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COVID-19 will stall IoT, 5G, and edge spending: Telcos are the exception, and providers must get their feet in the door and build use cases
Three intertwined technologies—the internet of things (IoT), 5G, and edge computing—are all about to see a massive stall in spending, according to fresh HFS Research data from major enterprises dealing with COVID-19 (see Exhibit 1). But some enterprises covered in this piece, mainly telecom firms (“telcos,” e.g., Verizon), are looking to these technologies to grasp the opportunities presented by COVID-19: increased remote working and network demand, for example. Most enterprises, however, will either be looking to slash their spending or simply not even consider upping their investment into technologies that don’t achieve rapid cost savings. The winners will be cloud, automation, and smart analytics. Despite enterprises’ lack of enthusiasm for IoT, 5G, and edge computing as they face COVID-19, providers (including advisors and software firms, or “vendors,” as Exhibit 1 shows) are much more optimistic about their clients’ desire to spend. Now is not the time for blind faith, but instead, these providers must show clever optimism:
- They must build their stories and capabilities and own the competition for those looking to spend big on IoT, 5G, and edge computing services right now. In doing so, they’ll also be primed to win bigger contracts when these clients (which they’ve helped through this challenging time) look to spend money across a wider suite of technologies.
- Telcos, as detailed in Exhibit 1, are one group of clients that can also help providers develop successful use cases across IoT, 5G, and edge computing. As they expand their network capacity and roll out new products and solutions, new use cases will help reel-in new clients when there’s a post-COVID-19 boom in all industries.
Exhibit 1: Most enterprises won’t look to IoT, 5G, and edge in the midst of COVID-19, but a few—mainly telcos, as detailed in the section to come—are pushing forward
How do you expect COVID-19 to impact your spending for any of the following?
How do you expect COVID-19 to impact your client's spending on any of the following?
Source: HFS Research, April 6, 2020
Sample: Coping with COVID-19 study, 631 major enterprises
Telcos are the exceptions going in big on IoT, 5G, and edge—providers must get their feet in the door with expanding firms, build stories and use cases, and capture new clients looking to spend after COVID-19
Internet-related businesses are some of the few winners of the COVID-19 crisis so far. Share prices for the Zoom platform, for example, are going through the roof (alongside battling high demand and Microsoft Teams updating like never before). Telcos are also seeing huge opportunities. China’s telco majors have already had success on the business and consumer fronts, with 5G infrastructure, partnerships, and applications are all ramping up. China Mobile is building tens of thousands of new base stations, attracting almost 2,000 partners, and is developing AI capabilities leveraging advancing 5G. Consumers are also flocking to China Mobile’s more expensive 5G packages—with 15 million customers compared with 2.5 million at the start of the year, with the firm targeting 73 million by the end of 2020. China Mobile is also boosting capital spending on IoT.
Outside of China, Verizon is one telco seizing opportunities for growth. It has already boosted capital spending by $500 million to $17.5 billion–$18.5 billion, mostly to expand its capacity through fiber investment. Expanding both 5G and 4G facilitates new product rollout, cost reductions, growth opportunities, and IoT advancements. Verizon’s online gaming is up by 75%, VPN use is up by 30%, there is 20% more web traffic, and 12% more streaming. Phone conversations are lasting 33% longer than normal. Verizon is also slashing internet and data plans for users, including billing flexibility. Verizon’s 5G labs are going into overdrive, working across industries with start-ups and big businesses, including Samsung, Motorola, and Qualcomm – with 5G smartphones rolling out globally, alongside Mobile Edge computing work with Amazon.
5G license auctions in the US have been delayed a month to July 23. Major telcos will be scrambling to ramp up their prowess before then. AT&T and T-Mobile have been rolling out 5G faster than Verizon, but have also battled with higher latencies. The 5G smartphone boom has yet to hit the US; Verizon looks on course to fulfill 5G requirements to be a leading player by this point (predicted to be mid-2020).
“Verizon is building capacity to meet demand through fiber investment and network convergence [into a single core]—optimizing today’s investments, and creating the scale and capacity to grow for decades.”
—Verizon leaders in a recent briefing
The Bottom Line: Providers must build their stories and capabilities for a post-COVID-19 boom in IoT, 5G, and edge—telcos are a good place to look now as they expand their networks: get your foot in the door with these clients and build some use cases.
With IoT, 5G, and edge computing spending likely to stall for many but increase for telcos, providers can maximize this opportunity by doubling down with telco clients, helping them through this challenging time, winning them over, and building a strong foundation for when they have money for all projects and technologies. Providers must also build their IoT, 5G, and edge computing stories and capabilities for a post-COVID-19 boom across all firms and industries—and not get caught in the headlights of a rush to catch up.