2023 Telecom trends update

No industry is recession proof, but we are so inextricably linked to our phones that the telecom industry tends to be resilient, even as consumers reduce spend in other areas. No one seems to know for sure where the macro economy is heading but the volatility is hard to overlook. Whether we enter a brief and mild recession or long and painful one, or none at all, consumers will prioritize wireless connectivity above a lot of other discretionary spend during times of uncertainty.

However, if macroeconomic headwinds intensify, carriers could see more postpaid churn as value seekers favor lower cost prepaid options or carriers force churn themselves for customers unable to pay their bills. They may also see customers pare back the number of lines, reducing the number of features on a plan, or simply downgrade to lower broadband tiers. Finally, in a down market, consumers will likely choose to hang onto older devices longer, which puts further pressure on device OEMs and carrier financing.

These are just a few of the trends and observations I predict will drive the Telecom sector for the remainder of this year, and into next.

5G’s ‘killer app’ might be bundled broadband

• The promise of 5G as a game changer has yet to be realized, with one possible exception. Fixed wireless access or home broadband in markets where carriers are turning up the service offers  consumers a bona fide competitive alternative for spotty satellite coverage or ‘the only game in town’ cable operator. This is expected to help carriers grow, but not without challenges placed on their current spectrum portfolio. It will also help stave off increased competition from cable operators looking to bundle their broadband offer with wireless service courtesy of MVNO relationships.
• Carriers will look to add more fiber to their diet organically through their own deployments to the curb/home/neighborhood, and inorganically. This includes joint venture or wholesale arrangements with fiber overbuilders and ISPs tapping into dark fiber already installed and ready to light up. With approximately half of all primary residences in the U.S. passed by fiber^[1] there’s likely a sense of urgency to be the first to cover the remaining households that make economic sense. Capex budgets for those pursuing this strategy will continue to be large, even though ROI may be a long game.
• The FWA, fiber, broadband conversation needs to tie in better with consumer device tech adoption. Telcos need to focus more on how to monetize the uptick in home tech integration as consumers consider a wider array of options in remote medicine/home health, vehicle charging, and smart home devices that will continue to drive the need for more reliable and faster broadband-based services to the home.

Telco CXOs Agendas include a focus on GenAI, Cyber, and ESG Agenda Items

• Telcos will have huge opportunities to improve customer experience and reduce cost to serve with AI/GenAI applications. Telcos/companies that organize AI efforts around a center of excellence concept, with governance across the enterprise, stand to outgain those that don’t.
• According to the KPMG Generative AI Survey, almost two-thirds (65%) of the 225 U.S. executives^[2] surveyed in the last two weeks of March believe generative AI will have a high or extremely high impact on their organization in the next three to five years, far above every other emerging technology. Yet nearly the same percentage (60%) say they are still a year or two away from implementing their first generative AI solution. 
• Furthermore, 60% of respondents in TMT (tech, media, telco) say that researching generative AI applications is a high or extremely high priority in the next 3-6 months, the highest of all industries. 
• Respondents from TMT and financial services are the most likely to say that the recent focus on tools such as ChatGPT have had a large impact on their digital and innovation strategies. 

As cyber-attacks continue in frequency and complexity, cyber vigilance needs to expand well beyond IT, to become a strategic function with more direct reporting to the C suite and boards

• According to the KPMG 2022 Global CEO Outlook Report, 75% of CEOs across industries, believe a strong cyber strategy is critical to engender trust with key stakeholders, and 79% believe cyber security can be a competitive advantage.^[3]
• Drilling down into Telecom executive responses from the 2022 KPMG CEO Outlook: Most CEOs (64%) feel well prepared for a future cyber-attack, and a majority (73%) agree geopolitical uncertainty is raising concerns of a cyber-attack in their organizations.
• More emphasis on cyber/security governance enterprise wide, making it as much a priority as the growth agenda for the company.

When it comes to ESG efforts, telecom companies are making progress, but still can do more

• Telcos will continue to focus their efforts around the social element of ESG by providing broadband services to underserved rural areas. We expect to see a greater number of targeted incentives and social bonds to invest in underdeveloped markets as Telcos look to maximize their ESG impact.
• It is only a matter of time before telcos come under greater pressure from stakeholders to improve their decarbonization efforts.
• Telcos also have a market opportunity to help other enterprises raise sustainability ratings, while improving their own

1. Fierce Telecom, FBA report: 43% of U.S. households now have access to fiber, Diana Goovaerts (January 5, 2022)
2. KPMG Generative AI Survey The survey polled 300 global C-suite and senior executives, of which 225 were US-based.
3. KPMG 2022 CEO Outlook: Growth strategies in turbulent times