The positive case for investment in telecoms

Out-Law Analysis | 02 Apr 2020 | 8:32 am | 2 min. read

The coronavirus crisis has highlighted how essential the services provided by telecoms operators are and why companies are right to invest in next-generation infrastructure.

Tighter restrictions on internet-based content and services are a possibility if there is not continued investment in improving broadband connectivity.

Coronavirus and the importance of connectivity

For every negative story out there at the moment about technology, such as police use of drones to enforce social distancing measures imposed to curb the spread of Covid-19, there are many more positive stories.

History has shown that at times of adversity – and contrary to recent scare stories – we tend to come together to face the future. In some ways, the current crisis provides an opportunity for technology, media and telecoms companies to showcase their strengths, simply by continuing to do what they do. Connectivity, after all – and now, more than ever – is essential not only to the economy as a whole, but to our own individual wellbeing.

There are, moreover, many examples, of businesses seeking to go the extra mile, for the common good.

Firstly, there are many instances of suppliers providing more for less. These range from tech providers who have waived or discounted licence fees in order to facilitate connectivity for remote working, to content providers who have reduced or removed tariffs for entertainment packages. Telecoms providers have taken a number of measures too, ranging from increasing data allowances and pledging not to terminate contracts with individuals, to seeking to speed up payments to small suppliers, and bringing forward network investment to improve connectivity and stimulate the economy.

With the obvious benefits of connectivity comes an increased awareness of the importance of the network and the need to maintain that network in working order.

All networks are facing an enormous surge in demand.

Last month, Telecom Italia announced that traffic on its fixed network had – in the course of two weeks – increased by a factor of 70%. As Analysys Mason has pointed out, this is the sort of increase that you might normally expect to see over the course of two years rather than two weeks.

And even before the Covid-19 pandemic reached its current levels, the German government had launched a legislative package entitled 'environmental digital agenda'. It contained, among other things, proposals to make media streaming more environmentally friendly by, for example, reducing the default video quality and deactivating autoplay on videos.

More recently, Netflix has announced that it will, at the request of EU policymakers, restrict high definition streaming on its platform so as to ease network congestion. Disney has also decided to delay the launch in France of Disney+, its subscription streaming service, following discussions with the French government.

With the current strain on the networks, operators are bound to be considering "traffic management measures" to avoid congestion as much as possible. This engages Article 3(3)(c) of the EU's Net Neutrality Regulation, which allows telecom operators to discriminate between specific content, applications or services, or types thereof.

In many sectors, businesses will be holding off on making investments on the basis of an uncertain future. In telecoms, however, the investment case has never been clearer. In the Financial Times at the weekend, Tim Bradshaw predicted – admittedly, in somewhat tongue-in-cheek fashion – that a short-term spike in creativity would be followed by the internet becoming overwhelmed, with governments ultimately needing to rule on what online services should be deemed "essential" to allow the networks to continue to function. In Europe, BEREC is closely monitoring the current status of internet capacity.

We have already seen announcements from the likes of Telstra and Verizon relating to the bringing forward or the increasing of planned capital expenditure in relation to their networks and 5G development and expect other operators to follow suit – both for their own businesses and also for the good of the broader economy.

For years, telecoms operators have objected to the term 'dumb pipe'. To be clear, many telecoms operators offer much more than this, but never has that dumb pipe been more essential.

Additional research and contributions from Wesley Horion of Pinsent Masons.