Plunging capex is a sign that telcos have an excess of capacity – and user demand is levelling off.
Comms vendors are battening down hatches for what could be a long capex winter.
Dell’Oro has just cut its outlook for mobile core spending for the fifth consecutive time. Not a single operator has adopted 5G SA this year, while the research firm has also written off the RAN market as “a disaster” and tips optical transport to decline as well.
But the deeper problem seems to be that traffic growth is falling.
The red flag that has caught people’s attention has been the restated numbers in the latest Ericsson mobility report. The authors cut mobile data traffic figures for the second half of 2023, yet declared that the growth outlook was virtually unchanged.
William Webb, a consultant and senior advisor at Access Partnership, is one who’s called out the authors of the report for this leap in logic. “If lower numbers are being reported for 2023 … then why should the traffic growth rate predicted remain the same?” he posted on LinkedIn.
He denounces the forecast as “a mess,” pointing out that the report, without any explanation, has somehow introduced a 10% jump in growth over 2023-24 to bring its new forecast into line with the old.
Bandwidth overproduction
The vendor community might dismiss Webb as a confirmed growth skeptic. He is the author of a (2016) book called “The 5G Myth” and has predicted that mobile data growth will plateau in 2027.
But he’s not the only one.
A new Analysys Mason paper says the telecom industry is running up against the limits of growth and faces a “crisis of bandwidth overproduction.” It says the telco responses to this looming crisis – volume price discounts and untried business models – replicate every other industry in the same predicament.
“Growth rates are not declining because of supply-side constraints such as spectrum or coverage; access networks have never been emptier,” the paper argues.
“Rather, the two principal drivers of traffic growth, smartphone usage and broadcast-to-streaming migration on mobile and fixed networks, respectively, have both run up against human limits; limited hours for engagement and the limits of human vision.”
If demand does not revive, then the lower unit costs brought about by over-investment in capacity will result in further deflation of margins and profitability, the paper argues.
It calls on telcos to reduce capex to make available more resources to invest – in M&A, into other adjacent infrastructure businesses, or in some key non-connectivity B2B segments.
While this is happening the 6G process marches on.
The case for 6G is pretty much the same as the one for 5G. More data, more capacity, greater efficiencies and a slew of new technologies that may enable new use cases. Some of the use cases are in fact the same as were predicted for 5G, like immersive experiences, FWA and next-generation IoT.
Which isn’t to write them off. It is just that telecom operators have just about maxed out their core connectivity business and have no visibility on a return to margin growth. How many have the appetite or the capacity for another capex binge?
Which leaves us in the curious situation of governments and vendors driving the 6G bandwagon at speed, while those footing the bill just want to get off.
Original article can be seen at: