Telcos As A National Growth Accelerator

A Government Investment Strategy Blueprint
At this challenging time, the role of the Telco has never been so important. They are key to retaining any semblance of normalcy in a COVID affected social and enterprise setting. More importantly, they are a key actor that will be crucial in enabling nations to manage the transition out of COVID-19 related stagnation but also in providing a resilient national infrastructure and stimulate GDP growth. There are numerous strategies that governments can utilize to invest in stimulating growth by strengthening the Telco position. This paper outlines some of those available levers.

The Telco Pre COVID-19
The telco community globally has largely been the butt of less favorable regulation, lack of strategic governmental attention, and subject to the hostile intentions of webscale competitors. In the early stages of the COVID-19 outbreak it has emerged as a key asset that has enabled the continuity of many businesses and helped people remain engaged, stimulated, and healthy while in “lockdown” situations. Moreover, it could be argued that telcos could play a pivotal role in countries being able to rebound from the financial and productivity shock coming from COVID-19.

Let us take stock of the challenges that Telco’s faced Pre-COVID which are myriad in nature and comprehensive in their impact. Over-The-Top (OTT) competitors have unfettered access to the critical assets telcos and burden the telcos with costs, without the prospect of reciprocal revenue. Telcos are also faced with punitive regulation that has significantly decreased their operating profits. Roaming fee abolition, religious adherence to net neutrality, and burdensome operating legislation with onerous stipulations all have contributed to an unhealthy and largely unintentional hostile environment. This is further exacerbated by spectrum licensing regimes that are largely “rear mirror” focused, lack commercial grounding, and it could be argued are acting as a resource tax, rather than a market-enabling mechanism.

Telcos During COVID-19
Given this backdrop, telcos have been invaluable in enabling some semblance of societal continuation during lockdowns due to COVID-19. At the basest sense, telcos have enabled many millions of workers to continue contributing to the global economy from their homes. They have enabled enterprises and organizations to continue operations and have entertained many billions with access to content. In a very tactical way, they have enabled governments to track, trace, and manage the spread of the virus, communicate effectively and directly with people, and keep supporting society in a virtual, but valuable way. Without the investment and operational diligence of many telcos, the impact of COVID-19 would have been far deeper and more profoundly felt in all economies. The fundamental truth that telcos put mobile devices and connectivity in people’s hands at affordable and accessible rates is one shining beacon of opportunity in the current gloom.

Telcos as a COVID-19 Recovery Engine
So, looking to the future, how can telcos be pivotal in driving the global economy forward as the world emerges from the initial phase of the COVID-19 pandemic? This can largely be separated into two major buckets: 1) tactical support for a safe society; and 2) a more strategic role revolving around supporting Gross Domestic Product (GDP) creation in market settings that will have new parameters and effectively be a new paradigm, Post-COVID-19.

In a tactical sense, telcos will be the pivotal axis upon which some of the fundamental societal tools being built will rest. They will provide the backbone for track and trace applications, as well as provide cities with valuable insight on aspects such as location, footfall, and traffic. They will enable the tracking of valuable medicines and protective equipment. They will also enable most workplaces to be flexible in establishing working practices closer to the pre-COVID-19 norm.

The most significant impact that telcos can have is enabling GDP creation through the embracing of technology-driven new working practices. They will be key in enabling a new digital society. Beyond the obvious conclusions that we are likely to see, including more remote working, more virtual meetings, and more virtual teams (all of which will be enabled thanks to the connectivity supplied by telcos), a raft of new solutions could accelerate GDP growth and all will require a robust level of support from the telco
community.

Looking closely at the prospect of a new digital society, connectivity that is secure, trusted, and dedicated will be key to making the most significant applications work effectively. These applications include the following:

- Flexible manufacturing that embraces concepts such as rapid retooling and repurposing, dynamic resource planning and sourcing, automated materials handling, and machine tending
- Resilient supply chains that incorporate multi-modal methods, automated last-mile delivery, asset tracking and integrity, decentralized distribution, and increased contactless delivery
- Smart cities that incorporate digital twin modeling, scalable, remote, and reactive healthcare solutions, improved and automated traffic management, increased focus on smart spaces, and innovative approaches to key service delivery
- The greening of the economy and environment with electric vehicles, renewable energy generation, improved environmental and air quality, and efficient public transportation
- The provision of resilient and efficient critical infrastructure with improved monitoring, prescriptive maintenance, and remote technical support
- Scalable, proactive, and connected emergency services, healthcare, and social care that embrace technology to enable concepts such as aging-in-place, remote diagnosis, capacity modeling, Artificial Intelligence (AI)-driven insight and decision-making, medical supply chain, and integrated data sharing

How Can Governments Support Telcos to Drive Post-COVID-19 Growth?
The case to support the telco community as a Tier One national asset is clearly laid out in the previous paragraphs. A strong, healthy, supported, and rewarded telco community will lie at the core of realizing the successful transition to a digital-first society. What should governments do to catalyze the reaction that will result in digital societies and also support telcos?

- Spectrum Reform: Governments could look to reduce the cost of 5G licenses for strategically important telcos to free cash for a speeded 5G network rollout. In addition, governments could look to license more spectrum for additional 5G bands, harmonize those bands with key global partners, and provide those bands at reduced cost. Finally, governments could license local, geographic-specific spectrum for key critical enterprise and utility applications, or enable the slicing of spectrum and spectrum resources for key critical applications. This should be done at as low a cost as possible to remove the barrier of cost to digitization in key infrastructure. There are many examples of this already happening pre-COVID-19 such as in Germany, the United States, India, Italy, and the United Kingdom, but the emphasis to ensure post-COVID-19 growth should be on speeding the legislation, a more efficient use of all spectrum assets, and a streamlining of the processes associated with spectrum licensing.
- Net Neutrality Reform or OTT Taxation Reform: Governments should reconsider allowing telcos to monetize massive increases of traffic from OTT providers by QoS fee methodologies or usage-based royalties. Alternatively, governments could consider new taxation regimes for large offshore multinational digital entities that do not invest in local infrastructure and digital fabrics. This revenue can then be used to fund other digital transformation processes.
- Repurposing and Reprioritization Subsidies and Funding: Governments already subsidize telco operations to varying degrees in order to provide services such as rural broadband, connecting the unconnected, and providing connectivity to underserved portions of society. Despite these efforts, business in rural areas are still underserved due to poor rural digital connectivity in many advanced nations. For example, in the UK, 26% of businesses are concentrated in rural areas employing 16% of active population and contributing about 16% to the GDP. While the UK is already allocating significant funds to reduce the rural-urban digital divide, through programs such as RDPE, the government should further stimulate operators to improve rural broadband and help them to absorb the costs attached to rural economy, for instance by rolling out strategic technologies such as 5G that may require significant upfront spending and long-term return on investment.
- It could be argued that, during this critical period, as economies climb out of the negative effects of the COVID-19 epidemic, some funds should be reallocated to building a level of digital resiliency in key critical infrastructure and enterprise sectors. This would benefit GDP and lead to a sustainable increase in quality of life for society at large, and at the same time provide a more resilient infrastructure to cope with any further recurrences of COVID-19 or similar global emergencies. In some cases, countries such as Japan, South Korea, and China are offering tax forgiveness in return for rolling out key network assets to support 5G operations.
- Critical Enterprise Investment: One key area of investment that governments could look to adopt is stimulating the digitization of key industry segments. Stimulation could include elements of relaxed licensing for localized spectrum deployment, grants or loans to encourage digital transformation and technology modernization of business organizations while enabling them to offset the upfront cost related to equipment infrastructure that will enable them connect physical first assets, automate their processes, and enhance the overall productivity of their businesses . It could also include subsidies through lower corporate taxes for companies providing cutting edge solutions and infrastructures such as 5G networks, mobile edge computing, private networks, artificial intelligence that are in the nation’s best interest. In the most extreme circumstances, investment could take the form of wholescale grants and for digitization of key critical infrastructure, such as manufacturing, utilities, emergency services, healthcare, and social services.
- Smart City/Digital City Investment: Cities are not only the epicenter for the spread of COVID-19, but are also the financial and cultural hubs of many societies. They warrant attention in order to increase resilience and to enable growth in situations that are new and not conducive to high population densities. Investment in this area can come from many levels of municipal and regional governments right through to national governments. Investment must be made in modeling, planning, and virtually simulating the operation of cities in order to understand the impact of digital and social interventions. It should also be integrated into a national plan and could be funded through a combination of local and national strategic resources.

In relation to telco operations and the stimulation of the connectivity backbone for smart cities, local municipalities and governments could proactively smooth the process that is needed to roll out infrastructure in cities. At present, it is estimated that up to 4 months is needed to receive permission to adopt a new site. When that is coupled with the notion that around 36% of mobile network operator Operational Expenditure (OPEX) is accounted for by site rental and regulations costs, the barriers for speeding rollouts are high. Local governments and municipalities could also look to offer municipally-owned real estate as potential cell sites at an attractive rate to subsidize critical network rollouts.

When looking at all of these investments, it is clear that the ultimate goal and golden thread of these investment strategies should be to speed the rollout of 5G and fiber broadband solutions, as well as stimulate the use cases in critical industries and infrastructure that depend on highly integrated, secure, and reliable connectivity solutions as a foundation. This will achieve the dual goals of providing a more resilient society and one that is on a path to sustained economic growth through a trickle down of funds from key projects as ecosystems are built to sustain a new working paradigm.

A Challenging Climate for Government Investment
It must be noted that a number of challenges exist when considering investment from a nation-state into its telcos and wider digital infrastructure. Two factors, among others, raise concerns that may mean that investments in the ways outlined above may be slower to emerge than believed possible:

1. Governments will be very reluctant to invest in the future of telcos that are subject to foreign ownership, especially when this entails involvement in critical infrastructure. They will also be precluded from stimulating homegrown Telco’s in isolation due to anti-competitive legislation. Similarly, Governments may be reluctant to invest in solutions that entail reliance upon global digital-first solution providers that are not contributing to the holistic development of their country due to off-shoring and creative accounting procedures.
2. The appetite of governments to stimulate and invest in developing markets likely to directly benefit telcos as Tier One critical infrastructure may be impacted. Governments are currently investing heavily in large financial mechanisms to keep economies afloat during a time of historic drops in the GDP created by enforcing the closure of entire swathes of the economy due to combatting COVID-19. National debt is climbing. Will governments be willing to add to that debt for a telco-centric investment approach in light of the two previous points?

Conclusion: Politics and Appetite Will Dictate Strategy
In summary, connectivity, 5G, and fiber are going to be the bedrock on which to build the new digital society and economy. Governments can choose to embrace and speed the transition or resist and elongate the period of recovery. The question will revolve around the political appetite to be innovative, the availability of local willing and invested commercial partners, the existence of a legal framework to support new models of operation, and the embracing of the notion that the pre-COVID-19 status quo will not return and will not provide a foundation for a successful nation-state.