San Francisco - Bay Area
The Internet is the essential infrastructure of the twenty-first century. It is as revolutionary in its effects on how people live, work, play, and interact as transportation, energy, and telephony were in the past. For billions of people already—and for billions more to come—life without digital interaction is all but unthinkable.
But suppose the unthinkable were to happen. Imagine that the infrastructure fails. Picture a bridge with a fractured support. Or a pipeline slowed to a trickle. Or an electrical grid that functions only intermittently. Such infrastructure-related realities occur all too frequently—and they represent big daily headaches and economic impediments for the people who must contend with them.
The costly and complex infrastructure that carries the traffic to make digital services possible is hardly immune to similar headaches and impediments. As the World Wide Web passes its twenty-fifth birthday, the volume of traffic that its infrastructure must carry is exploding at an exponential rate. This infrastructure is under strain; it needs investment and maintenance. It has limitations in reach, penetration, and capacity that can only be overcome through innovations. Perhaps most important, it needs the continuing collaboration of its own ecosystem of participants—companies, governments, users, and other parties—to keep pace with the increasing demands being placed upon it.
A new report by the World Economic Forum, written in collaboration with The Boston Consulting Group, Delivering Digital Infrastructure: Advancing the Internet Economy, is the first to undertake a comprehensive examination of the present threats to digital infrastructure with input from representatives of all affected stakeholder groups. These stakeholders include communications services providers (CSPs), content and digital-services companies, and hardware manufacturers active in the U.S., Europe, Latin America, Africa, and Asia. They also include government representatives and NGOs.
Infrastructure does not get built without foresight, planning, investment, and innovation. Serious impediments are already limiting digital activity and interaction. Without concerted effort to resolve these constraints, they could intensify and threaten to undermine the continued rapid growth of the digital economy. The constraints include the following:
Internet-based economic activity is expected to reach $4.2 trillion in the G-20 nations by 2016, or more than 5 percent of GDP, and this does not include a whole universe of pursuits not captured in GDP figures. The digital economy is growing at 10 percent a year, significantly faster than the economy as a whole. About 2.5 billion people are connected to the Internet today, a third of the world’s population; there are projected to be about 4 billion users by 2020, or more than half the global population. Digital services are still in their youth. They have the potential to revolutionize entire industries—such as health care and education—with enormous social and economic impact. The quality, speed, and extent of connectivity will be increasingly important factors in business and economic decisions, including where companies decide to expand or locate new facilities. The degree and nature of the challenge varies by region, but the need for improved infrastructure to accommodate fast-growing digital growth is global.
The WEF report examines the interaction between the digital economy and the infrastructure that supports it. It identifies the major problems and issues undermining investment and innovation in infrastructure today and suggests solutions or avenues to finding solutions.
A key underlying premise—one that all participants involved in preparing the WEF report share—is that CSPs and content providers face a mutually dependent future. The more powerful and secure the digital infrastructure becomes, the more attractive and trusted digital services will be. And the more innovative digital services become, the more advanced the infrastructure will need to be. Policymakers, industry participants, and other stakeholders need to work collectively to do three things:
Policymakers and regulators will play an important role. They should release more spectrum, allow industry consolidation where fragmentation is limiting investments, and take actions to help create environments in which dynamic digital economies can flourish. There is also an imperative for private companies to act. CSPs need to adapt business and pricing models to encourage and monetize data use. Digital-services providers must recognize their dependence on infrastructure and consider building out their own networks if needs are not being met by others. All private participants should evaluate opportunities for greater cooperation—infrastructure sharing, innovative partnerships, greater public-private collaboration—when such cooperation can further digital-infrastructure development and growth that benefits the larger ecosystem.
As more people and businesses come online—and more companies invent more ways to serve their needs—the volume of digital traffic will continue to grow exponentially. Two questions need to be addressed with a sense of urgency. Can the infrastructure that we all now count on to carry all this traffic keep up? And who is responsible for making sure that it does?
Delivering Digital Infrastructure provides a framework in which the participants in the digital-services ecosystem can continue the process of developing answers.
ABOUT BOSTON CONSULTING GROUP
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
© Boston Consulting Group 2024. All rights reserved.
For information or permission to reprint, please contact BCG at firstname.lastname@example.org. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and X (formerly Twitter).