Until recently, the business model was fairly straightforward. Residential customers paid for broadband and used it largely for entertainment and some browsing and schoolwork. This model has now been turned on its head because of the COVID-19 crisis. Home broadband is suddenly used for online education, work from home, telehealth, and myriad other applications. During the first few months of the pandemic, people rushed to either sign up for broadband or to upgrade their connectivity, a boon for broadband service providers.
Although some of these trends are temporary, early indication and research point to the long-term sustainability of at least part of these trends. Already, new business models and solutions are emerging that incorporate elements of the virtual world into the physical world. In healthcare, for example, telehealth has been adopted on a substantial scale during the pandemic. According to a McKinsey study, 46% of US consumers are now using telehealth, versus 11% in 2019. The healthcare industry is already exploring how to make virtual care a viable long-term component of care delivery.
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As consumers use their home broadband for services such as virtual healthcare or remote work, are they responsible for paying for the broadband that supports the delivery of such services? Let’s take the example of a person insured by Medicaid; this is likely a lower income individual for whom home broadband is expensive, possibly out of reach. Should the healthcare payor that is insuring her on behalf of Medicaid provide a subsidy for broadband? What about the home worker, whose company authorized a work from home arrangement partly in an effort to reduce operating costs? Perhaps this worker’s job requires extensive broadband utilization for AR/VR capabilities and value-added services such as security and so on.
A pattern is starting to emerge where home broadband (and perhaps devices and other equipment) is subsidized by a third-party, such as an employer, a medical provider, an educational institution or other. However, how these subsidies are delivered is far from clear. For example, a behavioral health provider in North Carolina who serves a lower income population provided free cellphones to some patients in an effort to continue their care during the COVID crisis. They had to provide these patients with free unlimited wireless broadband. Although the pandemic makes such initiatives necessary, such models are not sustainable over the long term.
It is likely that more nimble business models will emerge; for example, broadband could be purchased by third parties and bundled with some applications. These are early days, but there will be disruption ahead. Operators and vendors that will win are those that are already laying the foundation for meeting the needs of a fast-changing marketplace.
