Covid Recession Changes Very Little About Mobile Business

It is hard to see any long-term change in demand for mobility, smartphones or wireless in the wake of the Covid pandemic, anymore than it is possible to pin big shifts in demand to the internet bubble and recession of 2001 or the Great Recession of 2008. A shallow, short dip in revenues for service providers or phone manufacturers can be seen, but no fundamental reduction of demand after the recessions ended.

Economists might argue about the long-term effects of a major recession, though the near-term impact is normally a reduction in demand. A bigger issue is the effect on medium-term demand, and there is some evidence that a big recession depresses overall demand even eight to 10 years beyond the recession. 

But technology substitution and new product demand might have greater impact than any recession, no matter how severe, and that has arguably been true in the mobility business.

At the time of the internet investment bubble (2001), U.S. smartphone use was close to zero, as was use of “broadband” internet access services. Usage of both accelerated rapidly after the bubble burst. 

At the same time, fixed network voice demand began a sustained fall, suggesting that mobile voice had become the substitute for fixed network alternatives. Complicating matters was that a huge change in mobile voice pricing happened in 1998, when AT&T introduced Digital One Rate.

That new plan by AT&T Wireless drove rapid mobile adoption by consumers by revolutionizing the way consumers paid for--and how much they paid for--long distance calling.

The Digital One Rate pricing plan for mobile users priced all domestic calls at 10 cents a minute. That Digital One Rate plan effectively erased the distinction between local and long distance calling and provided a major incentive for consumers to buy mobile service as a way of controlling their long distance calling costs, which might have been 25 cents per minute or higher at the time.

In other cases a big recession does not necessarily seem to have changed behavior. Consider the smartphone. In 2001, when the internet bubble burst, smartphone adoption in the United States was very close to zero. Six years later, adoption still might have been in the 2.6 percent range. 

Not until about eight years after the internet bubble burst did smartphone adoption began its rapid ascent. That suggests the dot.com bubble did not cause the smartphone trend. 

source: Asymco 

Nor does the 2001 recession seem to have caused or accelerated the use of mobile phones in general. That trend was already strongly in place before the disruption. 

source: Harvard Business Review 

Likewise, many would note the more-rapid shift to cloud computing in the wake of the Great Recession of 2008, partly explainable by greater use of cloud-based conferencing apps, for example, and the need to support remote workforces, which, if nothing else, increased demand for cloud-based collaboration apps. 

Still, the turn of the century (with the internet bubble burst happening in 2001) also saw rapid adoption of many technologies even by “laggard” demographic groups. It may shock you, but an analysis by the Pew Research Center claims that senior adoption of “home broadband” was virtually zero in 2000. 

We can assume that huge adoption behavior was driven by the new perceived value of apps, content and services enabled by the internet. It is harder to view such growth as an outcome of the dotcom bubble. 

Social media exploded about 2008, the same time as the Great Recession. But it is impossible to conclude that the Great Recession “caused” the big upsurge in social media usage. 

source: Pew Research