Here’s How 2G/3G Shutdowns Will Affect Operations Leaders at MSPs and ISOs

The word “sunset” generally conjures up mental images of a shimmering sun slipping below the horizon in a vibrantly colored sky. But in the context of technology, the word may surface less pleasant memories for merchant services providers (MSPs) and independent sales organizations (ISOs): the sometimes-uphill battle to help customers understand the need to upgrade technology that, to them, seems to work just fine, and the mad scramble to replace or reconfigure customers’ hardware or software before the end of its useful life.

For operations leaders in the payments industry, memories like these are being made right now. A host of cellular providers and telecommunications companies across the globe have announced plans to sunset their existing 2G or 3G networks and shift to 4G LTE. Each of these carriers is working off a different plan and a different schedule, sometimes based on the country in which they operate, but the point is: Many network shutdowns are coming in the next year or two — and they will impact millions of 2G and 3G devices of all kinds, including point-of-sale (POS) terminals.

POS terminals contain modems that cannot connect to all generations of network, particularly older devices. If an organization’s terminal estate in a country with an approaching network shutdown includes POS terminals that do not support 4G, they will need to be swapped out with solutions that do — sooner rather than later, to avoid some of the potential challenges of reterminalization.

Before I explain some of the potential challenges facing operations leaders at MSPs/ISOs, let’s look at why this is happening in the first place.

Oftentimes, cellular carriers turn down a wireless network generation because they want to concentrate investment on other networks and reallocate spectrum capacity, often to more advanced networks like 4G. It’s also more cost-effective for them to operate on 4G LTE than on 2G or 3G because more devices can share the available spectrum.

A carrier usually shuts down the oldest network it operates, but not always. For example, legacy machine-to-machine (M2M) devices, such as older POS terminals, rely primarily on 2G. Some telecom providers with a significant M2M service base thus are opting to maintain their 2G networks, instead shutting down 3G to make room for more 4G LTE devices.

Additionally, because every country has its own regulations for the spectrum and mobile services, carriers in some countries are obliged to shut down an older network to comply with government regulations (in other countries, regulations might mandate that carriers maintain it).

So, what does all of this mean for payments terminals running on networks that are, or soon will be, reaching their end of life? 

Contrary to what the term “shutdown” implies, sunsetting a network generation doesn’t happen with the flip of a switch. Once a carrier announces an official deadline for a network’s end of life, the clock has started ticking.

That means, as carriers begin sunsetting their 2G or 3G networks, they will “refarm” those network spectrums and move them into the generations they plan to keep. They may also stop investing in those networks (e.g., by not repairing tower receivers), especially the closer they get to their end-of-life dates.

This will increasingly degrade network performance over time as transition ramps up and more core coverage and capacity moves over. Eventually, quality of service will degrade to the minimum contractual commitment, and 2G or 3G payments terminals dependent on guaranteed connectivity may no longer function as intended. This intermittent connectivity can disrupt business and create major issues for merchants, whose revenue depends on being able to accept card payments via terminals.

For operations leaders at MSPs/ISOs, the coming network sunsets will create different kinds of challenges.

The closer it gets to a carrier’s network end-of-life deadline, the more calls about intermittent connectivity interruptions that support teams will have to field and address, increasing their workload. Field technicians also will be the ones replacing all legacy equipment ahead of a network shutdown. MSPs/ISOs thus need the staff resources to expediently replace older POS terminals, ideally before customers begin experiencing issues. Service delays that lead to serious connectivity issues may erode customer trust and lead to loss of business.

Yet some organizations are running leaner than they were pre-pandemic, headcount-wise, to ease the pain of reduced revenue during COVID-19. Budgets are still tight for many, and may remain so for some time. Operational leaders will need to carefully balance company budget and customer expectations to ensure the organization has the staff resources to handle legacy equipment replacement in addition to standard installations.

Another bit of fallout from the pandemic: Factory shutdowns over the course of COVID-19 have led to a global shortage of semiconductors, which POS terminals need to function. Around the world, manufacturers are having difficulties securing supplies of semiconductors, which in turn delays the production and delivery of goods. Experts predict the shortage is likely to continue through 2021, coinciding with many global carriers’ 2G/3G sunsetting timelines. That means the closer a network gets to its end of life, the harder it may be for MSPs/ISOs to acquire the equipment they need to replace their customers’ terminals in time.

These factors make it clear: MSPs/ISOs whose terminals will be affected by a carrier’s network generation shutdown need a transition plan for their customers, if they don’t have one yet. In fact, even those in regions where carriers are not shutting down 2G or 3G need to consider what they might do when or if that day comes.

Some considerations for operations leaders include:

The transition process won’t be a simple one, and it will come with some headaches. But operations leaders still have time to get ahead of things. A solid transition plan will help to mitigate some of the coming challenges for their customers — as well as themselves — and provide for a smoother migration.

Please leave this field empty.