Tuesday, October 21, 2008

Bad Times, Good Times...

I remember reading somewhere (though I am not able to find the reference now, not even with the help of Google!) that usage of telecom networks goes up significantly during periods of economic crisis. While it might appear counter-intuitive -- why would consumers or businesses spend more during bad times -- there is a very simple social behavior aspect that can explain this phenomenon. Communication helps create a security blanket.

Periods of uncertainty, particularly economic slow-downs that can be spread over months and years, cause us to seek comfort in family and friends. Partly to keep track of what is happening with our loved ones and partly to gain confidence from the social network. Such times are also periods of less and erratic work, thus, providing more opportunities to share and bond. Given that our friends and family might be spread across locations and travel costs are reasonably prohibitive, telecom is the most appropriate way to stay in touch. With improved technologies that enable photo and video sharing and various other ways of 'networking', it will not be surprising if we find that the current economic crisis encourages more spending (of time, at least) on mobile phones and social networking sites.

Does this really mean that it would be good times for all telecom companies? Obviously, no. Consumers are unlikely to be willing to spend much more on telecom services than they did normally. In fact, one can expect greater discount-seeking behavior. It would take the form of shifting to unlimited packages or signing up for 'friends & family' schemes. Economy plans, even of lower quality, would become acceptable. Mobile operators should
consider creating packages that encourage group calling or conferencing and data sharing, like photos and video clips (MMS). ISPs or alternate operators could drive the usage of VoIP or Internet Telephony services, particularly for long distance calling. There would also be opportunities to innovate with personal video calling and conferencing services. Such services can also be used to drive increased adoption of Internet services amongst unaddressed segments like senior citizens. 

The recession in several developed markets and slow-down across the world offers  communications companies an opportunity to influence and support our psychological need to stay connected during bad times. Service providers can strengthen their relationship / engagement with consumers by becoming an integral part of their social lives. As a result they can also try to recession-proof their business models. 

ps.    If you have come across any research or evidence to support or dispute the above hypothesis, I would be interested in hearing from you.

pps.    Apparently there is some other research that proves that the need for family bonding (and perhaps, the spare time) during economic crises also results in a spurt in baby births. Interesting as the thought is, I guess some other forum can do more justice to that aspect of bad times, good times...

1 comment:

Sudesh said...

I would agree to your contention that telcos could benefit from the slowdown. One clear trend, I am noticing is reduction in travel budget and more use of technology like Video conferencing. Companies like Cisco, Polycom and others are trying to capitalize the slowdown to hardsell their telepresence solutions. Cisco, incidentally has saved $100 million on travel till now.

A Yankee research suggests that
those effects will be relatively small for telcos, but could be harsher for vendors.


Ovum also has shared its expertise on the impact in one of its reports: