The Next Recession Will Not be Like the Covid Recession

 Are mobile services and home broadband now “recession proof?” Maybe “recession resistant” is a better characterization.

A recession will temporarily halt revenue growth patterns for most suppliers. The bigger question is “how much?” and “how long” the dip will last. 

The probable answers are that growth will turn mildly negative, with that trend lasting perhaps “12 to 18 months. In a worst case scenario of a major and severe recession, the revenue growth dip might be more severe, but probably would not last any longer than a mild recession would cause. 

To be sure, this story is cyclical, not secular; short term rather than long term. The exception to the general trend is the widespread economic shutdown caused by the Covid pandemic, which arguably increased the level of spending, most connectivity suppliers would say. 

Cyclical trends are those which correlate to business cycles while secular trends tend not to correlate. The amount of money consumers spend on various types of products tends to be cyclical: up in good times, down in bad. 

Secular patterns tend to persist across business cycles, such as more spending or engagement with digital products; greater reliance on remote or cloud computing; greater reliance on e-shopping compared to place-based retail. 

As recession looms, we’ll see many more stories about how consumers and businesses are reacting to recessionary conditions. As virtually always is the case, discretionary spending will drop. 

And the issue always is whether mobile phone service, home broadband or other connectivity services are more discretionary or more essential. The historical data suggests mobile phone service and home broadband are more “essential” than “discretionary.”

In recent recessions, consumer spending on mobility and home broadband has dipped, but only slightly. On the other hand, a severe recession, such as happened in 2002 and 2008, will cause significantly more disruption, doubling or tripling the percentage declines. 

Product	Percent Change During Recessions	Percent Change in Buying Behavior for Prior Recessions
Mobile Phone Service	-2%	-5% in 2002, -1% in 2008
Home Broadband	-1%	-3% in 2002, -1% in 2008
Video Entertainment	-2%	-5% in 2002, -1% in 2008

So much depends on the severity of the coming drop, though some (a minority) observers believe it is conceivable no drop will actually happen. Most observers believe a recession will happen, and the issue is whether it is a mild or severe. 

source: Recon Analytics

Some might argue that mobile service and home broadband are “recession proof.” Some might argue “recession resistant” is a better characterization.