Why 5G and the secondary device market are crucial to COVID-19 recovery
The COVID-19 pandemic confirmed just how dependent we are on connectivity. Overnight, everyday life transformed with economies around the world depending on speed and reliability to support the new remote ways for conducting business, education, healthcare and communication.
While we are not yet in the clear from the pandemic, plans are in place to ensure economies can bounce back and markets can grow again. 5G adoption is central to recovery in all sectors, says Biju Nair, EVP & president, global trade-in and upgrades, Assurant.
To support this, the full 5G ecosystem needs to be ready from the networks to the handsets, to the policies required for proper adoption and rollout. On a positive note, carriers in many countries, such as the U.S., China, Japan, U.K and South Korea were able to accelerate the expansion of 5G networks over the past year.
In order to use ‘true’ 5G, not only does the network need to be in place, but users will have to upgrade to 5G handsets. However, the pandemic caused huge economic downturn with some consumers not being as financially stable as they were pre-pandemic. So, with spending down and 5G more important than ever, making 5G devices affordable for consumers is critical.
Using 5G to climb out of COVID economy
Our reliance on connectivity was greater than ever during an almost global lockdown and will continue as we recover. As an example, retail experienced ten years of e-commerce growth in just three months during the beginning of the pandemic. Not only does 5G provide ultra-fast, ultra-low latency connectivity for consumers, but it also transforms the business landscape.
As people continue to work remotely, they will look to 5G as an enabler. As businesses recover from the huge economic downturn, they likely will look to 5G to unlock new revenue streams. Many services, including previously unthinkable ones like a doctor’s visit, are shifting to a remote offering mode. And as governments rebuild their countries’ economies, 5G offers an accelerator to a recovery. Though recovery from the pandemic is underway and confidence is growing, rebuilding the economy is a slow process which 5G will aid.
According to research from Boston Consulting Group, it’s estimated that over the next decade, 5G deployment will contribute $1.4 trillion (€1.18 trillion) to $1.7 trillion (€1.43 trillion) to US GDP, and create 3.8 million to 4.6 million jobs. Manufacturing can see maximum factory utilisation and increased efficiency from 5G enabled sensors sending data that will optimise supply chains, production schedules and logistics management.
It is expected that telemedicine and remote health monitoring will also benefit from 5G devices and wearables. And governments will be able to improve upon smart cities and transportation while also providing critical data faster to first responders. Major industry events such as GSMA’s Mobile World Congress have shifted away from traditional badges to access conference to a smart badge on your smartphone, which will automatically coordinate access based on daily events and schedules.
But the issue remains that for consumers to access 5G, they need a 5G-enabled device which for many are cost-prohibitive. Mobile operators need to continue their focus on putting 5G devices into the hands of consumers, affordably, to realise their return on investment for the infrastructure build out.
The secondary device market and 5G adoption
The pandemic has proven the mobile industry’s reliance on secondary devices. In the beginning, operators and insurance companies alike were scrambling to find refurbished devices to fulfill warranty and insurance programs. As manufacturing grounded to a halt and supply chains were cut-off, the availability of devices quickly became an issue.
On top of this, the world’s largest OEMs also saw a significant decrease in new device sales, as consumers pull the purse-strings tighter in times of uncertainty. Disruption to supply chains has also caused a shortage of chipsets and other parts critical to manufacturing of new phones, further driving up demand in the secondary markets.
Not withstanding the pandemic, this follows a long-term trend of consumers holding onto mobile devices for longer. Recent Assurant data showed that consumers are keeping devices for over 3-years, lengthening the upgrade cycle. If consumers have less money and are more content to hold onto 4G devices, how can operators convince them to make the leap to 5G?
Although there is huge revenue potential for enterprise 5G, that revenue is still some way off today, carriers need consumer adoption on their 5G networks. Without consumers buying 5G devices and accessing the latest products and services on the network, carriers are unable to generate 5G revenue and see an ROI on the high costs of 5G deployment.
Mobile device trade-in programs have proven to be a way for consumers to reduce the cost of a new 5G device by unlocking the latent value of their previous 4G device. Extremely attractive trade-in promotions launched towards the end of last year and continuing into 2021 have helped to accelerate upgrades. And, as more viable use cases are developed for 5G devices, consumer adoption will continue to ramp up.
However, for many consumers still using a 4G phone, a trade-in program may be their only route to accessing a 5G device it’s up to operators, OEMs, retailers and cable operators to recognise this and drive these programs forward. Assurant has seen a very strong correlation between high attach rates on trade-in programs to increased net adds and increased Net Promotor Score, as an indicator of consumer satisfaction.
Pre-owned 4G/LTE devices still have useful lives
Not only do trade-in programs offer a route to 5G for consumers, but they also provide a path to extending the useful life of their old devices within the circular economy. The old device that’s traded in can be refurbished and resold, often in an emerging market.
This means that not only does one consumer get an upgrade to 5G, but another consumer may also find an affordable upgrade route to 4G. Moreover, by re-purposing the device within the ecosystem, you keep it from being sent to a landfill to become e-waste helping the economy and the environment simultaneously.
5G is important for global recovery post COVID-19 due to the economic and social benefits it promises with ultra-fast, ultra-low latency connectivity. The only way to access 5G is with a 5G device, which tend to be more expensive. The issue during a pandemic is financial constraints of the consumers.
Mobile device trade-in programs are an excellent way to diminish the cost-barrier to 5G, while keeping an old device within an environmentally friendly circular economy. The more 5G devices operators can get into the hands of consumers, the faster they can generate 5G revenues and continue 5G expansion. This will in turn boost global economies and aid the pandemic recovery process. Mobile operators, OEMs, retailers and cable operators need to continue to promote and incentivise trade-ins or risk stalling 5G adoption.
The author is Biju Nair, EVP & president, global trade-in and upgrades, Assurant.