Analysys Mason expects telecom price increases will become a political issue in 2023, as operators look to counter increased operational costs.

“Operators will be under pressure from investors to raise prices in line with inflation – if not higher – to maintain their margins and to cover their own increased costs,” Analysys Mason Partner Tom Rebbeck explained to SDxCentral. “Increased energy costs are an obvious burden for operators, but the pressure on labor costs will also be high.”

Rebbeck referenced telecom giant Orange, which reported labor costs were its highest operating expense in the third quarter of 2022, accounting for 18% of revenue and 28% of operating expense.

On the public-sector side, “regulators will be under pressure from politicians to do what they can to keep any price rises in check," he continued, citing United Kingdom regulator Ofcom, which "announced that it was launching a probe into telecoms price rises. Politicians are also directly trying to apply pressure on telecom operators to keep prices down.”

Rebbeck cited recent meetings between the U.K.'s Department for Digital, Culture, Media, and Sport (DCMS) and telecom firms tied to pricing issues, and expects to see more of these interactions in 2023.

While this pressure will generate heat between public and private sectors, Rebbeck doesn’t expect there to be much backlash from consumers.

“[There] might be a few articles in newspapers – that sort of thing –  but the price rises in absolute terms are still much smaller than for other essential services," Rebbeck explained. "For example, Europeans are seeing energy bills that are thousands of [euros] higher this year than last, much more than increases in telecom bills. Even in percentage terms, the rise in telecom bills will be lower than the rise in food costs."

In an accompanying report, Rebbeck wrote “operators will also be pushed to introduce, and publicize, ‘social’ tariffs for consumers in financial hardship, especially for fixed broadband services.”

While Rebbeck hasn’t found price hikes to be directly correlated to digital divide challenges, he believes the issues are interconnected in that operators have been pressured to address the market more seriously since COVID-19 propelled online resources to becoming a necessity.

“The pandemic has obviously reinforced the importance of telecom's connectivity, especially for work and for schooling," he elaborated. "If family budgets are under pressure – from rising food bills, fuel costs, and so on – then clearly there will be less money for other services, like telecom. We are seeing operators under pressure to make these sort of social tariffs available, but also to do more to promote them and increase awareness."

Rebbeck’s outlook is backed by keynote speakers at this year’s MWC Las Vegas event where Verizon VP Phillip French stated “some of this segment [unconnected populations] does not trust yet that [operators] really are here to help.” French believes that the public sector needs to emphasize multiple choices for consumers to foster trust with remaining unconnected and underserved populations.

Despite these predictions, “it is important to say that telecom spend is always resilient, even when we have an economic downturn,” Rebbeck noted. “If there is a decline in spend, it tends to be less than the fall in GDP. But operators will be looking to cut costs.”

“We know at the start of the pandemic, many operators put together plans for radical cost-cutting measures. Mostly these weren’t needed as spend held up pretty well, but we may see some operators dust off these plans,” he added.