Sources show COVID has presented diverse challenges to telcos and media companies, including lost revenue, overnight increased demand that stressed existing grids and networks, and complications that caused service outages. In addition, the transition to 5G has presented its own set of challenges, such as interruption of service and at times, slower speeds than 4G LTE. The largest M&A news over the past 12 months was the April merger between T-Mobile and Sprint, which has resulted in profound changes to the wireless segment as it created the second largest wireless carrier in the U.S.
- T-Mobile has three primary challenges to contend with this year: COVID’s impact, 5G build-out, and complications from its merger with Sprint.
- In May of this year, the carrier informed its investors it expected “its financial performance to lag for the rest of the year because of the coronavirus”. During the beginning of the pandemic, 80% of T-Mobile stores were closed due to stay-at-home orders and other restrictions implemented in attempting to control the spread of the virus. Direct costs related to the pandemic were initially estimated at $117 million.
- One of the most impactful effects of the pandemic made staying at home a must. Remote work ballooned basically overnight, and T-Mobile had to adjust accordingly. T-Mobile CIO Cody Sanford explained, “CIOs will have to continue thinking about how to help employees and customers weather the crisis and adapt to new ways of working and engaging with products and services.”
- In addition, T-Mobile initially implemented a program to assist customers that couldn’t pay their bill. The program was rolled back during the summer, but the carrier still assists those with extenuating circumstances. The company waved late fees, assisted with bill payment, and opened up free WiFi in many areas.
- T-Mobile initiated a $10.7 billion initiaitve in response to school closings caused by the pandemic “aimed at delivering internet connectivity to millions of under served student households at no cost to them. Partnering with school districts across the country, the program offers free wireless hotspots, free high-speed data and access to laptops and tablets, at-cost. And as the COVID-19 pandemic makes remote learning the new norm for millions of students across the U.S., the Un-carrier is expanding Project 10Million to offer more data options, including unlimited, for school districts to pass on to eligible student households.”
- Another response to the challenges the COVID pandemic brings involves T-Mobile selling and providing “connectivity for technology from Guardhat designed to alert industrial workers when someone comes within six feet of them, thereby helping to enforce COVID-19 social distancing guidelines recommending that people stay six feet apart from one another.”
5G Build Out
- Back in December of last year, CNET reported on the issues facing T-Mobile and its 5G rollout. They explained that T-Mobile’s 5G speeds were at best 20% faster than 4G, a substantially slower speed than rivals Verizon and AT&T. In addition, coverage was still an issue early on, yet T-Mobile’s coverage was reported better than both rivals.
- In February, T-Mobile cautioned issues with dynamic spectrum sharing (DSS) were inhibiting the build out of 5G to more areas. “DSS makes existing cellular spectrum simultaneously useful to 4G and 5G devices, dynamically increasing or decreasing the number of 5G connections with actual usage.” T-Mobile’s CTO Neville Ray warned some “tower hardware vendors have run into real-world problems that may delay DSS’ use in 5G networks, thereby stunting the growth of 5G services”, which would severely limit 5G capabilities.
- By June, T-Mobile had established itself as the carrier with the most coverage, but challenges in speed were still a concern as some areas provided the same speed as 4G. In addition, the company experienced a service outage due to its 5G expansion. The outage kept thousands from making calls and was investigated by the Federal Communications Commission.
- Venture Beat detailed T-Mobile’s 5G speed issue in an article last month. It has taken T-Mobile longer than expected to integrate Sprint’s mid-band frequencies over to the T-Mobile network. Currently, finding the higher 5G download speeds in the T-Mobile network proves rather elusive. In fact, it was announced in July that the Sprint migration process had begun but will take almost three years to complete. Meanwhile, the better download speeds that were available previously on the Sprint network are only intermittently available currently on the new combined network.
T Mobile and Sprint Merger
- The merger caused issues for some Sprint customers when their phones would no longer connect to the combined grid. Certain Sprint 5G customers could no longer use their 5G phones unless they migrated to using the Samsung Galaxy S20. Most of the disruption took place in Sprint’s old 2.5GHz band, which balanced coverage with 5G speed.
- T-mobile hyped up their service and coverage capabilities directly resulting from the merger with Sprint. However, “Responding to a complaint from Verizon, the National Advertising Division is recommending that T-Mobile avoid suggesting the 5G benefits of its Sprint merger will arrive immediately.” Specifically, the carrier was “told to rein in its advertising around 5G after an industry group determined the marketing hype risked misleading consumers.”
- Critics of the merger stated, “there’s no clear way to hold the carrier accountable to its promises, and that higher prices may be inevitable.” In addition, ramp up of connectivity speed in cities where Sprint was dominant over T-Mobile before the merger will require years to catch up to other cities.
- PC Mag explained some technical difficulties T-Mobile faced with the merger. These included their mid-band spectrum comes from Sprint and was originally divided into 2 bands, “which have extremely odd licensing structures. The licenses are very small and very fragmented, and little bits and bobs (especially of the EBS bit) are often still owned by other companies.”
- Additional difficulties include the need to keep some of mid-band for Sprint 4G customers until the complete integration of both grids. The hardware used by T-Mobile “doesn’t allow it to run 5G on all 180MHz of its mid-band spectrum. According to Thomas, T-Mobile’s Ericsson radios are limited to a total of 100MHz between 5G and LTE, and its Nokia radios are limited to 120MHz. That means right now, T-Mobile would need to put two radios in place to use a full 180MHz, which it’s unlikely to do because of cost.”
- Verizon responded to the coronavirus pandemic by cutting fees and waving roaming charges. However, customer churn presented as a problem for the carrier as a direct result of the pandemic. Store closures resulted in a decrease in equipment revenue as new device sales dropped. Market Watch reported, “The company faces bigger challenges in its media business, warning on its last earnings call that digital media revenue could drop 20% to 30%.”
- A 14-cent-per-share hit to earnings was reported by the wireless carrier in the second quarter of 2020, but third quarter earnings rebounded a bit, and COVID’s effect on earnings was reported at 5-cent-per-share. Most of the decrease in earnings were a result of less roaming and data travel plans revenue, a direct result from stay-at-home orders issued throughout most of the U.S.
- COVID challenged Verizon’s premium pricing strategy in 2020. The closing of approximately 70% of Verizon’s company-owned retail stores for most of the second quarter of 2020 led to a decrease in customer activity such as subscriber additions and a slight increase in churn rates. Device upgrades were also negatively affected.
- A ZD Net article detailed experiences Verizon salesmen have endured during the pandemic. Appalling behaving customers, and customers not following safety precautions endangered workers at some company stores.
- Verizon’s broadband division lost revenue due to the pandemic. “Verizon said it lost 81,000 Fios video customers in the second quarter, widened from a loss of 52,000 subs in the year-ago quarter.”
- COVID also negatively impacted Verizon’s 5G roll-out during the second quarter. While the company was able to pick up the pace in Q3, “Verizon’s over-reliance on millimeter-wave spectrum has left them vulnerable”, according to analyst firm MoffettNathanson. The same article explained, “Verizon was the last of the nationwide operators to proclaim a nationwide 5G footprint.”
- Moving slowly, the mobile carrier “added uplink capabilities to its 5G network and expanded its footprint to its 35th U.S. city” later that month. SDX Central reported, “Verizon was the first U.S. operator to deploy a non-standards based 5G network, but it is still well behind its biggest domestic competitors on 5G. A lacking supply of non-mmWave spectrum is a big factor precluding Verizon from deploying 5G more aggressively.”
- mmWave requires very close proximity to its receptor, sometimes as close as 300 to 500 meters. Being Verizon’s long-term strategic goal, the high band roll-out has limited Verizon’s coverage in urban areas and has presented a slew of challenges in retaining its customers. Churn has increased a bit due to the strategic decision. Fierce Wireless reports, “In addition to distance issues, FWA on mmWave also has to contend with mmWave’s propagation problems where the signal can be lost with obstacles like foliage and buildings.”
- “Verizon’s 5G effort began with a heavy push on mmWave to deploy its 5G Ultra Wideband network, but the coverage of that network remains narrow and sporadic, sometimes from city block to city block. That high-band network is now live in 55 U.S. cities and Verizon said it’s still on track to push that coverage to 60 cities by the end of the year.”
- CenturyLink’s most recent and prevalent issues were related to service outages and not being able to finish broadband deployment on-time for the Connect America Fund program.
- Remote work increased drastically due to stay-at-home orders resulting from the pandemic. The increase stressed existing system networks including CenturyLink.
- In early 2020, CenturyLink service outages were reported in Washington state and Colorado. The interruption of service in Tacoma, Washington was caused by a power outage and a cut line, while an overloaded system was most likely the cause in Fort Collins, Colorado.
- Another interruption of service occurred in May affecting parts of Idaho, Wyoming, Utah and Colorado. The cause of the issue was not reported.
- Hurricane Irene caused widespread outages and global connectivity issues for large swaths of CenturyLink customers in late July. The interruption of service affected popular streaming services, gaming platforms and webcasts of European soccer.
- Yet another outage was caused by a router issue at one of its data centers in Ontario, Canada. It was reported, “In a disturbing cascade of outages, peered routers attached to CenturyLink’s infrastructure went haywire. AWS, Cloudflare, Twitter, Hulu, Microsoft Xbox, Reddit, OpenDNS, and others, along with a range of interdependent e-commerce sites worldwide, took performance hits. Various sources say that 3% to 5% of global Web traffic was affected.”
- “Less than two years ago, another outage drew ire when 911 calls, government sites, ATM withdrawals, and other resources were disrupted for over 24 hours, leading to a federal investigation of CenturyLink.”
- More difficulties for the Louisiana based broadband provider surround using email. “The user can face any problem related to it such as account freezes, frequent login trouble, and configuration settings mishaps.”
On-Time Deployment Issue
- Related to the COVID pandemic, CenturyLink representatives alerted government officials of deployment delays in completing broadband deployments specific to the Connect America Fund program caused by the stay-at-home orders and asked the commission for a deployment deadline extension.
- Specific issues included “some localities have mandated a complete work stoppage that extends to broadband deployment; numerous permitting agencies were shut down or scaled back operations, substantially reducing their ability to process permit applications”; and supply chain disruptions caused higher instances of backorders and product unavailability for electronics, fiber and related equipment needed for the deployment of broadband.
- “In 2015, the FCC authorized 10 telecommunications carriers to receive nearly $9 billion in support over six years for rural broadband deployment from the CAF. CenturyLink received nearly $506 million to deploy service to almost 1.2 million homes and businesses in 33 states.”
- “In its notification to the FCC, CenturyLink said it now has enabled broadband service at speeds of at least 10/1 Mbps or higher to nearly 900,000 locations. On a state-by-state basis, CenturyLink’s 2019 year-end data reflect that it met or exceeded the program’s interim broadband deployment milestone in 10 states, but it may not have reached the interim milestone in 23 states.”
- Initially, 70% of US Cellular’s stores remained open, but customer traffic was down almost 50% during the first couple months of the pandemic. Supplies of Wi-Fi routers and hotspots were down due to supply chain interruptions. All of this resulted in a decrease of service revenue.
- Traffic to the carrier’s networks increased dramatically in the initial months of the pandemic, primarily due to stay-at-home orders. To combat the challenge, US Cellular partnered with Nokia to protect users from malware that was looking to steal private user data. “Trojans and ransomware masquerading as popular virus outbreak location maps, as well as new apps pretending to locate medical masks, increasingly threatened to proliferate on end-user devices.”
- US Cellular altered their plans for existing customers in response to the pandemic and resulting increase in data usage. Impacting the bottom line, the carrier decided to assist its customers through July 31st by not charging anyone for data overages.
5G Conversion Causing Outages
- Conversion from US Cellular’s 4G LTE to 5G and the addition of VoLTE technology continues to impact current customer’s normal service with temporary outages and slower data speeds. Enhanced calling through VoLTE provides customers with a suite of options, but has negatively impacted data speeds; “as the US Cellular network infrastructure improves, Enhanced Calling will likely become more reliable and less impactful.”
- Near Charlotte, upgrades due to the conversion of hardware and software to 5G caused service disruption from local existing towers. Some local residence stated dropped calls have been an issue over the course of years, not just as a direct result from the 5G conversion.
- Disruptions to service also occurred recently in the Chicago and the Quad-Cities area, although no specific reason for the interruptions was reported at the time. A few weeks later, downed power lines and trees that damaged fiber lines that feed into U.S. Cellular’s network were reported as the culprit.
- In California, planned disruptions in remote areas in order to upgrade existing equipment were set to cause outages intermittently on some days over the last two weeks of October and the first two weeks of November.
- As was common among most Internet broadband and cellular service providers, Charter Communications responded to an almost overnight increase in demand for communication access. Along with the increase in demand came an increase in service repair requests and a stressed grid.
- COVID restrictions implemented at the onset of the pandemic had other effects too. “According to some reports, Charter call center workers in Ohio and other locations were forced to work in tight cubicles less than 5-feet from their neighbor on floors with hundreds of other employees. Those reports added that workers were forced to use sick-leave if they exhibited symptoms and that in some locations field techs shared desks to maintain 24/7 customer support.”
- Charter was slow to accept stay-at-home principles. “Despite health officials’ recommendations that employers let employees work from home, (Charter) pushed back on that policy.”
- “One of the biggest challenges in shifting call center employees to work-from-home status is ensuring that the customer data they are privy to remains secure. For that reason, most operators have to maintain some presence at their call centers, but they are taking the necessary precautions to ensure that employees are practicing social distancing and following other CDC safety guidelines.” In the end, the adjustment cost Charter 15 days of paid vacation for each affected employee.
- Another effect shared by other companies in the industry was continued service in light of unpaid bills. Charter participated in the Federal Communications Commission’s ‘Keep Americans Connected Pledge’ during the height of the COVID-19 pandemic. The assistance was offered for 60 days beginning in March.
- Also notable is the continued process of ‘cutting the cord‘. Traditional cable companies, such as Charter and Comcast, faced the removal of cable TV service prior to the COVID outbreak, loosing hundreds of thousands of cord-cutters in 2019.
- In September, The AP reported that EarthLink “filed a complaint in the Supreme Court of the State of New York, County of New York against Charter Communications Operating, LLC (Charter), which operates under the trade name Spectrum, for engaging in a scheme to mislead EarthLink service subscribers to switch internet providers. EarthLink has brought forward this action to seek damages sustained as a result of Charter’s wrongdoing.”
- EarthLink claimed, “In violation of its legal and contractual duties, Charter has falsely informed EarthLink customers, among other things, that (a) EarthLink is “out of business”; (b) Charter has “taken over” EarthLink; and (c) EarthLink internet service “wasn’t available” in markets where it was.”
- An attorney for EarthLink stated, “Charter is engaged in a campaign of deception with the purpose of misleading consumers about their internet options. Charter has spread false rumors about the financial health of EarthLink in order to grow its customer base and eliminate competition, ultimately enabling Charter to increase prices in the future. Charter’s efforts have reduced service accessibility and increased consumer costs during the midst of a global pandemic, when the budgets of middle-class families are already being stretched to their limits. Access to affordable, reliable and high-speed internet is an economic lifeline for millions of Americans who are working or learning from home and are unable to access traditional office spaces or classrooms.”
- “The lawsuit seeks damages for what EarthLink claims was a scheme to mislead its subscribers into switching Internet providers.”
- “Earthlink says that these claims have reduced options for customers, damaged EarthLink’s reputation and caused it to lose customers.”
- In additional legal proceedings, Charter is defending itself against several music companies with the intention of proving whether a big percentage of sound recordings have been improperly registered. In question is a lawsuit brought on by Warner, Sony, Universal, EMI and other record labels similar to the one they just won against Cox Communications for $1 billion. “According to Charter, it examined 110 of the nearly 7,000 sound recordings alleged to have been infringed in the suit and found that the record companies ‘falsely registered at least 40 works’ as works for hire.”
- “Charter is one of the American internet service providers fighting a big copyright lawsuit from the record companies. The labels accuse Charter – just like Cox, Grande and RCN – of having deliberately shoddy systems for dealing with infringement and repeat infringes on its networks.”
- Another legal issue Charter faces involves Windstream. The company “filed a memorandum that seeks payment from Charter for poaching some of its subscribers after it filed for Chapter 11 bankruptcy.” In June, Windstream asked the U.S. bankruptcy court in a 52-page post-trial memorandum “to issue a verdict that seeks to have Charter pay $19.9 million for its losses, which includes legal fees, litigation costs and internal legal costs.”
- Earlier this year, Comcast filed with the SEC, ” We expect that the ultimate significance of the impact of COVID-19 on our businesses will vary but will generally depend on the extent of governmental measures affecting day to day life and the length of time that such measures remain in place to respond to COVID-19. At this point, it is impossible to predict such extent and duration and the degree to which supply and demand for our products and services, including advertising, will be affected. This uncertainty makes it challenging for management to estimate the future performance of our businesses, particularly over the near to medium term. However, the impact of COVID-19 could have a material adverse impact on our results of operations over the near to medium term.”
- It was expected economic stress placed on consumers and businesses because of the virus would affect the various Comcast units, especially NBCUniversal due to the postponement of the 2020 Olympics.
- As with other broadband and communication providers, Comcast was not spared from increased demand due to the immense amount of people working from home at the onset of the pandemic. In response to increases ranging between 32% to 60% capacity in large cities, the provider was running upwards of 700,000 speed tests a day to ensure there was no degradation of service.
- At the beginning of the pandemic, Comcast reported “it expects the COVID-19 crisis to have a ‘material adverse impact‘ on its operations as the response has resulted in the company shutting down its theme parks, delaying film releases, suspending productions.”
- In September, Biz Journals reported, “No part of Comcast Corp.’s vast media empire was hit by Covid-19 quite like its theme parks. Comcast CEO Brian Roberts estimated that 70% of Covid-19’s impact on the Philadelphia company was limited to its theme park division.”
- Since April, several service outages have been reported. In April, outages in the Denver area affected thousands of Comcast customers. It was reported that a cut fiber-optic line was the cause of the outage.
- In June, thousands of people in Illinois and Indiana were without Comcast service. The company did not provide a reason for the service interruption.
- Comcast customers in Memphis, Tennessee were affected towards the end of August as their service was interrupted.
- Technical issues caused by a cyber attack affected virtual learning for Miami-Dade Public Schools during the last days of August. On consecutive days, the school system experienced problems. The outage affected up to 160,000 students.
- While speed is not an issue for Connecticut customers of Comcast, access and cost are. “According to BroadbandNow, about 7,000 residents do not have any wired internet providers offering services where they live. About 32,000 residents lack access to high-speed broadband internet. Another 165,000 residents have access to only one wired provider, leaving them no competitive options to switch.”
- Issues between Comcast and Donald Trump made news as he repeatedly called the company ‘Concast’ for months and accused the media conglomerate of “presiding over incessantly skewed media coverage of his campaign and administration”. On Twitter, he called on supporters to drop the cable conglomerate for its ‘terrible service’ and ‘go to a good provider’ instead.
- In October, “Journalists and media commentators accused NBC’s competing town hall as a capitulation to Trump’s demands for airtime and an attempt to put ratings above the public interest, given the president’s penchant for spewing disinformation.” Trump responded by calling NBC fake news, then tweeted, “I figured, what the hell, we get a free hour of television. I’m doing it on NBC, the worst, home of sleepy-eyed Chuck Todd and some others.”
- Very little is available for Chicago based Nitel. Their Inc. profile describes the company as “a next-generation technology services provider that simplifies the complex technology landscape for its customers to create integrated and tailored managed network solutions that propel organizations forward. (They) solve complicated IT challenges for our customers so they can operate with greater productivity and have the freedom to focus on other critical business issues.”
Issues Facing the Telecom & Media Industries
Ericsson explains there are 3 main challenges that need to be addressed by telecommunications providers: improvement in and expectation of customer experience; cost efficiency in an increasingly complex operating system; and stagnant revenue growth. Research has found that security remains at the top of industry player’s minds, especially with the addition and rapid introduction of new technologies that are designed to address the challenges presented by Ericsson.
- Due to COVID, remote working has become prevalent out of necessity. The increased demand due to remote working led to system issues that required immediate attention soon after the massive shift to people staying home. The challenge remains maintaining a positive perception among customers and providing good customer service with limited resources.
- The immediate increase in telecommunication bandwidth usage at the onset of the pandemic stressed telco systems and caused an increase in negative customer service experiences.
- According to Bain & Company, “COVID-19 has caused a rapid and sharp reduction in new customer sign-ups. Telecoms need to transform customer experience to reverse the long-term trends of poor customer satisfaction, low loyalty scores, and high churn rates.”
- “Many telecommunication service providers are laggards compared to other industries when it comes to customer experience. High call volumes generated during the pandemic only served to emphasize the state of the archaic systems and processes in their contact centers. Long wait times, slow resolutions, and the challenges of remote work combined has frustrated both customers and agents. “
- “Nearly 80 percent of people polled in a survey conducted by a leading global conversational AI company in April 2020 want to speak with an agent. Yet over 33 percent of callers waited for more than 30 minutes on hold, with 5 percent saying they waited for more than 2 hours in the same survey.”
- Arthur D Little reports, “Suffering from cuts in their clients’ budgets, media companies are to expect significant advertising revenue losses, in addition to content production and distribution delays. Positive uptake in consumption and related subscription and transactional revenues will have a compensating effect but can only partially outweigh the advertising revenue loss.”
- An oft repeated challenge for telecom companies in 2020 is security. Since cloud services are maintained online and the demand for these services increased in 2020, telecom companies have had to address the issue of maintaining security of people’s private data.
- Inside Telecom declared, “It comes as no surprise that the telecoms industry ranks among the worst in handling and fighting cybersecurity.” They explained, “Almost 43 percent of telecom companies have suffered from DNS-based malware in 2019 alone, noting that a staggering 81 percent of these companies were sluggish with their response, waiting three days to apply critical patches to remove the breach.”
- Arthur D Little reported security issues of home office solutions led to negative outcomes, and companies within the industry must continue to address these protocols in the near and long-term to ensure positive user experiences.
- Ensuring network integrity continues to be a challenge telcos face. New technologies bring new security threats and dealing with them tends to be reactive. The challenge for providers is in moving to a proactive posture in addressing security threats before they occur. This will require “a number of operational and technical upgrades to meet customer expectations of system security. For telcos specifically, it is necessary to implement measures such as reliable and secure authentication features.”
- Industry Wired reported, “43 percent of telecommunication organizations have suffered a DNS-malware based attack, while on average, companies only deployed 4 of the 11 critical patches recommend by the ISC in 2016″
- And 5G Radar explains, “as 5G opens up more opportunities in areas such as healthcare, manufacturing and transport, the reality is that it is becoming an increasingly attractive target for cyber criminals, as it increases the available threat surface along with the consequences of any damage inflicted.”
- Another glaring security concern relates to Chinese company Huawei’s involvement in the build out of 5G. The Chinese government is known for spying on businesses and people, and Western governments are reacting appropriately. Politics met technology when U.S. president Donald Trump implored Western governments not to involve or allow the Chinese company’s equipment to be part of 5G hardware installations.
Complex Operations and Supply Chain
- Operations and supply chain is another issue the industry is facing in 2020. COVID immediately disrupted long established supply chains, and telecom companies had to respond. Complex operations have led to challenging adaptation and adjustment among invoicing, service configuration, order fulfillment, and payments. This is due to “millions of subscribers and a variety of products and customized solutions, and face-to-face assistance has not been an option due to pandemic restrictions. “
- Arthur D Little’s report explained, “Telecom operators, under renewed spotlight for their role in bringing people through the crisis, will suffer from increased operational complexity and losses in B2B revenues.”
- It also details that the pandemic “disrupted content creation supply chains, notably through postponing sports events, live concerts, new movie production and releases, and market launches, which has induced financial difficulties and risked bankruptcy for some players. In the longer term, there is a risk that, as soon as social-distancing restrictions ease, users will cancel subscriptions to paid digital platforms due to over utilization and slower content renewal.”
- Ericsson explains that the integration of new technologies to address existing challenges in customer service, stagnant revenue and improving cost efficiencies “bring such technological complexity that humans alone are simply not capable of handling the amount of incoming data that is needed to run networks efficiently and effectively. Which is why AI, machine learning and automation are key technologies in network operations.”
- Charlie Ergen, chairman and co-founder of Dish Network, recently stated in an SDxCentral article, “Some big incumbents today spend as much money in a year or two just to maintain their networks as we’ll spend to build the network. The reason is that the legacy is so hard, and so complex, and not automated, so you need a lot of people to do it.” It was explained, “Over half of communication service providers surveyed by tech consultant BearingPoint stated their operational structure does not support seamless integration and orchestration.”
- Quick and personalized service continues to be a challenge as consumers demand high quality service. “With ever-changing customers’ perception over communication with others, providing quick and empathetic assistance becomes indispensable for companies.”