Consumer broadband interest surges, but be wary of a recession

Customers are increasingly becoming more interested by ‘big ticket’ broadband services, but this demand might well be diluted by adverse economic conditions.

The telecoms industry has been somewhat shielded from the negative consequences of COVID-19, thanks to the importance of communications networks, though it was accepted this would be a period of flat revenues. That said, MoneySuperMarket is now claiming there is increased appetite for superfast and ultrafast connectivity contracts.

“Lockdown has had an impact on various aspects of our lives, with many of us now relying on a strong, stable internet connection in order to work from home, stay entertained or keep in touch with family and friends,” said Emma Spencer of MoneySuperMarket. “We’re seeing this reflected in high-speed broadband sales, resulting in a 99% spike following the implementation of social distancing measures.”

While these figures are quite sporadic, the trend is generally validated by analyst firm Omdia. Research Director Michael Philpott said consumers are appreciated the value of a more reliable, faster service, which is sustainable as the demand for home working, digital entertainment and video calling services is likely to continue.

The digital transformation which has been forced on consumers and businesses alike during this period of COVID-19 lockdown has raised the value of broadband services, which has been commoditised in the past. Although download speed is still important, wifi experience and customer service are elements likely to become more prominent as telecoms operators market Quality of Experience, as opposed to pureplay speed claims.

Generally, Philpott believes these trends are sustainable beyond the current situation and it is unlikely customers will downgrade to pre-coronavirus services, but this assumption has to be balanced with overarching economic trends.

Connectivity products and services will be some of the last household expenses to be sacrificed during a recession, but that does not mean expenses will not be trimmed. Some markets, those where unemployment could rise faster than others, could see these trends reversed, with lower download speed services becoming a preference as belts are tightened.

Let’s not forget, while broadband is not the ‘sexiest’ segment of the telecoms industry, it is one which has some of the most lucrative gains.

Source: Consumer Digital Revenue Opportunity Model, 2019-24, Omdia Knowledge Centre

Although there are segments which do look more lucrative, OTT video and smart home for example, the fixed broadband market is certainly one which looks much more probable for the telecoms industry.

Firstly, who is going to steal this revenue? Building deploying broadband infrastructure is an incredibly costly and time-consuming business, making it highly unlikely an outside party will enter the fray to steal revenues from the telecoms operators, but that cannot be said for digital entertainment or IOT-driven revenues.

These are services which are built on top of connectivity pillars and fair game for theft. We’ve already seen the likes of Netflix, Google and Amazon muscle in to steal profits in segments being eyed up by the telcos, and it would surprise few to see the same happen again.

Broadband is a very interesting market, and while it might be sensitive to the whims and woes of the national economy, COVID-19 has demonstrated the importance of a reliable and resilient service. This appreciation should lead to bigger and better things, should home working trends bed in permanently as some expect.

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