Like virtually every other industry, the telecommunications (telecom) industry has been affected by current macroeconomic and geopolitical trends (war in Europe, high inflation, global warming, etc.), causing doubt about the future of their enterprise. In some areas, the influence of these key telecom trends may not be as severe as you’d think, but in other areas, there are some radical departures taking place. To help operators and ecosystem players understand the effects of ongoing global challenges, and how to plan for the future, ABI Research has compiled some of the most important developments surrounding the telecoms sector.
Be sure to check out our 2023 telecom trends post.
Telecommunications Companies Prove Resilient in the Face of Global Challenges
All in all, the telecoms sector showed itself to be stable despite global macroeconomic challenges. The reason for this comes down to two main reasons: long-term relationships between operators and vendors, and telecom infrastructure longevity. Most infrastructure contracts are for the long haul, meaning companies are locked into agreements, even in turbulent waters.
Moreover, the average telecoms infrastructure has a 10-year depreciation cycle, making it unlikely for Chief Technology Officers (CTOs) to be phased by short- and medium-run production cost fluctuations. Adding to this, investment and government grants continue to be strong, opening the door for new entrants to make a splash in the telecommunications space.
Project Delays
Although the telecom industry has been resilient to recent developments, that doesn’t mean it’s been completely spared from global challenges. Several 5G spectrum auctions in Europe and the United States that were planned for 2020 and 2021 were postponed due to COVID-19. Furthermore, standardization activities, such as The 3rd Generation Partnership Project (3GPP) Rel-16 and the latest Rel-17, were delayed. But the most impactful trend in the telecoms market is the chip shortage, which has been caused by geopolitical constraints and COVID-19. As an example, the U.S. sanctions placed on Huawei prevented the Chinese company from manufacturing its 7 Nanometer (nm) chipsets in Taiwan. All the while, the United States is working hard to diversify its semiconductor supply with in-country foundries—signaling the importance of semiconductor dominance in a national strategy. The global chip shortage has also affected Mobile Virtual Network Operators (MVNOs), as will be explained further in a little bit.
Looking ahead to the future, it’s not entirely known how 6G will unfold. The soaring interest rates that materialized as a result of inflation could put a damper on 6G Research & Development (R&D). However, a number of governments have already proclaimed their lofty 6G ambitions, with 3GPP standardization activities to go underway around 2030.
A Need for Simpler, Lower-Risk 5G Core & Edge Network Solutions
Scalable, consumption-based business models are going to be highly in demand in the 5G era. The uncertainty of geopolitical and macroeconomic events gives rise to the need for flexibility in telecom services. We’re seeing Communication Service Providers (CSPs) increasingly turn to cloud/software consumption models in an attempt to simplify operations and offload costs. On top of this, there’s been an increase in CSP alliances with competitors in recent years as a way to fill in knowledge gaps and resist bad economic cycles. The agreement between Orange Spain and MasMovil is a good example of this growing trend.
Telecom players must change the way they think about providing products and services. There’s a mass transition to virtualized networks that rely much less on physical equipment and more on cloudification. While CSPs may have less control over network assets, the costs are more variable and are based on usage instead of fixed costs. This is vital for Network Equipment Vendors (NVPs) to understand because the traditional product sales model is being pushed further to the side every day.
How MVNOs Should Handle the Chip Shortage
The reduced supply of chips hinders the production of Subscriber Identity Module (SIM) cards of all form factors, which are needed for IoT solutions provided by MVNOs to telecom customers. Compounding the pain, when customers can’t subscribe to IoT devices, MVNOs lose other revenue streams such as network security services, application enablement, and End-to-End (E2E) solution integration. To address the semiconductor shortage, MVNOs should seek out partnerships to diversify the supplier channel and make use of Embedded SIM (eSIM). Support for eSIM means that customers don’t have to purchase multiple physical SIM cards to add or switch networks. Plus, Remote SIM Provisioning (RSP) removes the requirement to swap or physically de-solder a SIM card.
5G Helps Enterprises with Sustainability Goals and Reducing Energy Costs
As enterprises are trying to be more energy efficient and cut costs, substantial investment is being put into green energy. To get there, decision makers are going all-in with automation and digitization. These deployments, involving numerous Internet of Things (IoT) devices and myriad software solutions, will require partnerships with telecommunications companies that can provide adequate 5G coverage. In fact, ABI Research asserts that 5G deployments in manufacturing, logistics, transportation, and consumer verticals can reduce Carbon Dioxide (CO2) emissions by 20 gigatons by 2030.
For example, a single smart factory will save 103 tons of CO2 emissions by the end of the decade by combining 5G (for predictive, preventive, and remote maintenance) with Automated Guided Vehicles (AGVs). And because 5G brings impressive handover of signal between various access points, AGVs using 5G are 45% more productive than other AGVs.
5G connectivity is also greatly beneficial to sorting out supply chain issues plaguing enterprises at the moment. When public and private cellular network infrastructure is appropriately integrated, in conjunction with roaming agreements, enterprises essentially have access to global connectivity. This, in tandem with Artificial Intelligence (AI) and Machine Learning (ML) adoption, allows supply chain operators to identify problem areas and pick up on recurring patterns. That way, they can modify their operations before an issue becomes pervasive.
Learn More about the Trends Shaping Telecom Firms
This post only scratched the surface of all the trends in the telecoms sector. There’s still a lot more to know about the current state of affairs, including cybersecurity, concerns about personal data, and Wi-Fi 6; not to mention, even closer scrutiny of the telecom trends covered in this post.
To learn more about the latest developments in the global telecoms industry and how to manage any threats, download the free whitepaper: 2022 State of Technology Report: The Future Of Technology In A Tumultuous World.
