9 minute read 12 May 2020
Two young boys using a digital tablet together

COVID-19: How the telecoms industry is pursuing a renewed purpose

Authors
Tom Loozen

EY Global Telecommunications Leader

Fascinated by the positive impact of telecoms. Passionate musician. Enjoys educating himself on psychology, wine, sports, technology, arts and much more. Husband and father of three daughters.

Adrian Baschnonga

EY Global Telecommunications Lead Analyst

Lead Analyst with deep sector knowledge in technology, media and telecom, gained in professional services and business intelligence environments.

9 minute read 12 May 2020

Telcos are recognized as the engines of resilient and innovative societies worldwide.

In the few weeks since the COVID-19 outbreak, communications providers have found themselves at the heart of a fast-changing world. Communications and connectivity are in great demand as entire populations are staying at home and digital infrastructure is becoming increasingly essential for human interaction amid national lockdowns.

Supporting this dramatic change has not been easy, but operators have shown themselves to be agile and decisive, offering customers relief packages while working hard to ensure that networks can cope with the surge in demand. Early communications to customers and stakeholders have been clear, timely and well-received.

Early efforts to reassure customers and relieve financial hardship are being recognized. EY research shows that consumers believe telcos are coping better with the crisis than service providers in adjacent sectors. No longer viewed as mere “dumb pipes,” communications providers are finally being appreciated as providers of critical infrastructure in times of need.

These positive views are reinforced by encouraging business performance during the crisis. Telco share prices have performed better than other sectors, while we have seen fewer announcements of credit expansions, layoffs and furloughs to date, compared with other industries. Various factors are supporting the sector’s resilience, from subscription-based business models providing essential services, to responsive tariff-plan adjustments offering fairer deals for increased usage.

Immediate and long-term business objectives remain uncertain: focus is essential

Even still, business continuity is by no means certain. Apart from the increased demand experienced on networks, disruption to frontline staffing is limiting customer engagement and support, while a volatile supply chain is unsettling network rollout and spectrum release time frames. Network resilience and modernization, digital transformation plans and telcos’ contribution to wider society are all key issues to address as the crisis evolves.

As telco executives look beyond safeguarding their employees and maintaining business continuity, we believe they can convert their positive actions today into a revitalized strategy for the future. The focus should be on three key areas: customer propositions, digital transformation and their ongoing role in a digital society.  

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Chapter 1

Redefining your customer promise to thrive in the new normal

Customer expectations and propositions in place now may last a lifetime.

Relief packages today, reimagined propositions tomorrow

Operators have been quick to offer relief to consumers, adjusting usage-based pricing significantly by removing data caps, zero-rating certain services and offering payment waivers or holidays. These proactive moves have been supported by practical advice on how to maximize network performance in the home, which is crucial when home working, schooling and entertainment have suddenly increased. Customers appreciate this — EY research of US households shows that 62% are satisfied with their service providers’ package adjustments during the crisis, while only 6% of respondents are dissatisfied.

With resilient network connectivity becoming the prime household concern, meeting consumer needs going forward will require continued attention. Forty percent of UK consumers agree that the COVID-19 situation has made them value the reliability of their connection more than the speed it offers, with only 12% of consumers disagreeing. In addition, households are receptive to new value-added services — 47% of US consumers say that educational content or tools offered by their broadband or mobile provider are attractive. Flexible packages that can be easily upgraded or downgraded are also appealing.

These changes in attitude will continue after the lockdown periods and relief packages offered now will form the basis of future customer expectations. Telcos should carefully consider how far relief adjustments made now will become a permanent feature of their plans, and clearly communicate any further changes in the coming months. 

Telcos should carefully consider how far relief adjustments made now will become a permanent feature of their plans, and clearly communicate any further changes in the coming months.

Shifting the customer promise from speed to reliability, and incorporating remote working and cloud-gaming options into household packages, can shape new value propositions. Aligning new segmentation models to tariff plans that are less focused on tiered or capped data and more on the delivery of service quality and flexibility must be the priority.

Reignite your mission statement and service offering for SMEs

While telcos have been quick to adapt their consumer packages, adjustments to SME offerings have been slower, which is unsurprising given the diversity of needs within this segment. Prior to the crisis, the technology and telecoms spending outlook for SMEs was very positive, but COVID-19 is expected to halve growth rates going forward.

Given the enormous pressures faced by many small businesses, considered action by telcos now can help improve net promoter scores (NPS), paving the way for more successful cross-selling and up-selling outcomes in the future. Relief measures that enhance virtual private network (VPN) provision, cloud support and security guidance will be important, particularly for businesses that are directly affected by lockdowns and social distancing.

Looking ahead, telcos should take the opportunity to overhaul their value propositions and, importantly, educate their SME customers on the new services they can provide. Supporting SMEs’ full journey into the cloud while building new capabilities that take advantage of software-defined networking can help meet the growing demand for agile and scalable connectivity. At the same time, low-cost and high-impact forms of customer engagement, e.g., video-supported sales and troubleshooting, should become part of the core customer promise. 

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Chapter 2

Moving from digital-first to digital-throughout

Incremental transformation should become holistic hyper-automation as operators overhaul their technology capabilities.

Improving infrastructure resilience

The impact on network traffic has been the most critical issue for telcos arising from the pandemic. Operators worldwide are experiencing new demand peaks across their fixed and mobile networks. Although they have stated that their networks can withstand higher usage, some reports suggest that network performance has dropped during the crisis because of diminished download speeds rather than explicit network outages.

The ability to understand and anticipate specific drivers of increased demand — according to customer and application type as well as location and time of day — are mission-critical. Short-term actions that can help expand capacity where needed, while addressing near-term blockages, should be top of mind during the lockdown period. Guidance to customers on improving signal quality will also play an important role.

However, more fundamental changes are necessary if telcos are to meet the increased expectations of network resilience prompted by the pandemic. Network and customer teams must work together to deliver a new customer promise built around reliability, while traffic offload strategies and upstream network performance require clear and sustained focus.

Greater adoption of network functions virtualization (NFV) can drive a major improvement in network resilience, scalability and automation. Integrating more software into the network is a long-standing telco ambition, but progress to date has been slower than expected for most. Now is the time to prioritize this key transformation objective to help deal with changes in demand in more agile ways.

Smarter network planning and deployment

Before the crisis, the telecoms industry was entering a new capital expenditure (capex) cycle to support the rollout of 5G, with fixed-line capex also at elevated levels. However, COVID-19 is unsettling network spending plans. Preserving financial health is as important as meeting ambitious coverage goals set by policy makers; therefore, difficult choices must be made. Other factors, such as supply chain disruption and delayed spectrum auctions, are also altering the pace and timing of network upgrades.

Creating a manageable multi-year program of network modernization in this complex environment requires new thinking and better execution. Efforts to reduce vendor lock-in and diversify supply chains can lead to more agile and versatile upgrade paths. Meanwhile, artificial intelligence (AI) and automation should be at the core of network-planning activities to help drive more efficient spending which can deliver better return on investment (ROI).

Network deployment models should also be revisited. New investment models with other operators, tower companies, private equity firms and vertical industry partners will gain more importance, reducing capex burdens in the process. And by identifying complementary roles for access technologies, such as 5G, full fiber and Wi-Fi 6, operators can improve the quality of network coverage to provide better customer experiences in the medium term.

Entering the era of hyper-automation and full digital customer engagement

Customer experience has been the key driver of the telco transformation agenda. And COVID-19 has accelerated this trend further — more customers are reaching out for support while call centers and retail stores are closed.

Four in five telco executives are either revaluating the speed of their automation initiatives or taking steps to significantly adjust existing plans.

Enabling frontline staff to work from home and expanding self-service options are critical during the pandemic, but more frictionless customer journeys will be vital to build trusted customer relationships in the future. Chatbots should become much more than a “bridge” to the call center. The best customer conversations will harness a mixture of AI and agent capabilities in more effortless ways.

Increasing digital capabilities should not be limited to the customer experience. Extending automation and AI capabilities across the organization to strengthen all business functions will be critical as operators look to revitalize their transformation agenda.

Before the crisis, EY research showed that telco executives were not satisfied with their current transformation road maps — 46% believed that a lack of long-range planning was holding back automation initiatives while 67% saw a lack of skills as a barrier to maximizing AI. Fast-forward to the present, four in five telco executives are either revaluating the speed of their automation initiatives or taking steps to significantly adjust existing plans.

Improving how people, systems and processes interact is essential if telcos are to execute more holistic automation programs faster. Proof-of-concept trials in parts of the organization must change to multi-year planning that delivers the compounded benefits of emerging technologies across business functions.

Breaking down organizational silos and engaging process owners in revised transformation plans is key to success. Finding the right balance between reskilling, new hires and outsourcing will enhance workforce productivity, and prioritizing key partners will reduce complexity and accelerate the speed of change.

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Chapter 3

Taking advantage of your renewed purpose in the digital society

Revitalizing your relationships with industries and policy-makers can unlock long-term value for all parties.

Helping key sectors become more resilient and innovative

COVID-19 has made government and key sectors realize the true importance of telcos as the engines of a resilient and innovative society. Operators have positioned themselves for many years as enablers of the internet of things (IoT) across different verticals, and the digital infrastructure they provide now features prominently in national industrial strategies. However, the crisis has enhanced the relationships between telcos, governments and industries in new and encouraging ways. The developments of recent weeks underline this.

Governments and operators are working together in some markets on infection-tracking initiatives that make use of mobile location data. Telco engineers have been identified as key workers in national responses to COVID-19, and operators are proactively providing support to health care systems by offering zero-rated connectivity to health care workers and conducting trials of remote video capabilities that can aid infection diagnosis.

EY’s recent research of enterprise attitudes to 5G reveals that both governments and health care providers have critical communications use cases in mind. These will become even more important in the wake of the pandemic, and operators are well positioned to help them realize their ambitions.

Figure 7: Leading 5G-IoT use cases for government and health care (pre COVID-19)
Rank Government and public sector Health care and life sciences
1 Local govt. services (e.g., public Wi-Fi) Consumer wellness data collection
2 Public safety and emergency response Inter- or Intra-system data sharing
3 Public utilities Chronic disease prevention
4 Transport optimization Patient monitoring
5 Citizen education and training Clinician training
6 Smart tourism Connected hospital
7 Building and site surveillance Remote surgery

Source: EY Maximizing the 5G opportunity for enterprise, based on a survey of 1,000 enterprises worldwide, conducted in September/October 2019

Operators can take a number of steps in partnership with their enterprise customers to drive the emergence of new, valuable 5G services. Repurposing existing 5G trials for pandemic-related use cases, while refining cloud and analytics solutions for health care providers and governments, can make a positive impact on society and the way we prepare for a future crisis. 

In addition, network slicing can deliver customized 5G connectivity to health care providers and public sector agencies in ways that can enhance responses to future crises. Operators can drive new ecosystems that deliver innovative end-to-end solutions at scale and at speed. To make this happen, they must engage in proactive conversations with their enterprise customers today.  

The concept of “vulnerable customers” is changing due to the crisis. Age, location, income, profession and physical or mental health could all inform future definitions of vulnerability. These concepts are much more than just a compliance issue. Operators should proactively address changing regulations to ensure their service offerings are sensitized to this increasingly diverse group.

Telcos’ renewed social purpose can also energize their workforce and talent agenda beyond the current crisis. Millennials are increasingly attracted to careers with a social conscience in purpose-led organizations. By reframing their company values to emphasize their social role, telcos can attract the next generation of leading science, technology, engineering and mathematics (STEM) graduates to power the digital society in years to come.

Taking charge of a fluid regulatory landscape

The regulatory environment continues to change as a result of the pandemic, adding to the uncertainties operators are facing. The release of 5G spectrum has been deferred in some markets, but accelerated in others. Existing data privacy and protection rules do not provide adequate guidance for the development of location-based infection tracking and monitoring. While some regulators are taking a more lenient stand on compliance obligations during the crisis, the overall levels of regulatory certainty are lacking at the moment. 

Taking a proactive stance will ensure the best outcomes as the regulatory landscape changes. Engaging with regulators to find ways that can ease the negative impact of spectrum auction delays is a priority, and the growing discussion around traffic prioritization for critical sectors should trigger new dialogue regarding net neutrality rules in the future.

Operators should also seek greater clarity on long-term policies, whether it relates to state support of 5G and full-fiber upgrades or ways of narrowing the digital divide for vulnerable customers. Effective interactions with policy makers now will help to drive healthy levels of network investment in the future.

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Chapter 4

And beyond: the bold and decisive will thrive in the future

The crisis is bringing fundamental issues to the fore: telcos should address these as they reposition themselves/reframe their future

Operators must ensure they build on their responses to the COVID-19 crisis to inform their future strategy. There are many important questions to be addressed if telcos are to futureproof their transformation agenda for the next decade and beyond.

Ongoing issues that preceded the crisis are becoming more urgent and should be addressed in telcos’ long-term thinking. For example, how can 5G and full-fiber technologies combine to create a single customer-facing connection? How can telcos radically reassess where they should build, buy, sell or lease assets? How can telcos unlock new forms of value as society’s data custodians, operating effortlessly across industry boundaries? How can a redefined social purpose help telcos reinvent their workforce and win the war for talent?

Whatever the answers, executing them will demand bold moves

The message is clear. Since the outbreak of the pandemic, telcos have kept people, businesses and governments connected. They provide the infrastructure that enables societies to be resilient and innovative, creating new capabilities to prepare for the next crisis.

But to seize these opportunities, they’ll need to adapt and shape the next wave of telecommunications. What’s needed is decisive action. And the time to act is now.

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Summary

The impact of COVID-19 across the world will be felt for years to come. During this crisis, telcos have achieved a renewed importance in keeping society connected. This critical role has highlighted their strengths, and taking full advantage will demand a renewed sense of purpose. By reimagining their customer propositions, becoming fully digital organizations and increasing their long-term impact on society, communications providers can create new forms of value for society and themselves that will endure well beyond the pandemic.

About this article

Authors
Tom Loozen

EY Global Telecommunications Leader

Fascinated by the positive impact of telecoms. Passionate musician. Enjoys educating himself on psychology, wine, sports, technology, arts and much more. Husband and father of three daughters.

Adrian Baschnonga

EY Global Telecommunications Lead Analyst

Lead Analyst with deep sector knowledge in technology, media and telecom, gained in professional services and business intelligence environments.