Carriers have played a critical role during the COVID-19 crisis

2 July 2020 |  David James, Practice Leader, Wholesale Telecoms, Omdia 

Lockdowns changed traffic patterns overnight

In response to the COVID-19 pandemic governments around the world have imposed lockdowns on their citizens, advising, encouraging, and in many cases requiring them not to leave home for work, education, entertainment or any other non-essential activity. The result has been dramatic changes in communications traffic. 
Traffic volumes have grown significantly, traffic peaks have lengthened, and traffic directions have reversed.

Telecoms carriers have become the unsung enablers of the retail communications services that have enabled populations to continue working, while keeping them educated, informed, and entertained in their own homes.

Before the pandemic took hold, carriers experienced traffic peaks in the evening when people returned home from school and work to surf the web, stream video, and play online games. However, that pattern changed when local and national governments enforced “shelter at home” policies. Enterprise traffic that was previously carried on corporate WANs during the workday migrated to be carried over the public internet. Adults and children turned to video streaming and download services, online games, and video calling their friends and family throughout the day.

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In the first weeks CenturyLink saw a 25% increase in game-related traffic (predominantly upgrades and new installations), with download traffic up 26% and video traffic up 13% in the first month. Colt too reported significant increases in the capacity used for its voice and data services – in some instances up to 20 times normal capacity. Verizon also experienced a pronounced uplift in domestic and international voice minutes in the first two weeks of the crisis in North America. All the carriers we spoke with reported dramatic growth of collaborative tools including video conferencing, up as much as 300%! 

Backbones took the strain, but local access networks felt the pain

Although carriers have built their backbone networks to carry peak traffic loads, wireline and wireless access networks do not always have the capacity to adjust to these new traffic volumes. However, much has been done to ease the pressure on those last-mile networks. Governments and regulators increased the availability of spectrum to MNOs to address the increased demand. In Europe content owners, including Netflix and YouTube, were asked to reduce the quality of their streamed video to reduce the traffic load of their services. 

Wholesale carriers also did what they could to adjust to the new normal. Many telcos have reassigned resources from product development to network operations, support, and maintenance. Carriers also brought additional capacity online, and their staff in network operations centers (NOCs) and security operations centers (SOCs) constantly monitored traffic and threat patterns to keep networks running efficiently and effectively. Quieter roads and the release of staff from supporting many of the smaller businesses that have ceased operation during the pandemic have made it easier for telcos to complete necessary network repairs and upgrades.

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Major changes observed in traffic patterns

Before the pandemic the usual pattern saw traffic grow through the daylight hours, with peak demand occurring in the evening. As shelter at home orders confined people to their homes, that evening peak began earlier in the day and remained at least as high into the late evening as more consumers worked, communicated, downloaded, and streamed their entertainment throughout their waking hours.

Global wholesalers also observed geographic shifts in traffic patterns. Changes in traffic patterns have followed the spread of the virus, starting in Asia before spreading to Europe, then North America, and most recently to Africa and Latin America. In each country or state where a lockdown was imposed, a lot of wireline and wireless traffic migrated from the urban locations where large sections of the population were employed to the suburban and rural areas where many people live and were trying to work and keep entertained. Carriers also observed an increased number of cyberattacks and fraud attempts. 

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The volume of distributed denial-of-service (DDoS) attacks rose, as did the numbers of malware and ransomware attacks.

Wholesalers took action to protect themselves, their customers, and their partners.

Carriers responded by accelerating capacity upgrades originally planned for later in the year, and they also took a more hands-on approach to traffic management to route traffic away from pinch-points. Carriers reported that earlier deployments of SD-WAN and the automation of intercarrier interfaces have both been beneficial in enabling them to adapt to new traffic volumes and patterns. Backbone networks are built for resilience and to handle large traffic peaks with capacity to spare. Hence, there were no major failures and the carrier community has rallied around to support each other and to scale up the capacity of critical interconnection points.

A mixed picture for telco revenues and margins 

Many fixed and mobile retail service providers have responded to the crisis by increasing data limits and relaxing payment terms for their customers. However, they are unlikely to be able to recoup this ‘lost’ revenue by increasing fees later. Some mobile operators have also been hit hard by the dramatic halt in international travel which has resulted in a fall in roaming. In Singapore, roaming revenues can account for 12-20% of mobile revenues, and for some Hong Kong operators the figure is about 20%. However, this contrasts with much lower percentages in other Asian markets.

Although many wholesale carriers have brought forward spending on capacity during the crisis, few have been willing (or able) to increase charges to their customers. Wholesale revenue is not always directly linked to traffic volumes, and growth of peering between carriers means that money does not necessarily change hands when similar volumes of traffic are exchanged. Furthermore, carriers do not want to be seen to be ‘profiting’ from others’ misfortune during the crisis. 

Overall, we expect carriers’ revenues to remain flat during 2020 while the squeeze on margins intensifies.

What will the ‘new normal’ look like? 

The carrier community has responded well to the COVID-19 crisis. Competitors have pulled together to deploy additional capacity, re-route traffic, and ease interconnection of networks to reduce the impact of localized congestion. The usual processes have been relaxed to allow paperwork to follow implementation of changes rather than having to precede them. In some cases, where physical travel between countries has been disallowed and access to data centers has been strictly limited, telecoms companies have even loaned each other equipment from their stores. Although it is unlikely that this level of cooperation will become a permanent change, we have every reason to believe that the experience of this crisis has permanently removed some of the roadblocks that have slowed innovation and collaborative problem solving in the past.

We expect to see greater adoption of SD-WAN technologies and increased use of inter-carrier APIs for the automation of routine transactions. As an increasing number of manual processes are automated more carrier services will become available on-demand. The overall picture is one of increased efficiency and responsiveness to changing customer demands. 

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It is also quite likely that as businesses have realized that employees can be productive when working remotely, many people will be allowed to continue working from home, at least a couple of days each week. As a result, some of the changes in communications traffic patterns caused by the crisis will become more permanent. This will hasten the roll-out of high bandwidth local access networks, such as fiber-to-the-premise (FTTP), fixed wireless access (FWA), and 5G and will increase demand for improvements in cybersecurity and fraud prevention from retail service providers.  

The pandemic has been disruptive for most people and tragic for many others. Some enterprises will not return to business and less money will be available for investment in the next few years. There will be consolidation of retail service providers in particularly competitive markets to achieve greater economies of scale. The pandemic forced service providers and their customers to quickly adapt to radically different work and home environments, an effort that was initially unsettling, but has left the lasting impact of greater preparedness for future challenges. 

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