2022 telecom industry outlook – Four trends pushing the industry forward (Opinion)

Jana Arbanas and Dan Littman is vice chair of Deloitte’s US Telecom and Deloitte Consulting LLP principal respectively. 

Keeping up with new networks, services, and applications

The telecom sector continued to make progress in augmenting its network capacity with additional fiber and wireless deployments to meet the constant demand for higher-speed networks in 2021. However, as we start the new year, we see an emerging set of issues and opportunities presented by a dynamic regulatory, technological, and competitive environment that may influence the sector’s progress in the coming year:

1. The potential for more competitive broadband markets

While most consumers currently use Wi-Fi enabled by a wired cable or fiber connection to access the internet, many users, particularly younger generations, are turning to their mobile data plans for internet access. Millennials and younger consumers are roughly twice as likely to rely on their mobile data plans, either through their smartphones or a mobile hotspot, than their older cohorts for internet access. With the introduction of unlimited mobile plans and speed tests measuring mobile download speeds hitting an average of 100 Mbps, it’s little wonder that there is less need for smartphone users to switch to their home Wi-Fi.

The introduction of 5G fixed wireless access (FWA), which has the potential to match and even surpass the performance of today’s wired broadband connections, may accelerate the consumer trend toward wireless. But because 5G FWA can create more choices for consumers when deciding how and with whom to connect to the internet, it may also accelerate industry competition and pricing pressure for broadband internet services.

Whether through mobile hotspots, fiber footprint expansion, or 5G FWA rollouts, the ability of telcos to compete in the home broadband services market appears to be rising.

Strategic questions to consider:

● With spectrum being a scarce resource, how can operators prioritize its use to maximize its value?
● How can operators use FWA to create additional synergies between their wireless and fiber asset deployments to improve their cost structure and benefit customers?
● While telcos may initially benefit as a wholesale provider of wireless capacity, what are the long-term consequences if mobile virtual network operators begin using their wireless scale to build out their own networks?

2. A shift to more decentralized government broadband infrastructure funding

The $1 trillion Infrastructure Investment and Jobs Act (IIJA) bill that passed in November includes $65 billion in spending to support greater broadband deployment and adoption. Government programs dedicated to expanding and improving telecommunication infrastructure and services have largely been managed at the federal level over the past decade. The administration of the broadband funding per the enacted IIJA, however, will primarily flow to the states through federal grant programs.

Though federal programs have traditionally favored wired solutions, states are increasingly technology-agnostic in awarding grants as long as a service can meet minimum performance thresholds. This trend opens the field to new players, including entrepreneurial FWA and low-earth-orbit satellite internet service providers.

Many telecom organizations may not be fully equipped to shift to a more decentralized state-managed and potentially more competitive award program. As a result, there will be a need to develop more nuanced methods to keep abreast of many local funding mechanisms and grant programs, evaluate which programs are worth pursuing, and monitor compliance with local terms and conditions.

Strategic questions to consider:

● How must telco policy organizations reorient themselves to address more decentralized allocation of federal funding?
● In what capacity will ISPs engage with local governments—private, public partnerships, as a sole provider, or as part of a consortium?
● Given the focus on affordability, will new funding sources, alternative players, or mandated requirements result in greater scrutiny on pricing and fees? How might these variables affect the competitive environment?

3. Rising interest in multi-access edge computing and private cellular networks.

Enterprise interest in 5G edge computing applications and private cellular networks is beginning to emerge. Lured by the potential benefits of new advanced use cases, enterprises and organizations are evaluating the adoption of private cellular networks enabled by the confluence of greater spectrum availability, 5G wireless technologies, distributed edge computing architectures, and AI-driven applications.

The supplier ecosystem and business model for delivering enterprise-oriented 5G edge computing and private network solutions are undefined and fluid. However, they might begin to solidify in 2022, with potential winners emerging. As a result, operators should act quickly to define how they should best participate in this emerging market.

Many customers are already developing preferences for specific vendor management tools and development platforms. In this environment, if telcos do not move quickly to stake out and define their role, others may dictate it for them.

Strategic questions to consider:

● What should the telco’s role be in developing and delivering 5G private cellular networks and enterprise-oriented edge solutions? Will it take the form of spectrum leases, fiber backbone, and backhaul, or something more?
● What are the telco’s core competencies and value proposition in delivering 5G enterprise networks? Which business models will allow telcos to optimize value?
● What capabilities are required to execute on a given strategy or business model? Can telcos develop new capabilities internally? To what extent should they pursue acquisition or partnering strategies?

4. The need to reassess cybersecurity and risk management in the 5G era

While adopting 5G creates several benefits, it also brings new security concerns and challenges. While operators have taken steps to evaluate and minimize threats in their own organizations, they are in a unique position to offer 5G security services to enterprises seeking to deploy their own advanced wireless networks.

As networks become more software-based and decentralized, their surface attack area and points of entry only increase. For example, 5G networks can support a vast number and types of devices with varying performance and service requirements. As a result, the speed, volume, diversity, and sensitivity of data running over networks are set to explode. And while 5G’s more decentralized networks can help alleviate redundancy, privacy, and data sovereignty concerns, they can also complicate and intensify the risk of data mismanagement.

But new threats go beyond cyber. 5G adoption also introduces new enterprise vendors, alliances, and ecosystems partners, creating new dependencies and third-party risks to manage. For many organizations eyeing 5G, however, hiring and upskilling the right talent poses one of the most significant challenges. Adoption will require appropriately skilled security professionals for the successful operationalization of 5G.

Strategic questions to consider:

● How can telcos use their approach to cybersecurity as an opportunity to differentiate themselves and capture value in the 5G enterprise market?
● Where can telcos switch from reactive security mechanisms to more proactive ones?
● As telcos migrate from legacy networks to modern architectures, do they have appropriate risk management and governance organizations in place?

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