COVID-19 makes data connectivity as critical as toilet paper

With people confined to their homes by the virus, residential broadband networks will become more important than ever.

Iain Morris, International Editor

March 13, 2020

3 Min Read
COVID-19 makes data connectivity as critical as toilet paper

Confining teenagers to their bedrooms used to be a form of punishment. These days it is a treat like no other. With great broadband and a round-the-clock curfew comes a great opportunity for social media and Fortnite.

As governments fight the outbreak of COVID-19 by closing schools and restricting outdoor activities, residential broadband usage could spike, this Light Reading analysis shows. Teenage gaming enthusiasts and Instagram addicts are not the only reason. Adults forced or advised to work from home will need online connectivity throughout the usual office hours.

Europe's operators are racing to meet demand. Spain's Telefónica this week added new features to its entertainment offering, including sports coverage and children's programs, for no extra fees. Movistar Junior, a Telefónica app aimed at younger members of the household, is also now free of charge. And mobile customers on the operator's Fusion and Movistar packages will be gifted an additional 30 gigabytes of monthly data for the next two months.

With Italy still under lockdown, Vodafone Italy has also reportedly been cutting fees for housebound students. For the next month it has scrapped usage limits attached to the services used by its younger customers. Meanwhile, traffic on the landline network of rival Telecom Italia is up 70%, largely because of Fortnite gamers, said CEO Luigi Gubitosi during an earnings call this week.

The fear is that networks will not be able to cope, especially if other countries follow the examples set by the Czech Republic, Ireland and Italy, shutting schools and restricting movement. Because bandwidth is shared between users on fixed broadband and mobile networks, quality suffers during peak hours. A surge in traffic linked to COVID-19 could result in widespread service quality problems or even outages.

It could also be a test of the infrastructure deployed by different operators like none the industry has seen before. Countries with resilient Internet backbones and an abundance of high-quality fiber-optic networks may be in a much safer position. That would seem to bode well for the likes of Portugal and Spain, where full-fiber networks are available to most of the population. By contrast, in the UK, which is still heavily reliant on copper-based broadband connections, operators might struggle if people are confined to their homes.

For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.

Unfortunately, Europe's operators cannot easily respond to the crisis through additional, short-term spending on network infrastructure. "If the network equipment chain slows, capex would decline," said analysts at Jefferies in a research note issued this morning. Germany's Deutsche Telekom has already warned the market to expect some possible disruption to its supply chain in the network equipment sector due to the COVID-19 outbreak.

Despite this, Jefferies sees an upside for telcos. Stuck in their homes, customers will have less opportunity to switch provider – something which normally happens in retail outlets, according to analysts at the firm. Constraints in the handset supply chain would also minimize this "churn" risk and free up working capital, said Jefferies. This, combined with a fall in network spending, could boost short-term free cash flow.

The good news is that telecom networks could assume critical importance while the virus rages. "Demand for services should be up, not down, if people spend more time at home," said Jefferies. The danger is that a stampede for data becomes the virtual equivalent of the supermarket toilet roll battle, catching some telcos with their pants down.

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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