home. As a result, most people now work remotely and stay connected with colleagues, friends, and family via video conferencing. Consumer broadband and telco core services are therefore in extremely high demand and, coupled with the higher burden on the network, consumers have high expectations and dependencies on quality connectivity.
Furthermore, we found that people of all ages (including non-digital natives) are becoming more technically aware. This means they may be willing to purchase more services beyond core connectivity from their broadband provider. At the same time, their expectations on performance are rising. Consumers have a better understanding of the products on offer and, for example, expect Wi-Fi to deliver quoted broadband speeds throughout the house and not just in proximity to the router.
As a result of this changing landscape, there are opportunities, but also challenges that operators must overcome to better address consumers, stay relevant in the market, and win “in the home”.
This report looks at the different strategies telcos can pursue to win “in the home” and address the changing demands of consumers. It draws on an interview programme with eight operators, as well as a survey of more than 1100+ consumers globally . As well as canvassing consumers’ high level views of telcos and their services, the survey explores consumer willingness to buy cybersecurity services from telcos in some depth.
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With increasing technical maturity comes an increasingly demanding market
Consumers are increasing in technical maturity
The consumer market as a whole is becoming much more digital. Over the past decade there has been a big shift towards online and self-service models for B2C services (e.g. ecommerce, online banking, automated chatbots, video streaming). This reflects the advent of the Coordination Age – connecting people to machines, information, and things – and the growing technical maturity of the consumer market.
COVID-19 has been a recent, but significant, driver in pushing consumers towards a more digital age, forcing the use of video conferencing and contactless interactions. Even people who are not considered digitally native are becoming increasingly tech savvy and tech capable customers.
Cisco forecasts that, between 2018 and 2023, the number of Internet users globally will increase from 51% to 66% . It has also forecast an increase in data volumes per capita per month from 1.5GB in 2017 to 9.7GB in 2022 . Depending on the roll out of 5G in different markets, this number may increase significantly as demand for mobile data increases to meet the potential increases in supply.
Furthermore, in our survey of 1,100+ consumers globally, 33% of respondents considered themselves avid users and 51% considered themselves moderate users of technology. Only 16% of the population felt they were light users, using technology only when essential for a limited number of use cases and needing significant support when purchasing and implementing new technology-based solutions.
Though this did not vary significantly by region or existing spend, it did vary (as would be expected) by age – 51% of respondents aged between 25 and 30 considered themselves avid users of technology, while only 18% of respondents over 50 said the same. Nevertheless, even within the 50+ segment, 55% considered themselves moderate users of technology.
Self-proclaimed technical maturity varies significantly by age
The growing technical maturity of consumers suggests a larger slice of the market will be ready and willing to adopt digital solutions from a telco, providing an opportunity for potential growth in the consumer market.
Consumers have higher expectations on telco services
Coupled with the increasing technical maturity comes an increase in consumer expectations. This makes the increasing technical maturity a double edged sword – more consumers will be ready to adopt more digital solutions but, with a better understanding of what’s on offer, they can also be more picky about what they receive and more demanding about performance levels that can be achieved.
An example of this is in home broadband. It is no longer sufficient to deliver quoted throughput speeds only within proximity to the router. A good Wi-Fi connection must now permeate throughout the house, so that high-quality video content and video calls can be streamed from any room without any drop in quality or connection. It must also be able to handle an increasing number of connected devices – Cisco forecasts an increase from a global average of 1.2 to 1.6 connections per person between 2018 and 2023 .
Consumers are also becoming increasingly impatient. In all walks of life, whether it be dating, technology or experiences, consumers want instant gratification. Additionally, with the faster network speeds of 4G+, fibre, and eventually 5G, consumers want (and are used to) continuous video feeds, seamless streaming, and near instant downloads – buffering should be a thing of the past.
One of our interviewees, a Northern European operator, commented: “Consumers are not willing to wait, they want everything here, now, immediately. Whether it is web browsing or video conferencing or video streaming, consumers are increasingly impatient”.
However, these demands extend beyond telco core services and connectivity. In the context of digital maturity, a Mediterranean operator noted “There is increasing demand for more specialized services…there is more of a demand on value-added, rather than core, services”.
This presents new challenges and opportunities for operators seeking growth “in the home”. Telcos need to find a way to address these changing demands to stay relevant and be successful in the consumer market.
Table of Contents
Executive summary
Introduction
Growing demand for core broadband and value-added services
COVID-19 is driving significant, and likely lasting, change
With increasing technical maturity comes an increasingly demanding market
Telcos need new ways to stay relevant in B2C
The consumer market is both diverse and difficult to segment
Should telcos be looking beyond the triple play?
How can telcos differentiate in the consumer market?
Differentiate through price
Differentiate through new products beyond connectivity
Differentiate through reliability of service
Conclusions and key recommendations
Appendices
Appendix 1: Consumer segments used in the survey
Appendix 2: Cybersecurity product bundles used in the conjoint analysis
Internet platforms need a frictionless solution to fight the fakes
On the Internet, the old adage, nobody knows you are a dog, can still ring true. All of the major Internet platforms, with the partial exception of Apple, are fighting frauds and fakes. That’s generally because these platforms either allow users to remain anonymous or because they use lax authentication systems that prioritise ease-of-use over rigour. Some people then use the cloak of anonymity in many different ways, such as writing glowing reviews of products they have never used on Amazon (in return for a payment) or enthusiastic reviews of restaurants owned by friends on Tripadvisor. Even the platforms that require users to register financial details are open to abuse. There have been reports of multiple scams on eBay, while regulators have alleged there has been widespread sharing of Uber accounts among drivers in London and other cities.
At the same time, Facebook/WhatsApp, Google/YouTube, Twitter and other social media services are experiencing a deluge of fake news, some of which can be very damaging for society. There has been a mountain of misinformation relating to COVID-19 circulating on social media, such as the notion that if you can hold your breath for 10 seconds, you don’t have the virus. Fake news is alleged to have distorted the outcome of the U.S. presidential election and the Brexit referendum in the U.K.
In essence, the popularity of the major Internet platforms has made them a target for unscrupulous people who want to propagate their world views, promote their products and services, discredit rivals and have ulterior (and potentially criminal) motives for participating in the gig economy.
Although all the leading Internet platforms use tools and reporting mechanisms to combat misuse, they are still beset with problems. In reality, these platforms are walking a tightrope – if they make authentication procedures too cumbersome, they risk losing users to rival platforms, while also incurring additional costs. But if they allow a free-for-all in which anonymity reigns, they risk a major loss of trust in their services.
In STL Partners’ view, the best way to walk this tightrope is to use invisible authentication – the background monitoring of behavioural data to detect suspicious activities. In other words, you keep the Internet platform very open and easy-to-use, but algorithms process the incoming data and learn to detect the patterns that signal potential frauds or fakes. If this idea were taken to an extreme, online interactions and transactions could become completely frictionless. Rather than asking a person to enter a username and password to access a service, they can be identified through the device they are using, their location, the pattern of keystrokes and which features they access once they are logged in. However, the effectiveness of such systems depends heavily on the quality and quantity of data they are feeding on.
In come telcos
This report explores how telcos could use their existing systems and data to help the major Internet companies to build better systems to protect the integrity of their platforms.
It also considers the extent to which telcos will need to work together to effectively fight fraud, just as they do to combat telecoms-related fraud and prevent stolen phones from being used across networks. For most use cases, the telcos in each national market will generally need to provide a common gateway through which a third party could check attributes of the user of a specific mobile phone number. As they plot their way out of the current pandemic, governments are increasingly likely to call for such gateways to help them track the spread of COVID-19 and identify people who may have become infected.
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Using big data to combat fraud
In the financial services sector, artificial intelligence (AI) is now widely used to help detect potentially fraudulent financial transactions. Learning from real-world examples, neural networks can detect the behavioural patterns associated with fraud and how they are changing over time. They can then create a dynamic set of thresholds that can be used to trigger alarms, which could prompt a bank to decline a transaction.
In a white paper published in 2019, IBM claimed its AI and cognitive solutions are having a major impact on transaction monitoring and payment fraud modelling. In one of several case studies, the paper describes how the National Payment Switch in France (STET) is using behavioural information to reduce fraud losses by US$100 million annually. Owned by a consortium of financial institutions, STET processes more than 30 billion credit and debit card, cross-border, domestic and on-us payments annually.
STET now assesses the fraud risk for every authorisation request in real time. The white paper says IBM’s Safer Payments system generates a risk score, which is then passed to banks, issuers and acquirers, which combine it with customer information to make a decision on whether to clear or decline the transaction. IBM claims the system can process up to 1,200 transactions per second, and can compute a risk score in less than 10 milliseconds. While STET itself doesn’t have any customer data or data from other payment channels, the IBM system looks across all transactions, countrywide, as well as creating “deep behavioural profiles for millions of cards and merchants.”
Telcos, or at least the connectivity they provide, are also helping banks combat fraud. If they think a transaction is suspicious, banks will increasingly send a text message or call a customer’s phone to check whether they have actually initiated the transaction. Now, some telcos, such as O2 in the UK, are making this process more robust by enabling banks to check whether the user’s SIM card has been swapped between devices recently or if any call diverts are active – criminals sometimes pose as a specific customer to request a new SIM. All calls and texts to the number are then routed to the SIM in the fraudster’s control, enabling them to activate codes or authorisations needed for online bank transfers, such as a one-time PINs or passwords.
As described below, this is one of the use cases supported by Mobile Connect, a specification developed by the GSMA, to enable mobile operators to take a consistent approach to providing third parties with identification, authentication and attribute-sharing services. The idea behind Mobile Connect is that a third party, such as a bank, can access these services regardless of which operator their customer subscribes to.
Adapting telco authentication for Amazon, Uber and Airbnb
Telcos could also provide Internet platforms, such as Amazon, Uber and Airbnb, with identification, authentication and attribute-sharing services that will help to shore up trust in their services. Building on their nascent anti-fraud offerings for the financial services industry, telcos could act as intermediaries, authenticating specific attributes of an individual without actually sharing personal data with the platform.
STL Partners has identified four broad data sets telcos could use to help combat fraud:
Account activity – checking which individual owns which SIM card and that the SIM hasn’t been swapped recently;
Movement patterns – tracking where people are and where they travel frequently to help identify if they are who they say they are;
Contact patterns – establishing which individuals come into contact with each other regularly;
Spending patterns – monitoring how much money an individual spends on telecoms services.
Table of contents
Executive Summary
Introduction
Using big data to combat fraud
Account activity
Movement patterns
Contact patterns
Spending patterns
Caveats and considerations
Limited progress so far
Patchy adoption of Mobile Connect
Mobile identification in the UK
Turkcell employs machine learning
Big Internet use cases
Amazon – grappling with fake product reviews
Facebook and eBay – also need to clampdown
Google Maps and Tripadvisor – targets for fake reviews
Uber – serious safety concerns
Airbnb – balancing the interests of hosts and guests
Conclusions
Index
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The goal of this research is to understand how telecoms operators’ investment priorities and investments are likely to change in response to COVID-19. To do this, we collected more than 200 survey responses from participants in telecoms operators, telecoms vendors, and analysts and consultants and other groups. All responses are treated in strict personal and company confidence. Take the survey here.
This research builds on our initial research on the impact of the pandemic to the telecoms industry, COVID-19: Now, next and after, published in March 2020.
Background to the telco COVID-19 survey
The respondents were fairly evenly split between telcos, vendors, and ‘others’ (mainly analysts and consultants). This sample contained a higher proportion of European and American respondents than industry average, so is not fully globally representative. We have drawn out regional comparisons where possible.
Who took the survey?
Source: STL COVID-19 survey, 202 respondents, May 8th 2020
Meanwhile, 44% of respondents were C-Level/VP/SVP/Director level. Functionally, most respondents work in senior HQ and operational management areas.
What are their roles?
Source: STL COVID-19 survey, 202 respondents, May 8th 2020
How respondents perceive the risks from COVID-19
Respondents were positive on the prospects for most areas overall. We have taken a slightly more pessimistic view in our analysis of the survey results and the categorisation below to balance this bias and factor in future economic risk.
While not all activities we have categorised as “at risk” will necessarily be delayed, we believe that in some telcos there may be more pressure in these areas if the financial impact of COVID-19 is harsher than expected at the time of the survey. We expect that when Q2 results come out, many operators will have a clearer view of how the crisis will affect them financially – and those that are ahead of the curve in adopting technologies such as automation will be in a good position to accelerate their impact, those that are behind the curve may face a more difficult uphill battle.
A relative view of how respondents perceived the outlook for telcos in different business areas and verticals
Source: STL Partners analysis of COVID-19 survey, 202 respondents, May 8th 2020
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Notes on the research findings
The way research respondents perceive any given question is generally dependent on their current situation and knowledge. To get relevant answers, we asked all respondents if they were interested or involved in specific areas of interest (e.g. ‘consumer services’), and to not answer questions they couldn’t (e.g. for confidentiality reasons) or simply didn’t know or have a clear opinion.
We saw no evidence that respondents were ‘gaming’ the results to be favourable to their interests.
Results need to be seen in the context that telcos themselves vary widely in size, profitability and market outlook. For example, for some, 5G seems like a valid investment, whereas for others the conditions are currently much less promising. COVID-19 has clearly had some impact on these dynamics, and our analysis attempts to reflect this impact on the overall balance of opinions as well as some of the specific situations to bring greater nuance.
As of mid May 2020, the total economic impact of COVID-19 was probably less clear to the majority of the respondents than the operational and lifestyle changes it has brought. It is therefore likely that as telco results for Q2 start to be circulated, and before then internally to the telcos, differing pressures will arise than that existed at the time of this survey. The resulting intentions may therefore become more or less extreme than shown in this research, though the relative positions of different activities in the various maps of risk and opportunity may change less than the absolute levels shown here.
We’ve interpreted the results as best we can given our knowledge of the respondents and what they told us, and added in our own insights where relevant.
Inevitably, this is a subjective exercise, albeit based on 200+ industry respondents’ views.
Nonetheless, we hope that it brings you additional insights to the many that you already possess through your own experiences and access to data.
Finally, things continue to change fast. We will continue to track them.
Table of contents
Executive summary: What’s most likely to change?
Research background
Technology impacts: Implementing automation, cloud and edge
Network impacts: Making sense of divergent 5G viewpoints
Enterprise sector impacts: Healthcare and consumerisation
Consumer sector impacts: What will last?
Leadership impacts: Building on new foundations
What next?
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The world has been talking about connected healthcare – the use of in-home and wearable systems to monitor people’s condition – for a long time. Although adoption to date has been piecemeal and limited, the rapid rise in the number of elderly people is fuelling demand for in-home and wearable monitoring systems. The rapid spread of the Covid-19 virus is putting the world’s healthcare systems under huge strain, further underlining the need to reform the way in which many medical conditions are diagnosed and treated.
This report explores whether telcos now have the appetite and the tools they need to serve this very challenging, but potentially rewarding market. With the advent of the Coordination Age (see STL Partners report: Telco 2030: New purpose, strategy and business models for the Coordination Age), telcos could play a pivotal role in enabling the world’s healthcare systems to become more sustainable and effective.
This report considers demographic trends, the forces changing healthcare and the case for greater use of digital technologies to monitor chronic conditions and elderly people. It explores various implementation options and some of the healthcare-related activities of Tele2, Vodafone, Telefónica and AT&T, before drawing conclusions and recommending some high-level actions for telcos looking to support healthcare for the elderly.
This executive briefing builds on previous STL Partners reports including:
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Why healthcare needs to change
During the twentieth century, life expectancy in most countries in the world rose dramatically. This was down to advances in medical science and diagnostic technology, as well as rising awareness about personal and environmental hygiene, health, nutrition, and education. Average global life expectancy continues to rise, increasing from 65.3 years in 1990 to 71.5 years in 2013. In some countries, the increase in lifespans has been dramatic. The life expectancy for a Chilean female has risen to 82 years today from 33 years in 1910, according to the World Health Organization (WHO).
Figure 1: Across the world, average life expectancy is rising towards 80
Source: The UN
Clearly, the increase in the average lifespan is a good thing. But longer life expectancy, together with falling birth rates, means the population overall is aging rapidly, posing a major challenge for the world’s healthcare systems. According to the WHO, the proportion of the world’s population over 60 years old will double from about 11% to 22% between 2000 and 2050, equivalent to a rise in the absolute number of people over 60 from 605 million to an extraordinary two billion. Between 2012 and 2050, the number of people over 80 will almost quadruple to 395 million, according to the WHO. That represents a huge increase in the number of elderly people, many of whom will require frequent care and medical attention. For both policymakers and the healthcare industry, this demographic time bomb represents a huge challenge.
Rising demand for continuous healthcare
Of particular concern is the number of people that need continuous healthcare. About 15% of the world’s population suffers from various disabilities, with between 110 million and 190 million adults having significant functional difficulties, according to the WHO. With limited mobility and independence, it can be hard for these people to get the healthcare they need.
As the population ages, this number will rise and rise. For example, the number of Americans living with Alzheimer’s disease, which results in memory loss and other symptoms of dementia, is set to rise to 16 million by 2050 from five million today, according to the Alzheimer’s Association.
The growth in the number of older people, combined with an increase in sedentary lifestyles and diets high in sugars and fats, also means many more people are now living with heart disease, obesity, diabetes and asthma. Furthermore, poor air quality in many industrial and big cities is giving rise to cancer, cardiovascular and respiratory diseases such as asthma, and lung diseases. Around 235 million people are currently suffering from asthma and about 383,000 people died from asthma in 2015, according to the WHO.
Half of all American adults have at least one chronic condition with one in three adults suffering from multiple chronic conditions, according to the National Institutes of Health (NIH). Most other rich countries are experiencing similar trends, while middle-income countries are heading in the same direction. In cases where a patient requires medical interventions, they may have to travel to a hospital and occupy a bed, at great expense. With the growing prevalence of chronic conditions, a rising proportion of GDP is being devoted to healthcare. Only low-income countries are bucking this trend (see Figure 2).
Figure 2: Spending on healthcare is rising except in low income countries
Source: The WHO
However, there is a huge difference in absolute spending levels between high-income countries and the rest of the world (see Figure 3). High-income countries, such as the U.S., spend almost ten times as much per capita as upper middle-income countries, such as Brazil. At first glance, this suggests the potential healthcare market for telcos is going to be much bigger in Europe, North America and developed Asia, than for telcos in Latin America, developing Asia and sub-Saharan Africa. Yet these emerging economies could leapfrog their developed counterparts to adopt connected self-managed healthcare systems, as the only affordable alternative.
Figure 3: Absolute health spending in high income countries is far ahead of the rest
Source: The WHO
The cost associated with healthcare services continues to rise due to the increasing prices of prescription drugs, diagnostic tools and in-clinic care. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s US$3.3 trillion annual healthcare expenditure is spent on individuals with chronic and mental health conditions.
On top of that figure, the management of chronic conditions consumes an enormous amount of informal resources. As formal paid care services are expensive, many older people rely on the support of family, friends or volunteers calling at their homes to check on them and help them with tasks, such as laundry and shopping. In short, the societal cost of managing chronic conditions is enormous.
The particular needs of the elderly
Despite the time and money being spent on healthcare, people with chronic and age-related conditions can be vulnerable. While most elderly people want to live in their own home, there are significant risks attached to this decision, particularly if they live alone. The biggest danger is a fall, which can lead to fractures and, sometimes, lethal medical complications. In the U.S., more than one in four older people fall each year due to illness or loss of balance, according to the U.S. Centers for Disease Control and Prevention. But less than half tell their doctor. One out of five falls causes a serious injury, such as broken bones or a head injury. In 2015, the total medical costs for falls was more than US$50 billion in the U.S. Beyond falls, another key risk is that older people neglect their own health. A 2016 survey of 1,000 U.K. consumers by IT solutions company Plextek, found that 42% of 35- to 44-year-olds are concerned that their relatives aren’t telling them they feel ill.
Such concerns are driving demand for in-home and wearable systems that can monitor people in real-time and then relay real-time location and mobility information to relatives or carers. If they are perceived to be reliable and comprehensive, such systems can provide peace of mind, making home-based care a more palatable alternative for both patients and their families.
Table of contents
Executive Summary
Barriers to more in-home healthcare
Introduction
Why healthcare needs to change
Rising demand for continuous healthcare
The particular needs of the elderly
Shift to value-based care
Demands for personalised healthcare and convenience
How healthcare is changing
Barriers to more in-home healthcare
Implementation options
Working with wearables
Cameras and motion sensors
The connectivity
Analysing the data
How telcos are tackling healthcare
KPN: Covering most of the bases
Tele2 and Cuviva: Working through healthcare centres
Vodafone and Vision: An expensive system for Alzheimer’s
Telefónica’s Health Moonshot
AT&T: Leveraging a long-standing brand
Conclusions and recommendations
Recommendations
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People in China and South Korea are buying 5G phones by the million, far more than initially expected, yet many western telcos are moving cautiously. Will your company also find demand? What’s the smart strategy while uncertainty remains? What actions are needed to lead in the 5G era? What questions must be answered?
The report is informed by talks with executives of over three dozen companies and email contacts with many more, including 21 of the first 24 telcos who have deployed. This report covers considerations for the next three years (2020–2023) based on what we know today.
“Seize the 5G opportunity” says Ke Ruiwen, Chairman, China Telecom, and Chinese reports claimed 14 million sales by the end of 2019. Korea announced two million subscribers in July 2019 and by December 2019 approached five million. By early 2020, The Korean carriers were confident 30% of the market will be using 5G by the end of 2020. In the US, Verizon is selling 5G phones even in areas without 5G services, With nine phone makers looking for market share, the price in China is US$285–$500 and falling, so the handset price barrier seems to be coming down fast.
Yet in many other markets, operators progress is significantly more tentative. So what is going on, and what should you do about it?
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5G technology works OK
22 of the first 24 operators to deploy are using mid-band radio frequencies.
Vodafone UK claims “5G will work at average speeds of 150–200 Mbps.” Speeds are typically 100 to 500 Mbps, rarely a gigabit. Latency is about 30 milliseconds, only about a third better than decent 4G. Mid-band reach is excellent. Sprint has demonstrated that simply upgrading existing base stations can provide substantial coverage.
5G has a draft business case now: people want to buy 5G phones. New use cases are mostly years away but the prospect of better mobile broadband is winning customers. The costs of radios, backhaul, and core are falling as five system vendors – Ericsson, Huawei, Nokia, Samsung, and ZTE – fight for market share. They’ve shipped over 600,000 radios. Many newcomers are gaining traction, for example Altiostar won a large contract from Rakuten and Mavenir is in trials with DT.
The high cost of 5G networks is an outdated myth. DT, Orange, Verizon, and AT&T are building 5G while cutting or keeping capex flat. Sprint’s results suggest a smart build can quickly reach half the country without a large increase in capital spending. Instead, the issue for operators is that it requires new spending with uncertain returns.
The technology works, mostly. Mid-band is performing as expected, with typical speeds of 100–500Mbps outdoors, though indoor performance is less clear yet. mmWave indoor is badly degraded. Some SDN, NFV, and other tools for automation have reached the field. However, 5G upstream is in limited use. Many carriers are combining 5G downstream with 4G upstream for now. However, each base station currently requires much more power than 4G bases, which leads to high opex. Dynamic spectrum sharing, which allows 5G to share unneeded 4G spectrum, is still in test. Many features of SDN and NFV are not yet ready.
So what should companies do? The next sections review go-to-market lessons, status on forward-looking applications, and technical considerations.
Early go-to-market lessons
Don’t oversell 5G
The continuing publicity for 5G is proving powerful, but variable. Because some customers are already convinced they want 5G, marketing and advertising do not always need to emphasise the value of 5G. For those customers, make clear why your company’s offering is the best compared to rivals’. However, the draw of 5G is not universal. Many remain sceptical, especially if their past experience with 4G has been lacklustre. They – and also a minority swayed by alarmist anti-5G rhetoric – will need far more nuanced and persuasive marketing.
Operators should be wary of overclaiming. 5G speed, although impressive, currently has few practical applications that don’t already work well over decent 4G. Fixed home broadband is a possible exception here. As the objective advantages of 5G in the near future are likely to be limited, operators should not hype features that are unrealistic today, no matter how glamorous. If you don’t have concrete selling propositions, do image advertising or use happy customer testimonials.
Table of Contents
Executive Summary
Introduction
5G technology works OK
Early go-to-market lessons
Don’t oversell 5G
Price to match the experience
Deliver a valuable product
Concerns about new competition
Prepare for possible demand increases
The interdependencies of edge and 5G
Potential new applications
Large now and likely to grow in the 5G era
Near-term applications with possible major impact for 5G
Mid- and long-term 5G demand drivers
Technology choices, in summary
Backhaul and transport networks
When will 5G SA cores be needed (or available)?
5G security? Nothing is perfect
Telco cloud: NFV, SDN, cloud native cores, and beyond
AI and automation in 5G
Power and heat
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The Coronavirus pandemic is an unprecedented event in our lifetimes. As well as the virus’s impact on health, shock and fear have rippled across the world. Everyday life is changing almost everywhere, with major impacts across the economy. It is having many of the same effects as a new world war, albeit a war against a common invisible enemy.
At the start of every world world war, people in the UK thought it would be over by Christmas. Coronavirus won’t be over by Christmas (December) 2020. Unchecked. Each person with COVID-19 infects about 3 people, on average. This means it is hugely infectious and can (re)infect populations rapidly. Hopefully, better healthcare treatments will be developed fast, and in time a vaccine too – though the World Health Organisation (WHO) believes this will take at least a year, and longer to immunise the population.
On this basis, unless several miracles happen, we think the world is likely to be dealing with some form of social distancing and other preventative and curative measures for a while. Given what we know today, here is our initial take on what telcos are doing now – and what they should do next, including four scenarios to help envisage a range of possibilities amid the current uncertainty.
Telcos and vendors can and should now do some great things
Telecoms is an essential service in today’s world. The initial focus of telcos has inevitably been on the short term crisis response: keeping the network working, adapting to new and changing patterns of customer behaviour, and trying to keep their employees and customers safe. Beyond that, telcos have been offering additional services and help to customers, and we outline some of the measures taken so far in this report (summarised below).
Beyond that, telco leaders must keep thinking and planning ahead. As a sector it is in a relatively strong position. Telecoms stocks are among those least impacted in the crisis, showing that shareholders see telecoms as a relatively safe haven with a more reliable future than many other sectors (e.g. travel, hospitality, etc.).
That’s not to say that all telcos will survive the crisis in the state they are in today. Some may be nationalised or struggle to finance debt or worse, though for the most part we imagine telcos will find state support where needed because of the importance of the service they deliver.
On a more positive note, the near term future will see an enhanced focus on addressing some big problems, such as accelerating the transformation of healthcare and making it and other critical functions such as logistics even more robust and resilient.
STL Partners believes that the crisis will further accelerate the evolution of the Coordination Age, as customers and governments will accept, change and learn new behaviours (such as online ordering, remote delivery, automated services, etc.) fast in the context of an environment in which they simply have to do so. The crisis will also place the importance of critical and sometimes limited resources (e.g. food, healthcare, communications) firmly in the spotlight, along with issues such as potential conflicts between the use of data and privacy.
It’s too early to say whether highly controlled economies like China will do better than less controlled ones. Yet the strengths of a coordinated response to a problem (such as how a national health service can organise and plan collectively) will become clearer, and is likely to shape regulation that prioritises desired outcomes in a more pragmatic way, potentially bringing regulated collaboration back into fashion somewhat compared to pure competition in some sectors.
True leaders think ahead
Despite all the near term focus that a crisis brings, the challenge of addressing future problems should not just be dropped. We recommend that telcos and vendors shouldn’t abandon their longer term ambitions to develop new services and solutions in order to deal with the crisis. By analogy, the countries that are doing best in the COVID-19 response today are those that were best prepared for a viral pandemic, i.e. those that have planned how to scale up testing and hospital capacity, and have previously outlined a pandemic response strategy. Likewise, the telcos that will do best will continue to offer resilient support to their communities, and develop new solutions for customer problems.
Perhaps the best that could happen is that telcos and other service providers could ultimately find this crisis a stimulant to accelerate internal and business model change. For this to happen, the change needs to come from the top, and leaders in telecoms need to set the example of looking to do everything possible to help deal with the crisis, while maintaining a strong forward looking outlook.
STL Partners will continue to research how to do that realistically in the new context. We believe that Coronavirus will change how services evolve. For example, some 5G capital investments are likely to proceed with greater caution in the near term. Our initial thoughts on this is that, rather than bin all development, telcos should use this as an opportunity to better develop their understanding of customer needs, and develop the non-network capabilities and offerings to support consumers and other sectors to prepare the ground better for when 5G does arrive.
Short-term: Some smart offers to copy
Telcos are broadly offering customer support in four ways:
Supporting healthcare, government and other critical care customers: prioritising communications and resources for first line responders and healthcare facilities, offering population movement statistics, participating in national tests, and providing other services (e.g. bulk SMS updates to patients and healthcare communities)
Business customers: support for home working such as increased capacity on collaboration services, support on business continuity
Consumer customers: quite a wide range of offers, varying from suspending data bundle usage caps, to providing free calls for pensioners, free calls to the worst hit countries, waiving roaming charges and late payment relief for COVID-19 impacted customers
Shops and customer premise visits: a range of measures to ensure customer and employee safety, including shutting shops entirely, keeping some open, and introducing social distancing
Mid term: Adjust, but don’t forget the future
For the next few months, humans will interact differently. People and businesses will want to survive, and will be keen to return to ‘normal’ – but they won’t be able to.
Thus new habits, such as home working, and work and social video conferencing, will become more deeply embedded behaviours. New support structures to care remotely for the isolated will evolve, potentially with lasting effects. Telcos will need to support these behaviours with appropriate service and capacity, and with considerate offers as they have started to do as the crisis bites. Telcos should not behave like or risk being seen as profiteers during the crisis. Such action would be wrong – and a PR disaster.
They will need to continue to focus on the needs of critical sectors such as healthcare, government, security and logistics, and maintain a close relationship with government to assist the centralised efforts to combat COVID-19 and support the pandemic relief effort.
Long term: Four possible scenarios
When the future is as uncertain as it is now, scenarios are a useful way to envisage possible alternatives and enrich planning. We’ve therefore outlined four scenarios for the recovery stage:
Scenario 1:Back to (almost) normal. A cautiously optimistic scenario in which all economies recover reasonably swiftly without much impact on the global order. Global trade recovers gradually, and activities like 5G investments are merely delayed at the outset.
Scenario 2:Fragmented recovery. A moderately pessimistic scenario in which some economies are much more significantly damaged than others. Recovery takes longer and global initiatives are less successful because of lower collaboration. 5G take-up is patchy, nation by nation.
Scenario 3:Weak and distanced. The most pessimistic scenario in which nations have become much more insular and distrustful, and economic and social recovery is much slower. Economic realities have significantly delayed 5Ginvestments in most nations.
Scenario 4:Stronger than before. The most optimistic scenario. Collaboration and cooperation are enhanced, and the broadly successful response and recovery to the crisis has refocused strategic thoughts on the importance of resilience in the long-term. 5G is close to the trajectory it would have been on before the crisis and accelerating fast.
Introduction
World War C
The Coronavirus pandemic sweeping the world in 2020 is a truly disruptive ‘black swan’ event. It is impacting people’s lives in almost every nation and will continue to do so for many years ahead.
STL Partners, like all our customers and partners, families and friends, is feeling the impact already. We are lucky enough to be able to continue to work because the nature of our work is relatively unaffected by virtual working. Many in the global economy are not so lucky, and many others have been even more directly impacted by the illness. Our thoughts and best wishes are with you all.
Our job is to try to help others make better decisions to shape the future of their businesses. We believe that COVID-19 will change the global economy in a way that will impact all previous strategies and plans. This analysis is therefore intended to help preparations and planning for the next few months and years. Yet certainty is in short supply, and the situation is changing all the time. We do not claim to have all the answers and will update our analysis when it makes sense.
The scale and speed of this pandemic is unprecedented in the lives of the few alive today under the age of 102. Even so, when the so-called “Spanish Flu” swept the world in 1918, road and air travel were relative novelties, information spread slowly and its distribution was highly limited.
Today, the virus has spread much faster – but so too has news, information and research relating to it. The primary challenges for economies and societies as a whole are:
Supporting the frontline medical battle for the lives of the severely infected.
How the available information can be used to manage the disease to best effect by governments and authorities.
How other technological and economic developments such as globalised food chains and online information and entertainment services can help to sustain the rest of the population until the virus and the fear and disruption it has brought are defeated, or at least brought under control.
Operational and financial support to maintain economies and employment wherever possible.
Coronavirus and the Coordination Age
STL Partners has written at length about the Coordination Age – our view that the world economy now needs on-demand solutions enabled by the emergence of new technologies like AI, virtualisation, 5G, etc. These solutions must deliver outcomes (e.g. in healthcare) in a resource efficient way.
This age impacts all industries, but in the forefront are healthcare and logistics, which are also those most under test by Coronavirus. Succeeding against COVID-19 will require a massive and sustained effort of coordination, in this case mostly orchestrated by governments and health authorities.
Telcos and the telecoms industry will not solve this, but they can be major enablers of success. They can also have a major role in helping societies deal with the crisis and rebuilding and reshaping themselves after it has passed. This report starts to sketch out how this might happen.
Three stages and three questions for telcos
To simplify the analysis of what could happen, we’ve split the near future into three stages, and have structured the report correspondingly:
Now: shock and lockdown. Dealing with the initial global spread of the pandemic.
Next: finding a new, temporary normal. Coping with the longer-term impacts of social isolation, healthcare, and economic damage.
After: rebuilding and reshaping. What will be the lasting changes, what will need to be rebuilt?
In each case, we outline our best views on the ‘certainties’ – or at least more certain outcomes, and explore different scenarios where uncertainty is currently prime.
Throughout, we address three questions about what actions telcos and the industry should take:
What do telcos need to do to survive?
What can telcos do to help their customers?
How can telcos help the immediate response, then rebuild and reshape society?
Now: Shock and lockdown
The problems that need to be solved
A health crisis is a hard reminder of the need to serve the greater good of our societies. We need other people and organisations to survive and thrive, especially in today’s highly globalised and connected world. In this regard, there is an over-riding responsibility for those in positions of power to direct that power in service of the integrity of society and the economy – how we exchange goods and services to maintain our lives.
In such moments, the pursuit of competitive gains which is the normal function of companies and markets becomes secondary to the overall well-being of the society and the economy that supports it. This is a fundamental – albeit temporary – suspension of ‘business as usual’.
Telcos have a long history of providing support in times of crisis, and the COVID-19 pandemic is the broadest and most systemic global crisis of our times. The fundamental functions and sectors that the industry needs to support are:
Healthcare – sustaining and protecting the healthcare system in a time of critical demand and pressure
Logistics – ensuring that supply and delivery chains are enabled to operate and deliver the goods (e.g. food and medical supplies) and services (e.g. water, power, hygiene) required for the healthy function of society
Government – ensuring that governments and responsible authorities are enabled to function and make decisions to best manage, control and mitigate the impact of the virus and the accompanying fear and disruption
General communications – ensuring that the public, businesses and others can stay in touch with each other to provide information, economic, medical and emotional support, and maintain employment.
Immediate actions
Following airline safety advice
The classic airline safety advice is to fit your own oxygen mask before attempting to help others.
We expect that telcos will be putting in place their contingency plans for dealing with the COVID-19 pandemic – though of course, the exact circumstances cannot have been foreseen.
Clearly, maintaining the core functions of telecommunications networks will be the priority – doubling down on enabling and protecting data and voice communications across the network, especially to mission-critical establishments like hospitals, and other healthcare and state facilities.
This may require operators to scale up network capacity at key points, although early data suggests most traffic growth from home-working and home-schooling may come at historical off-peak times. There is likely to be a shift from mobile to fixed broadband in many cases, with mobile use being concentrated in residential areas rather than urban centres and transport corridors. Mobile voice traffic is likely to rise substantially (in Spain, a 50% rise has been reported) as people speak to elder relatives and connect to conference calls and other services. Encouraging customers to shift usage to fixed-line telephony (which usually has extra capacity) could be wise.
Most cloud and enterprise facilities have been engineered to be highly resilient, but there is also likely to be increased demand in the distributed consumption of data in many societies as social isolation measures move populations into home-working environments and away from traditional daytime centres of communications localised on business.
How telcos can support and are supporting their customers
Many telcos are putting in place wider measures to support their customers.
Figure 1: How telcos are supporting their customers
Telco responses to Coronavirus
Source: Operator announcements, STL Partners
For healthcare, government and other critical support customers:
Prioritising connectivity for frontline healthcareresponders (AT&T, Verizon and others)
Offering bulk text upgrades to patients and healthcarecommunities (Vodafone)
Offering insights on population movements and statistics (Vodafone, Deutsche Telekom, Telefonica)
Collaborating in other hospital and healthcaretrials and programmes (China Mobile, China Telecom, TELUS)
Extending free hospital Wi-Fi (Globe)
Free-rating data on healthcaresites and apps
For these sectors and business more broadly, additional:
Conferencing lines, VPN capacity, and capacity / licenses for collaborationtools (BT)
Other home-working security(BT, NTT)
Cut price access to digital marketing services and conferencing for small businesses (Telstra)
For consumer customers, telco measures include:
Additional free data in bundles (Telefónica, Telstra, Dialog)
Removing caps on some limited data bundles (AT&T, Sprint, T-Mobile, TELUS, Telstra, Dialog)
Additional entertainmentcontent in some packages (Telefónica, TELUS, Dialog)
Free or reduced tariff calls to the countries most impacted by COVID-19(Verizon, Sprint, T-Mobile)
Free landline calls for pensioners (Telstra)
Free medical hotline service (Dialog)
Free data packages for families with school children without internet access or no data charges on educational services (Du, Etisalat, Dialog)
Waiving fees / suspension of service for non or late payment for impacted customers, or extending payment terms / credit (AT&T, Verizon, Telstra, Dialog)
Waiving all or some roamingfees for overseas customers (TELUS)
Encouraging the use of digital cash and health apps (Globe)
And in terms of shops and customer premises visits, telcos are taking a range of measures from:
Closing shops, or keeping some open to provide critical equipment (AT&T, Sprint, T-Mobile, DTAG, TELUS)
Possibly stopping or limiting customer premises visits, or continuing but with new isolation/protection procedures in place (AT&T, Globe)
NB This is illustrative and not an exhaustive or comprehensive list. Please see our blog for links to some of the companies’ policies and articles relating to them at the time of research.
STL Partners is conducting a rapid survey of telco responses which can be found here. We will be updating and freely sharing what operators tell us over the next few weeks with details of the measures used so that other telcos can review what they can copy or learn from these measures to support their customers.
Help your employees
Again, many telcos in directly impacted environments have asked employees that can to work from home. We would also hope telcos are putting in place additional health measures to protect those employees that do need to make physical contact with customers and others, such as health advice and screening.
Starting to look ahead
Which sectors will be most affected?
The impact of the COVID-19 pandemic across the economy is very hard to predict at this stage, although there are certain sectors that are clearly already under immediate pressure, such as:
Consumer leisure and mass transport: cruise lines, passenger airlines, hotels and tourism as people shun travel and self-isolate
Consumer service industries such as cafes, bars, restaurants, gyms, hairdressers
Entertainment and mass gatherings such as sporting events, festivals, conferences and events, concerts, museums.
Wider impacts are anticipated in demand for other consumer goods and services, such as cars, clothes and other non-food and everyday items, and this knocks on to the value chains of those industries too.
This pattern is evident looking at the impact on FT.com share indices over the last month in Figure 2. Indeed, of the major sectors, telecommunications was the least devalued on the 16th March when we looked at this data (a day on which there was a 10% drop in global financial indicators).
Figure 2: Financial markets rate telecoms as one of the sectors of the economy least hit by Coronavirus
Coronavirus impact on industries
NB Oil and gas sectors have recently faced additional pressures from an industry price war. Source: STL Partners, FT.com
Moody’s credit rating agency paints a similar picture of their estimated impact of the pandemic on the credit worthiness of industries by sector as shown in Figure 3.
Figure 3: Moody’s credit rating impact of Coronavirus by industry
Source: Moody’s
At this early stage it’s very hard to be sure of what the overall impact of the COVID-19 pandemic will be on each sector. But there’s certainly some consistency between the logic of what is causing the impacts, and the degree to which markets and market rate-setters are reflecting likely changes in future value.
For telcos, the questions are: how can they support all sectors effectively during the crisis, and how can they help them recover and rebuild in due course. We will explore this a little further in subsequent sections.
Table of contents
Executive Summary
It won’t be over by Christmas
Telcos and vendors can and should now do some great things
Source: The WHO
