The trend of relying on the internet has long been established. But the fear and uncertainty caused by the COVID-19 coronavirus pandemic has changed the landscape of how we communicate and dramatically increased our dependence on digital platforms, which is a portent of the digital future, Digital Colony Partners CEO Marc Ganzi said in a keynote address at the Connectivity Expo this week.
“Without today’s technology, social distancing would have meant isolation,” Ganzi said. “COVID-19 has changed the way we work and connect while accelerating the trends underlying persistent demand in digital infrastructure. All aspects of our personal lives and professional lives and consumer lives have been affected.”
Ganzi gave hard proof of the increased pressure on networks. He said that in April, AT&T reported a 25 percent increase in its baseline traffic. Traffic grew 50 percent for Vodafone in Europe in March. In response to the increased demand, Verizon saw data usage increase 115 percent for gaming, 49 percent for virtual private networking, 36 percent for video, 37 percent for internet, 25 percent for voice minutes and 39 percent for downloads. He said that T-Mobile experienced usage increases in Multimedia Messaging Service of 77 percent, smartphone hotspots 38 percent, messaging of 26 percent, gaming of 45 percent.
“Network traffic has increased with carriers reporting significant surges in their traffic,” Ganzi said. “This is a significant amount of growth in network traffic. The velocity of the change is astounding.”
Networks will need access to increased capacity to handle the deluge of data, as network demand becomes mission critical. This will call for increased investment in the entire digital ecosystem, Ganzi said, with workloads moving from the core to the perimeter of the network while drawing increased infrastructure investment into edge computing.
“As the pandemic puts high workloads on the network and data usage requires more bandwidth, additional digital infrastructure is needed for these unprecedented times,” Ganzi said. “Currently, there is no off-peak time. All day is peak hours for carriers, operators and content providers. Edge computing and small cells play a big role in making sure that video conferencing and video streaming and other online service platforms perform as needed.”
Operators have reacted to the data usage by increasing capex. For example, Verizon has added $500 million to its budget. These pandemic-related expenditures come on top of investments already sunk into the 4G/5G buildout.
“Couple the digital transformation to 5G and the effort to deal with the capacity impacts of today and you have, simply put, the perfect storm for digital and for digital infrastructure,” Ganzi said.
Ganzi provided some more statistics on the increased use of various digital platforms. He said the total active users of Zoom in March 2020 rose to 200 million, compared with 10 million in December 2019. In March, total messaging on Facebook rose 50 percent from the previous month. Microsoft Teams added 12 million daily active users, bringing its total to 55 million total users. In the first quarter 2020, Ganzi said, and Netflix more than doubled its expectations with nearly 16 million additional paid users. “Every part of the ecosystem has been tested like never before,” he said.
Tower stocks have done well since January, although the broader stock market has foundered. As of April 23, SBA Communications was up 26.9 percent, Crown Castle International was up 13.7 percent and American Tower was up 6.5 percent, while the NASDAQ stock market index was down 3.8 percent and the S&P 500 index was down 12.2 percent. Public data centers have also achieved double-digit stock increases in the first four months.
“Overall, publicly traded digital infrastructure stock has continued to grow and outperform the market during the pandemic,” Ganzi said. “Mobility is central to our economy and digital infrastructure has a record of resilience in times of crisis and we believe it will grow. We experienced stress during the Dot-Com crash and in 2008-2009. Towers have never been put to the test like today, but our asset class is resilient.”
Global mobile data usage is expected to grow four times by 2025, spurred by increased smartphone adoption and the availability of affordable high-speed network services. Global mobile capex spending of $1.1 trillion is projected to be invested worldwide between 2020 and 2025, roughly 80 percent of which will be in 5G networks. To meet that growth demand, digital infrastructure will need to converge, Ganzi said.
“The evolution of digital infrastructure into a converged ecosystem will be necessary to absorb the data tsunami,” Ganzi said. “As the need for capacity grows, the digital infrastructure sector — towers, data centers, small cells and fiber — will enter the zone of market convergence and the need for digital infrastructure neutral-host operators, such as Digital Colony, will increase.”