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2023 telecom industry outlook

Five key trends shaping the telecom landscape

In the year ahead, telecommunications companies will be focused on delivering advanced connectivity and higher performance to customers while reinforcing value and competitiveness. Our 2023 outlook examines five trends shaping telecom industry growth and business strategy, from 5G monetization to edge computing to an increasing focus on sustainability.

Preparing for a strong, resilient future

Telecom industry growth continues to be driven by the continued importance of connectivity, bringing both opportunities and challenges for communications service providers (CSPs). This year’s telecom outlook explores how CSPs are delivering value to consumer and enterprise customers with bundled services and connectivity options like 5G fixed wireless access (FWA) and fiber, as well as their role in meeting the growing demand for edge computing. We’ll also consider how CSPs may want to balance pricing decisions with the need to accelerate deployment of infrastructure like fiber networks, while attending to the growing urgency to reduce resources, waste, and emissions from network operations, upgrades, and deployments. As connectivity works its way into more of the world, it may be more imperative than ever to balance costs with the needs of households, businesses, communities, and the environment.

Some of the specific themes we see playing a critical role in 2023 and beyond include the following:

  • The bundle battle: Add more value for cost-conscious consumers. For individuals and families, connectivity is important. Yet, consumers often have cost constraints that can limit their options or drive them to seek the best service at the lowest price. To offer more value to consumers, many CSPs are bundling mobile and home internet access, offering connectivity options like fiber and 5G FWA, and partnering with entertainment services to include subsidized or free subscriptions.
  • Fixed wireless access surges, but will it endure? As part of this “bundle battle,” 5G FWA has enjoyed substantial growth. This type of connectivity can provide strong reliability, but some questions remain about how much it can scale. As more people use 5G services, and if more bandwidth-intensive “killer apps” emerge, the limits of 5G FWA could be exposed. However, market dynamics and next-gen technology solutions could overcome these challenges.
  • What enterprises want from 5G edge. For enterprise customers, the need to cut costs, automate capabilities, and support innovation is driving interest and adoption of edge computing. CSPs will likely need partners to develop and deploy edge solutions, requiring more cooperation with erstwhile competitors.
  • Joint ventures accelerate deployment of fiber networks. Many of the connectivity solutions we cover rely on fiber networks. With high demand, strong competition, and the need to optimize costs and risk, more CSPs are partnering with private investors to accelerate deployment of fiber networks.
  • Increase the focus on sustainability. In doing so, these partnerships can support existing customers while extending further into underserved communities, helping to narrow the digital divide—the gap between those who have access to modern information and communication technologies and those who don’t. This aspect tugs at the broader economic imperative of connectivity: more bandwidth, more equally distributed, enabling greater access to education and opportunity.

Download the full report to learn more about the impacts of telecom industry trends, key actions to take, and critical questions to ask.

The idea of CSPs offering product and service bundles is nothing new: In the United States and Canada, 3G and 4G wireless services reached rapid adoption by bundling monthly connection services with new smartphone contracts. Over time, CSPs have offered all kinds of bundles, ranging from device and service bundles to content bundles, cloud and gaming services, and smart home product offerings ranging from security to managed Wi-Fi.

Some companies that have lots of fixed connections but no facilities-based mobile offering (mainly cable companies) are partnering to be able to provide both. At the same time, some companies with lots of mobile connections but no (or not enough) fixed connections (mainly wireless telecoms) are using new business models and technology to offer their own bundles.

In 2023 and beyond there may be ample room to grow fixed-mobile convergence bundles in the United States: Only about 8% of US consumers subscribed to a converged service in 2022.

Cable broadband providers are increasingly partnering with wireless providers and becoming mobile virtual network operators (MVNOs). Meanwhile, 5G technology, especially in mid-band, has taken FWA to a new level.

MVNOs and FWA are important new parts of the bundle boom, but the next big driver of growth could be video content. Video-on-demand (VOD) streaming revenues, either subscription, ad supported, or a hybrid, are likely to be more than $30 billion in the United States in 2023.

Strategic questions for CSPs to consider:

  • Has FWA passed its peak, or are we seeing the start of something even bigger?
  • By bundling, are CSPs trading off subscriber numbers and revenues for profits?
  • Is bundling something CSPs must do to maintain competitive parity? How can bundles be more effective in attracting and retaining subscribers?

FWA technology surged in the United States in 2022 and on 5G, with 90% of broadband net adds among the largest providers coming from FWA. But in the fourth quarter of 2022, numbers slowed, leading some to ask if FWA can sustain the high pace. Is providing broadband over 5G sustainable in terms of performance and economics or is it only an economically viable solution in the early days of the 5G rollout?

US mobile network operators (MNOs) have collectively spent more than $100 billion on spectrum and networks to build out 5G. Although consumers are embracing 5G speeds, they largely aren’t paying for it. Enterprise use cases such as private 5G networks look like an interesting opportunity over time but may take beyond 2023 to materialize. Although 90% of current US FWA users say their broadband is at least "good enough," will that change soon? In 2023, it looks unlikely. Although there are US services that offer higher peak-time data rates, there are few consumer applications (aside from little-used 4K and 8K video streaming) that require more than 10 Mbps speeds, suggesting that even multiple user households will find FWA speeds good enough for 2023.

The second concern about the sustainability of 5G FWA is the economics dictated by spectrum availability. In the early days of 5G, it makes a lot of sense for MNOs to fill up unused capacity with $20 to $30 monthly average revenue per user (ARPU) FWA customers, especially those who are bundling with mobile service. But as the relatively scarce mid-band spectrum begins to fill up with mobile users, is FWA still sustainable?

In good news, MNOs are likely to solve this capacity crunch via technological advancement. Although almost all current 5G FWA subscribers are on mid-band frequencies, over time MNOs should be able to take advantage of improvements to 5G spectral efficiencies even at those bands.

Strategic questions for MNOs to consider:

  • Will MNOs be able to move significant numbers of current mid-band 5G FWA users to mmWave over time?
  • Will consumers find a killer app that needs 50–100 Mbps per stream download and exceeds the near-term ability of non-mmWave 5G to provide?
  • How will upload requirements change for consumers?Was the surge in 5G FWA in 2021 and 2022 a spike resulting from harvesting low-hanging-fruit subscribers in certain areas with the right densities?

Edge computing is a multibillion-dollar market growing at more than 20% annually, and CSPs, hyperscalers, and equipment companies are all battling for share. It is important for enterprises interested in reducing latency, improving performance, reducing costs, and giving them greater control over their data.

While the technologies enabling enterprise edge computing—such as 5G connectivity, compact and powerful servers, and new processors—are innovative, many decision-makers see edge computing as an extension of their existing network, storage, and compute environment rather than something totally new. They want to upgrade, rather than replace, their infrastructure.

Enhancing networks and data capabilities for the enterprise edge often requires strong partnerships with a reliable ecosystem of providers. At least for now, no single vendor or class of vendor can provide the complete edge solution, which requires both an ecosystem of providers as well as a need to coordinate them.

Strategic questions for CSPs to consider:

  • How much of the "solution stack" can CSPs deliver or orchestrate for companies looking for 5G and edge computing solutions?
  • What role can CSPs play in helping decision-makers understand how an integrated solution will work?
  • Can CSPs make the pricing and implementation road map transparent?
  • Can the CSPs act as integrators, presenting an attractive "bundle" with ease of purchase and potential pricing discounts, or consider being a part of someone else’s integrated bundle?

Consumers and businesses alike require robust connectivity. The more bandwidth that telecoms and cable companies offer, the more use cases emerge to take advantage of it all. Fiber optic networks are especially good at moving more data at faster speeds over longer distances, connecting directly to homes and businesses, and providing the backhaul for wireless networks. Fiber connectivity can add value for customers and is often a competitive differentiator for providers, but it’s very expensive to build and manage the infrastructure

.CSPs and private investors are increasingly forming joint ventures that can accelerate deployment and offer long-term returns to investors and customers.

Accelerating fiber rollout can help narrow the digital divide. Improving access to technology can deliver greater opportunities to underserved communities, helping to reduce the disparities in education, health care, and job opportunities while supporting overall economic productivity.

Investors, CSPs, customers, governments, and society all have a stake in enabling greater connectivity. Joint ventures and alliances can accelerate the deployment of fiber networks that are critical to advanced connectivity. With more alliances, incentives, and shared investments, connectivity could expand more quickly, ultimately supporting greater productivity, innovations, and opportunities.

Strategic questions for CSPs to consider:

  • What are the best ways to structure and monetize joint venture partnerships?
  • How should CSPs think about balancing wholesale and retail business models for fiber networks built by joint ventures?
  • What investments would help CSPs build fiber infrastructure to reach underserved areas and form the basis of broader networks to potentially monetize?

Building and upgrading networks is capital-intensive and includes other embedded costs for resources, emissions, and waste. Achieving net-zero is an urgent priority for businesses. According to Deloitte’s 2022 CxO sustainability survey of more than 2,000 C-suite executives worldwide, TMT leaders appear more concerned about climate change than do their counterparts in other industries: 70% reported their company is "very worried" (vs. 61% of leaders in other industries). But they also appear more optimistic: 54% of TMT leaders strongly agreed that, by taking immediate action, their companies can help limit the worst impacts of climate change and move toward an improved future (vs. 46% of leaders in other industries).

The telecommunications industry is increasingly focused on carbon reduction. Industry associations such as the GSMA and ITU have set sustainability guidelines and advocated best practices for the industry. These include setting science-based emissions targets, increasing the use of renewable energy, and tackling e-waste—the world’s fastest-growing waste stream.

In the United States, regulators have proposed a new environmental, social, and governance (ESG) rule that would mandate more rigorous disclosures on greenhouse gas emissions, environmental risks, and mitigation actions. Although the new regulations have not yet been announced, CSPs can look to the European ESG regulatory framework for guidance on what direction they may potentially take. According to Deloitte’s 2022 sustainability action survey, many US TMT leaders have been anticipating new regulations by prioritizing ESG governance and reporting.

Strategic questions for CSPs to consider:

  • How can CSPs further minimize their Scope 1 and Scope 2 emissions (for example, increasing clean energy purchases and using lower-emission fleets)?
  • How can new network protocols (such as 5G) and new equipment reduce emissions?
  • How prepared are CSPs to comply with new ESG regulations?
  • Have CSPs assessed whether they have full access to all the various data sources they will need to efficiently and completely respond to emerging regulatory expectations?
  • Have CSPs defined sustainability KPIs and benchmarks for their own data and supplier data?
  • Have CSPs considered helping their suppliers develop their own net-zero road maps and reporting strategies?

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