To understand why, one need only look at the world’s broadband networks, the rising tide of data flowing through and across them, and the business and social benefits they will deliver if the right policies are in place.

 

Worldwide internet use is exploding, driven by mass urbanization, a growing middle class in Asia and Latin America, and cheaper mobile devices. This has triggered a deluge of data traffic, which is expected to rise by 34 percent this year alone for fixed broadband, and 84 percent for mobile.

 

These waves of data have the potential to generate significant commercial and economic development. Studies have shown that a 10 percent rise in broadband penetration can lift GDP by 1.2 to 1.4 percentage points in low-, middle-, and high-income countries. A doubling in mobile traffic can raise per-capita GDP by as much as 1.5 percentage points.

 

Meanwhile, more than four billion of the world’s roughly seven billion people remain offline. Changing that situation would create innumerable business opportunities, fuel innovation in commercial services and business models, and gives people access to information, education, entertainment, and government services delivered online. It would also contribute further to the global surge in data traffic.

 

To keep pace, the world needs new investment in broadband infrastructure. Yet the companies that operate broadband networks face stiffening competition that makes such investment burdensome, and in some cases impossible. Ovum, a consultancy, predicts that in the five years from 2013 to 2018, free IP services will siphon off $386 billion in revenue the world’s telecommunications carriers would traditionally have expected to receive.

 

Moreover, in regulated telecoms services, profits are capped but costs are not. As traffic volumes multiply, demand is growing for improvements that will allow networks to transport larger volumes of data, faster. That costs money, at a time when operators’ revenue is coming under immense pressure. As a result, the only industry players capable of making investments in networks are often being discouraged from doing so. At some point, this business model simply breaks down. A new one – which encourages innovation, and promotes the development and adoption of broadband networks – will have to take its place.

 

Policy that keeps pace

 

The right regulatory frameworks can help bring such a new model into existence. In Europe, for example, a program of liberalization begun in the late 90s triggered a wave of modernizing investments that greatly increased overall network capacity. Since then, however, competition has squeezed margins, leaving many operators to consider in detail the case to invest in new and better infrastructure. Meanwhile, data traffic in Europe is expected to grow at a compound rate of 50 percent a year between 2013 and 2018.

 

In many countries, such as India, spectrum is another key issue where the right regulatory policies will help pave the way toward modernization and growth. Spectrum is the basis for mobile broadband, the platform for many of the 4.5G- and 5G-based services that will emerge in the next four to five years. Without adequate spectrum, countries will be unable to capitalize on the new business models that 5G will help create.

 

Over the next five years, most countries will need to increase their available spectrum by anywhere from 50 percent to 100 percent. In India, where competitive bidding is designed to maximize the cost of spectrum adding to the challenge of the business case to proceed, regulators must act decisively or risk jeopardizing the health of the national economy.

 

The solution is “adaptive regulation” that keeps pace with changing technology. For example, policymakers historically have focused on ensuring network access. Yet price regulation seldom takes into account the cost of making ICT networks resilient and robust. Investments in resilience are vital; without them, networks become insecure, and data vulnerable.

 

Regulators and other industry players must work together to create the conditions where network operators are willing and able to make the necessary investments. Countries that succeed in doing this will reap numerous benefits, including the ability to offer innovative new services and integrate more firmly into the global value chain.

 

A host of new technologies are increasing society’s dependence on the network: cloud computing, big data, the internet of things, driverless cars, augmented reality, 3D printing, robotics, and remote healthcare delivery, to name a few. This dependence will only deepen with time. In a precarious and unevenly developed global economy, a fresh round of investment in broadband infrastructure could provide a shot in the arm – not only to developed markets, but to underserved constituencies in poorer countries as well.

 

Regulation either encourages investment or impedes it; there is not much middle ground. Among telecoms carriers, incumbent operators are the main investors in network infrastructure. If their incentives to invest are degraded, the network may languish, causing the digital divide to widen and societal inequity to grow.

 

With 5G rollout expected to begin in 2020, regulators have about five years to safeguard the next phase of the digital revolution. Their aim should be to lay a solid foundation for the next round of growth by creating policies that encourage innovation and promote the development of broadband networks. While some of today’s policies made sense when they were enacted, they have become outdated over time. Regulators must immediately begin designing a framework that creates a win-win environment for the future, encouraging operators to make the investments that will benefit all of society’s Internet users in the years ahead.

 

By Joe Kelly, head of International Media Affairs at Huawei Technologies.

 

This article has also been published in ‘Telecom Lead’.