Infrastructure funds are deploying considerable amounts in a field they now consider part of their core portfolio. Institutional investors, including many pension funds, are now keen to back digital infrastructure such as data centres. It’s no longer possible for governments, financial institutions, businesses or individuals to imagine operating in a non-digital world.
And as the ways in which we work and live continue to be transformed by the ever-increasing use of data, automation, AI, robotics and greater connectivity, the importance of a reliable and resilient network – regardless of location or population density – is increasingly apparent.
The technology required for such a network ranges from data centres through fibre optic cables, mobile phone towers and wireless equipment to satellites. Much of it will – as in the energy transition – be funded by the private sector.
The cost of connectivity
There is still, however, a digital divide. Communities lacking dependable broadband connectivity were ‘left behind’ during the pandemic. As Ada Cerne notes, the realisation of this brought digital connectivity to the forefront of investment programmes in many advanced economies, which began rolling out towers, fibre and fibre- to-the-home in rural areas and isolated communities with renewed vigour.
It also exposed the growing inequalities and disparities in connectivity between developed and developing countries. With many countries lacking a comprehensive modern telecommunications infrastructure, the universal provision of good quality broadband would have a significant cost. The IMF has calculated that around USD 418 billion would be needed to connect all unconnected citizens globally.
Given that price tag, the digital divide between advanced and developing economies looks set to widen still further with the adoption by the former of technologies such as 5G.
Regulation in transition
While the pandemic stressed the critical nature of the network and its need for resilience, the war in Ukraine has furthered the debate on how to keep it safe from interference. Whether the information in data centres belongs to governments, public bodies, businesses or individuals, it has to be secure. (Military and security organisations themselves, of course, have additionally exacting standards and network requirements.) This means that investors in digital infrastructure may not only have to consider issues around data privacy and security but may also face regulatory regimes governing the ownership of critical infrastructure such as the network and its elements.
However, while some countries already have foreign investment control mechanisms in place or plan to introduce them, in some jurisdictions they are not even under consideration. Overall, the current situation is a hotchpotch of complex and highly political processes and laws.
Securing the future network
To provide the safety and resilience needed for a network that is essential to daily life, the equipment supply chain needs to expand beyond the relatively few providers that currently underpins today’s network.
One possible solution to this security problem is the Open Radio Access Network (Open RAN). The goal of Open RAN is to separate the wireless network into interoperable parts, thereby fostering competition and innovation among the existing providers and potential new entrants and marginalising the risk of breach by multiplying the number of actors and limiting the impact of a breach on a single one of them. By promoting interoperability, network operators can build the best network solution for their service area rather than accepting the offering of a single supplier which may not be wholly fit for purpose. States and supranational organisations see this meanwhile as a means to strengthen the network.
Achieving Open RAN is a technologically complex undertaking which will transform the current network. While this is still at trial stage under the watchful eye of governments which are pouring funds into it for this purpose, the investment required to build the new physical infrastructure will be significant. Towers – or at least the equipment on them – will need to be upgraded. Additional fibre will need to be installed, both as backhaul and direct service to home and businesses, and new sources of funding will be needed.
It seems increasingly possible that the existence of the reliable and resilient network imagined above – fit-for-purpose, secure and reliable – will be determined on a country-by-country basis rather than globally.
