Friday, December 16, 2022

When Advanced Infrastructure Does Not Drive Economic Growth

Even if a next-generation mobile network is launched about every 10 years, the actual lifespan of any particular generation can extend for a few decades, in part because the legacy network has value even after the next generation starts to be commercially deployed. 


Also, any new next-generation network is adopted first in some regions and later in others. 


source: Ericsson 


5G,for example, is most available in Europe, North America, East Asia and parts of the Middle East. 5G should then roll out on a wider basis to India, Southeast Asia, Latin America, Eastern Europe and Sub-Saharan Africa.  


But 4G will still be a significant commercial network by about 2030 in many of those regions. 


That is true of almost all fixed network deployments as well. Within any single country, deployment begins first in the urban areas and suburbs. Only later does service appear in smaller towns and then rural areas. 


Some might be tempted to argue that if 5G deployment were to happen faster in a trailing region, that economic outcomes might be significantly or notably higher. The theory will always be hard to validate. 


Historically, next-generation networks are built where the demand is greatest, and the payback easier. That is the urban and suburban regions of any country. Such regions of countries already have customer density and economic activity levels that make adoption more likely, as well as typical recurring revenue levels that are more favorable than in rural areas, generally. 


In other words, advanced networks are built where the greatest chance of early financial returns are possible. Deploying such networks first in the most-difficult places is risky, as it delays a return on investment. 


By analogy, we might also argue that deploying a next-generation network in a low-density, rural area with few enterprise customers and less economic activity overall than an urban area is quite unlikely to result in near-term boosts of economic activity. 


In other words, the argument that better broadband or the latest mobile network will lead to higher economic growth is questionable. Growth happens in urban areas in part because the population is greater, hence all markets and the volume of economic activity are bigger. 


Simply building high-quality home broadband or the latest-generation mobile network in a low-density area with relatively-little existing economic activity will not change matters, in and of itself. 


Normally some level of subsidy is required, and even then, the outcomes desired are more along the lines of social inclusion rather than serious expectation of a dramatically-changed economic growth rate.


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