Connectivity and financing gaps: Assessing the challenge
By Maikel Wilms, Partner and Director, Boston Consulting Group (BCG)
The International Telecommunication Union (ITU) has set out to mobilize policy support and financing to give everyone in the world meaningful digital connectivity. Boston Consulting Group is helping ITU and partners across the global digital landscape assess and address this monumental challenge.
The Digital Infrastructure Investment Initiative (DIII), recently launched by ITU with leading development finance institutions, is centred around three key questions:
- How big is the gap in financing to connect everyone worldwide adequately for digital communications?
- What are the main challenges faced by countries in closing those connectivity and financing gaps?
- What financing mechanisms and instruments are available to unlock digital infrastructure investments?
Over the past few months, we have developed a methodology to address these questions in close collaboration with the International Telecommunication Union (ITU), leading development finance institutions, and various tech companies in the wider DIII Working Group.
Boston Consulting Group is a key knowledge partner in the DIII.
Inspiring cooperation
This DIII methodology is the result of vigorous multi-stakeholder collaboration. We hope it serves as a launchpad for cooperation, inspiring people across all sectors to tackle digital infrastructure challenges.
We hope to prompt leaders and decision-makers to act on deploying innovative financing mechanisms and solutions.
Understanding the global challenge
Today, nearly two-thirds of the global population lacks access to the Internet at sufficient speed. This issue is even more pronounced in low- and middle-income countries.
Closing the connectivity gap globally by 2030 would cost about USD 1.6 trillion, according to our high-level estimate derived from a project-based financing gap model.
To understand the populational connectivity gap, we defined ‘connectivity for all’ as wireless or fixed connections above 20 megabits per second (Mbit/s) and focused on the target of ensuring connectivity for 100 per cent of people by 2030.
How to close the connectivity gap
We identified five key drivers to reduce the persistent disparity in connectivity between high-income and lower-income countries:
- Building out new fixed broadband in urban areas, aiming to increase new fixed connections by 18 per cent.
- Expanding wireless networks, including mobile, fixed wireless, and satellite, by 32 per cent, mainly in rural areas.
- Extending the network backbone by approximately 1.7 million kilometres globally.
- Raising the capacity of data centres in low- and lower middle-income countries.
- Boosting the capacity of high-performance data centres in upper middle-income countries to support future data requirements.
Our estimate of USD 1.6 trillion represents the sum of both capital and operating expenditures for implementing all five drivers to address the connectivity gap.
Assessing challenges at country level
Together with our partners in the DIII, we have established a Country Assessment Framework to help identify the challenges individual countries face and initiate multi-stakeholder discussions on closing the connectivity gap.
By applying this framework, the DIII Working Group has identified five recurring challenges for many countries:
- Demand fragmentation, typically observed in less densely populated areas, often increasing the perception that universal connectivity projects are not economically viable.
- Core infrastructure gaps, including insufficient backbone and the lack of data centres.
- Unclear or unimplemented digital policies, often held up by capacity constraints, while country and regional strategies are absent, outdated or not embedded as enablers into key social development plans, such as in education and healthcare.
- Project execution risks, which can be substantial for projects requiring highly specialized technical capabilities.
- Country risk, a major roadblock for investment in developing markets.
How these challenges materialize still depends on the conditions in each country. But even with those varying contexts, we believe our methodology will help engage and focus a wide range of stakeholders on our 2030 connectivity target.
Identifying innovative financing mechanisms
Together with the DIII Working Group, we have identified innovative financing solutions that could help build out the world’s digital infrastructure. A platform for pooled investments, for example, could support into small and medium-sized infrastructure ventures, such as Internet service providers (ISPs).
At the opposite end of the scale, development finance institutions could make upstream interventions to mitigate currency risks and ensure funding is lined up when needed for projects to enable digital ecosystems.
Proactive collaboration
These are just a few examples of the potential approaches and solutions outlined in a DIII white paper: Digital Infrastructure Investment Initiative: Closing the digital infrastructure investment gap by 2030.
Each government, company or other stakeholder can reflect on how to customize and integrate these solutions for different operational contexts.
The proactive, collaborative approach is key to unlock tangible, impactful actions.
Together, we can close the digital infrastructure gap and bring the whole world online.
Header image credit: Adobe Stock
