Will Cell Towers Matter More to GDP Than Public Transportation? Only if Telcos and Governments Work Together

August 14th, 2020 by · Leave a Comment

This Industry Viewpoint was authored by David Drai, CEO of Anodot

As the global economy has witnessed drastic changes in 2020, both in our personal and professional lives, telecom operators and governments around the world now need to rethink their infrastructure investment strategy going forward.

In particular, one of the second-order effects of COVID-19 is the need to shift investment from physical to digital infrastructure. In the past, one strategy that governments have used to improve GDP may have been to invest in improving public transportation and reducing traffic loads to make commuting to work more efficient. As governments start to shift their national budgets towards supporting digital infrastructure, telecom operators must share in this growth by aligning their investment strategies with the national agenda. This includes investments in areas such as rural broadband access, 5G networks, and artificial intelligence.

Of course, investing in physical infrastructure will always remain important, but now more than ever telecom organizations need to take an active role in shifting towards investing in digital infrastructure to enable people to work from home, generate income online, and stimulate the economy.

For example, companies that facilitate virtual infrastructure in the workplace — such as Zoom, Slack, Monday.com — have seen huge growth in the past several months. While these companies certainly help facilitate remote work in the virtual economy, there’s still a need for telecom organizations to support investments in new technologies and increase mobile and broadband access.

As VMware’s CEO Pat Gelsinger said at Bank of America’s 2020 Global Technology Conference:

“Wherever GDP is, tech will be better, and software and cloud will be better than that”, Gelsinger said. “This is a permanent change...we’re not going back.”

5 Technological Trends Driving Change in Digital Infrastructure

As telecom organizations continue to play a large role in working with their governments to drive digital infrastructure and innovation, there are several areas that will be essential to GDP growth going forward.

  • 5G Networks: As described in the OECD’s paper on the road to 5G networks, this next generation of wireless networks is intended to process information 200 times faster and have 1/10th the latency. This report also explores that 5G has the potential to shift the telecom paradigm, as it’s the first standard built with the Internet of Things (IoT) in mind.
  • Internet of Things (IoT): Alongside the development of 5G networks, IoT requires metrics to assess its effectiveness in various policy areas. The OECD’s paper on IoT measurement and applications explores these challenges associated with the exponential growth of IoT devices. Similarly, GSMAs paper on the Mobile Economy highlights that between 2019 and 2025 the number of global IoT connections will nearly double to ~25 billion and global IoT revenue will triple to $1.1 trillion.
  • Broadband Access in Rural & Remote Areas: As the world was thrusted into the virtual economy in 2020, many rural and remote areas have experienced a significant disadvantage in terms of their broadband access. The OECDs paper on bridging the rural digital divide explores technological trends that can improve this with fibre optics, coaxial cable, as well as satellites and hybrid approaches.
  • Artificial Intelligence: With the proliferation and acceleration of data creation, many telecom companies have turned to AI and machine learning to monitor and gain insights from their vast troves of data. From improving the customer experience to monitoring network stability, AI presents a unique opportunity for countries, companies, and individuals to adapt to the aforementioned changes in the workplace. For example, smart manufacturing, predictive maintenance, and AI-based analytics will be integral to stay competitive in the global economy.
  • Big Data Centers: Alongside the growth of the above-mentioned technologies comes the ever growing need for big data centers. According to the advisory and intelligence firm Arizton, the global data center market is expected to reach revenues of $174 billion by 2023 with a CAGR of 4% from 2018-2023.

For telecom organizations, understanding and addressing the technological trends that are driving digital infrastructure investment is only part of the equation. They also need to consider the mobile economy.

How The Mobile Economy Drives GDP Growth

Access to reliable mobile broadband has the power to generate extensive benefits to both social and economic growth. As the GSMA Mobile Economy report highlights, however, these changes can only be realized when telecom organizations receive active participation and support from governments and regulatory bodies.

The Mobile Economy report goes on to highlight the significant contribution that mobile makes to the global economy. In particular, mobile contributed $4.1 trillion of economic value globally in 2019, representing 4.7% of global GDP. This figure is expected to reach $5 trillion by 2024 as countries continue to invest in mobile infrastructure.

Aside from purely economic benefits, access to mobile is increasingly being used for societal and individual life-enhancing services. These services all contribute to achieving the UN’s Sustainable Development Goals (SDGs), a few examples of which include:

  • Access of education: Reportedly, 1.4 billion mobile subscribers use their phone to access education for themselves or their children.
  • Financial inclusion: Access to mobile money has increased to 1 billion registered accounts in 2019, reducing financial exclusion in low-and-middle income areas.
  • Energy efficiency: Aside from individual benefits of mobile, the aforementioned new technologies such IoT, 5G, and AI are all helping build the next generation of smart cities, while reducing pollution and increasing energy efficiency.

There’s also an economic benefit that telcos can realize from the increased productivity and efficiency of workers due to the increase in speed and accessibility of mobile services. In particular, there are three metrics that highlight the expanding benefits of mobile access:

  • Connectivity gap: In the last five years, nearly 1 billion more people are covered by mobile broadband networks. The report highlights that, aside from infrastructure, a key part of continuing to close this gap is improving the affordability and availability of local services.
  • Coverage gap: 2019 saw an increase of 260 million people connecting to the mobile internet for the first time, increasing the total to roughly 49 percent of the global population. The people who have yet to connect fall into two categories: ‘uncovered’ and ‘covered but not connected’. Those who are still ‘uncovered’ represent the coverage gap, which will require infrastructure investment from governments and companies to close.
  • Usage gap: The usage gap refers to those who are ‘covered but not yet connected’. As mentioned, this means that aside from infrastructure, improving this metric will require both increased affordability and local accessibility of services.

The report goes on to highlight four vital areas for policy makers and telco operators to focus on in order to accelerate digital development, which are:

  • Network performance and reach
  • Spectrum policies for the 5G era
  • Capitalizing on the 5G opportunity
  • Ensuring consumer trust

As we’ve seen, with all the changes to the global economy comes the need for telecom organizations to take an active role in policy change and infrastructure investment strategies.

Investing in new technologies that support the digital economy such as 5G, IoT, and AI will certainly be important for driving GDP growth. In order to realize the potential of these new technologies, however, telecom organizations need to align with governments and regulatory bodies to increase access to broadband for both economic and social purposes.

Only with combined effort between the public and private sectors will countries be able to accelerate digital infrastructure development and drive GDP growth.

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Categories: Artificial Intelligence · Industry Viewpoint · IoT, M2M · Wireless

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