Increasing Demand for High-Speed Internet Connectivity Driven by Remote Work and Digitalization
The increase of remote working and digitalization has had a major impact on broadband usage and the way people perceive the quality of their broadband services. Before the pandemic hit in early 2020, broadband adoption was gradually increasing; since then, the minimum level of broadband performance that users expect to want has continued to go up, and consequently, demand for faster speeds, lower latency, and greater reliability (for both fixed and mobile networks) has risen significantly. According to household ICT surveys conducted by INEGI, more than 35% of employed internet users reported participating in remote or hybrid work, either full-time or part-time. This number is structurally higher than it was before the pandemic began. The increase in remote/hybrid work has also meant an ongoing increase in daytime broadband traffic, as well as an increase in demand for video conferencing services, cloud-based applications, and secure remote access. Because video collaboration software, cloud-based productivity tools, and enterprise VPN products typically require much more bandwidth per user than traditional consumer browsing does, users consume much more data when using them.
The increased broadband traffic volumes have changed the patterns of traffic volume. In the past, peak usage would have been confined to the hours of the evening dedicated to entertainment. Now, there has been much more increased usage during the mid-day to early-afternoon hours, prompting increased investment by operators into backhaul capacity, fiber densification, and mobile network optimization. In addition to benefiting from the increase in peak times, fixed broadband lines, especially those that are FTTH, have benefited from this trend, as families are looking for a more stable connection (that is capable of supporting multiple users simultaneously) for working, going to school, and connectivity (to other devices) all from within one household. Digitalization does not stop at the workplace. With the growing popularity of digital education platforms, telemedicine, online banking, and e-government services, almost 70% of internet users have utilized digital public and/or financial services on a regular basis, so all these individuals depend on access to persistent broadband.
This transition has also shown how important broadband has become to our daily lives and made broadband an essential utility instead of a luxury; users will pay a premium for higher-tier plans and will be less sensitive when it comes to modest price increases. For service providers, the demand growth strategy is clear; service providers need to focus on the current users and provide decisions about increasing their usage through enhanced user relationships and experiences. Lastly, as digitalization continues to become embedded in both professional and personal lifestyle activities, high-speed broadband can assist with increased productivity and become a long-term growth driver for the Mexican economy.
Government Initiatives and Public Investment to Expand Broadband Infrastructure in Underserved Areas
Mexican government interventions are important for the development of broadband services in underserved areas (rural & semi-urban) of Mexico; without public funding, private investment alone would be insufficient to justify the cost of the infrastructure. Mexican government initiatives are focused on closing the digital divide, improving affordability through subsidization, and extending services to populations who have historically been excluded from accessing quality broadband services. The institute of federal telecommunications (IFT) manages Mexico’s national broadband strategy. The goal of this strategy is to ensure all citizens have universal access to broadband services. The sharing or wholesale network models have been a key policy tool to increase service availability without duplicating the cost of capital investments; therefore, mobile broadband service has continued to grow and is now available to over 95% of the population, up from almost zero in the last decade.
In addition, the Mexican government has invested money into the expansion of fiber backbone networks, connecting public institutions to broadband services, and funding last-mile projects in low-income areas. Additionally, the government has funded multiple connectivity programs to provide schools, hospitals, and municipal centers with broadband services – creating anchor demand for the other commercially supported connections to be developed more commercially sustainably, in regions that subsidized were historically not serviced at all. Based on INEGI reports, there has been an increase in the percentage of households with internet access in states that have received targeted broadband-related public investments by over 10% very recently, closing the gaps between rural and urban areas. From the market’s perspective, all of the above has expanded the number of households eligible to purchase service, and are therefore creating a sustainable new customer pool. New customers, in many cases have started with mobile broadband entry-level plans, but through increased digital literacy, have eventually transitioned up to service plans that have higher usage levels. This ongoing transition from new customers creating a significant demand pipeline for new operators has the potential to continue for the long term.
Furthermore, the government’s support for infrastructure sharing assists in decreasing construction costs and accelerating the deployment timeframes. By decreasing barriers to entry for regional isps & alternative product providers, government policy increases the amount of competition and options and therefore increases the quality and affordability of services. At the strategic level, public investment is a key risk-management tool for using private capital for investment and therefore allows for growth in areas, which would otherwise remain unserved. The therefore partnership strategy ensures continued growth in the broadband service market in Mexico.
Rising Adoption of Smart Devices and IoT Applications Requiring Reliable Broadband Services
IoT and smart devices are rapidly increasing demand for broadband in Mexico through their structural change in usage. IoT usage generally focuses more upon connection density, uptime, reliability, etc., than consumer usage; therefore, it changes the way broadband is used and monetized. Based on INEGI’s technology adoption measures, a typical connected household in urban Mexico has multiple internet capable devices, such as: smartphones, wearables, smart televisions (TVs), security systems, and home automation. The use of multiple devices creates a much larger amount of baseline broadband traffic and increases the expectation for uninterrupted service.
On a national level, the adoption of IoT devices and applications by companies (enterprise accounts) and government organizations is also increasing. Various applications of IoT depend on continuous broadband connectivity, including: cold chain logistics tracking (e.g., temperature monitoring/management), smart metering, fleet management, connected healthcare devices (e.g., remote patient monitoring), and industrial monitoring systems. The emergence of nationwide LTE-M and NB-IoT networks operated by national carriers will provide the ability to connect millions of devices using low-powered, wide-area network technologies. Although each individual IoT connection generates a relatively small amount of data traffic, the total demand from all of these devices creates a long-term, stable revenue stream for companies.
In terms of how IoT affects broadband businesses, IoT moves growth metrics from subscriber accounts to the number of active connections per user and per enterprise.
