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COVID-19: Telco cloud revenue from 5G to drop by 25%

The telecommunications industry's shift toward global software-centric networks and operations is taking a hit as a result of COVID-19 and the current bleak economic outlook, according to ABI Research. 

ABI says telco cloud revenue from 5G core deployments will fall between 20%-30% short of the forecasted US$9 billion in 2020. The investment shortfall in modernising telco networks may be somewhere in the range of US$2 to US$3 billion in the short term.

"The 5G market was growing faster than anticipated, with 2020 expected be the starting point for 5G Standalone (SA) core commercial deployments in Communications Service Providers (CSPs) networks. But that expectation may take a little longer to materialise," explains Don Alusha, senior analyst at ABI Research. 

"That is due, in part, to the fact that COVID-19 will almost certainly derail further trials and testing to verify the processing performance and stability of 5G SA networks," he says.

"In the short term, the industry may have no choice but to protect existing consumer revenue."

Alusha says CSPs will accompany that defensive approach with small-scale projects that aim to seek operational efficiencies without necessarily committing to new investments for 5G SA networks and intelligent software.

"There is, by now, widespread agreement that the enterprise market will drive investment in 5G and fuel further growth. In the long term, the turmoil emanating from COVID-19 will serve as a springboard for the industry to mull over alternative growth options at its disposal," he says. 

"The industry's positioning in the global production frontier remains anchored to hard-to-duplicate network assets and infrastructure that continue to yield results on the consumer front. The brief pause in production processes of some major economies should give the industry an opportunity to ponder avenues so that it can reinvigorate itself. 

"With 5G SA core, fiber-optic network, and dynamic new software, it is now possible for the industry to usher in a new era of prosperity, innovation, and collaboration for enterprises, communities, and individuals. But that will not come without challenges, particularly an across-the-board internal organizational retooling," Alusha adds.

Alusha says there is no doubt that impending 5G SA core network deployments and cloud-native software give the industry an edge over competing forces. 

"But sooner or later, those at the upper echelons of both the supply and demand side of telecoms will almost certainly realise that they need to preserve the current order of doing business if they are to sustain that edge. Further prosperity and innovation will stem from new forays that are either built atop that edge in a vertical fashion or leverage new, highly complementary horizontal capabilities," says Alusha.