9. Towards a Robust Digital Infrastructure
A large and complex ecosystem of companies and other entities compete, collaborate and cooperate to construct and maintain the interconnected network of networks that is the internet. The ecosystem works, and anyone can download a web page or video, or activate a mobile app, because of common standards and a shared understanding among participants of the benefits of a vibrant and growing economic system. With rapid growth, however, as well as big differences between where various players stand on the development path, individual interests inevitably diverge, and the shared understanding can start to fray. When companies lose the incentive to invest, for example, technological advancement slows. Essential processes such as spectrum allocation can be subverted. Governments can feel compelled to intervene in unproductive ways. Any of these actions can have an adverse impact that is felt throughout the ecosystem. Users and usage suffer. Services go un- or under-delivered. Growth slackens.
A clear understanding of goals and direction for the future can help overcome uncertainty and disagreement in the short term created by current challenges and emerging trends. Particular challenges and solutions differ around the world, but based on conversations with a wide range of players who will collectively determine how – and how well – the internet functions in the future, the understanding rests on three pillars:
- Commitment to actions that promote the long-term growth of the digital economy
- Removal of impediments to the expansion of digital infrastructure
- Modernization of policies and regulations to encourage investment and innovation throughout the internet ecosystem
1. Commitment to actions that promote the long-term growth of the digital economy
It is much easier to grow in an expanding market than in a stagnant one – especially if that stagnation is brought on by unnecessary action (or inaction). All of the participants in the digital ecosystem have a shared interest in its continued growth. They can take the following steps:
i. Governments, businesses, and other stakeholders should commit to long-term actions that promote growth of digital services and the digital economy.
All stakeholders can establish comprehensive, aspirational plans that lay out a path to broadband connectivity for all. Making expanded connectivity a reality requires a continuing commitment to investment and innovation by the private and public sectors – and an understanding of the importance of keeping digital traffic flowing. Governments in particular need to recognize the broader role that digital services can play in economic development and growth; the digital economy is much more than a potential source of tax revenues. Multistakeholder forums such as the April 2014 conference in Brazil on the Future of Internet Governance can help further this goal. Broadband targets and other digital goals need to be included in the UN’s post-2015 agenda of Millennium Development Goals.
ii. Establish international guidelines that enable the flow of data and services while recognizing privacy and security concerns.
This includes developing cybersecurity and privacy frameworks for data use that facilitate accountability and enforcement. Countries should also take steps towards establishing regional and international digital markets that remove barriers to cross-border trade and cooperation, enabling, for example, entrepreneurs to access international suppliers (such as cloud providers) and consumers to purchase products and services without regard to country of origin.
iii. Open doors (or keep them open) to international digital service businesses while promoting and supporting local initiatives.
The most important thing public sector participants can do is create investment-friendly tax, legal and regulatory environments for digital services. They can also commit resources to fund basic and advanced technical education, and take steps to deliver government services digitally and provide open access to government data to spur innovation. Public and private sector players can serve as catalysts. Private companies, particularly infrastructure providers, can help make it easy for consumers to access and use digital services.
2. Removal of impediments to the expansion of digital infrastructure
Ensuring a basic level of well-functioning, reasonably-priced digital infrastructure for consumers and businesses is an essential goal. Facilitating delivery of faster, more capable infrastructure is the appropriate next step. Removing policy, regulatory and financial impediments to the construction and improvement of robust digital infrastructure is critical to both.
Stakeholders should consider the following steps:
iv. Encourage technological and business model experimentation in infrastructure by removing barriers to innovation and encouraging local experimentation.
Policy-makers should seek to liberalize fixed broadband markets where adequate infrastructure-based competition exists, for example by allowing operators to set prices on fibre networks. They should allow experimentation with commercial IP interconnection agreements as long as they are fair and they benefit innovation and growth in the overall digital ecosystem. Restrictions on municipal and other local investments in high-speed broadband networks should be relaxed. Regulatory policy should permit new entrants and incumbents to use existing fixed infrastructure assets, such as utility poles and underground conduits, at fair prices.
v. Encourage stakeholders to pursue cooperative business models to achieve greater utilization of infrastructure and grow demand for digital services.
While competition will likely remain the dominant business model in most markets (as it should), companies in different segments – CSPs and content providers, for example – can also benefit from cooperating in areas that expand the digital pie by serving consumers better. Companies can pursue opportunities to reduce the overall investment burden by sharing infrastructure investments by mutual accord in areas such as equipment and spectrum.
vi. Experiment with innovative funding and market-access mechanisms to promote market-based infrastructure investments in emerging markets.
International as well as local efforts should focus on emerging markets and hard-to-reach areas where infrastructure needs are less likely to be addressed by commercial players. Governments, NGOs and businesses can experiment with funding and market-access mechanisms to promote market-based infrastructure investments in emerging markets. These explorations could be multi-party and could include shared infrastructure approaches based on commercial agreements that reduce the investment burden on individual participants.
3. Modernization of policies and regulations to encourage investment and innovation throughout the internet ecosystem
The policy-makers of the future must be able to tackle the challenges posed by the digital economy. They need to consider the impact of policies on the entire value chain, including telecommunications, digital services and media, and ensure that any regulations that are deemed necessary are applied with a light touch and restraint. Perhaps most importantly, policy-makers need to take into account how quickly technologies and the innovations they enable are evolving. Complicating matters is the fact that the internet is a global phenomenon, and many of the issues it gives rise to are also global in nature. These issues often require some form of global, coordinated solution. The following is recommended:
vii. Modernize policies and regulations to be light-touch in approach and supportive of innovation and investment across the entire ICT value chain.
Simple, transparent policies work best in fast-changing environments. Existing regulation should be reviewed for the possibility of reducing or eliminating rules that impede technological innovation and business model experimentation (for example, by relying on ex-post approaches where possible). Governments should avoid, or look for alternative approaches to, adding new regulations or expanding existing regulations to new sectors. In some instances, self-regulation can be a viable option in competitive markets. Governments should seek to develop policies that address issues at an appropriate geographic level (which, in some cases, will be international).
viii. Allow targeted consolidation of mobile operators to encourage service-level innovation in markets where fragmentation limits investments.
Policy-makers and competition authorities need to take a more comprehensive view of the mobile marketplace that includes both price-based competition and the benefits of improved infrastructure and services. To this end, competition authorities can take into account dynamic efficiencies (improvements in network quality and innovation, for example), as well as consumer prices, when conducting merger reviews. They can also include the impact of fixed/mobile convergence and growth of cable broadband when considering market definitions. They can allow for more consolidation in markets where competition is fragmented and take steps to facilitate swaps among operators that lead to efficient network footprints. They should allow sharing of infrastructure to encourage cost-effective coverage in lower-density areas.
ix. Release more spectrum for private sector mobile use and adapt allocation and utilization policies to encourage greater efficiency in its use.
Governments need to release additional spectrum for licensed and unlicensed use. They also should accelerate their approaches for spectrum harmonization to avoid unilateral band assignments by countries. Auction models can be modified to reduce the cost of spectrum, and secondary markets will enable spectrum owners to swap holdings to improve utilization and reduce costs. Governments at all levels can support experiments in alternative deployment models, such as small cells.
The digital economy will not stop or stand still. New technologies and services are already on (digital) drawing boards worldwide. The digital economy will continue to expand and generate growth. The only questions are where and how fast.
Lack of investment in infrastructure is an impediment, but barriers are never erected evenly. Some economies grow faster and more dynamically than others. Policy plays a role in determining which economies lead. Some companies and sectors are quicker to embrace technological and business model development, taking the risks that expand existing markets and create new ones. It is within the power of each of the digital ecosystem’s participants – public and private sector alike – to reap their own benefits while furthering the global investment and innovation necessary for continued expansion.