How to build a digital infrastructure that benefits emerging economies

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum. Author: Sunil Bharti Mittal,  Founder and chairman, Bharti Enterprises

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Digital connectivity is increasingly a pivotal force in the evolution of society and the economy. The momentum of the broader economy in developed countries is now acutely dependent on their digital infrastructure. Developing countries, on the contrary, struggle to realize their enormous economic potential because of weak digital infrastructure and poor adoption rate because of a weak affordability index.

The importance of digital infrastructure to emerging economies cannot be overemphasized. The real opportunity for these countries is that they can leapfrog legacy technologies. Investments in a digital system may be front-loaded in nature, which can be challenging in the short term, but if these countries’ governments enable a supportive regulatory environment and an appropriate financial incentive structure they can encourage investment in the sector.

The right policy environment and collaboration with stakeholders are essential to a fast rollout of the necessary infrastructure. Governments not only have to ensure the timely release of spectrum but also ensure it’s at the right price. The cost of spectrum will ultimately have a bearing on the affordability of the services it enables. As such spectrum pricing should be determined by the unique affordability quotient of the market in question. Equally, maximizing revenue should not be the predominant guiding force for policy-makers in these markets. Such an approach would not only inhibit the rate of digital adoption but also seriously affect the ability of operators to invest in new networks.

Public policy additionally needs to encourage stakeholders to pursue collaborative business models to encourage greater use of the infrastructure and to help expand the demand for digital services across different sectors of the economy. Given the broadening scope of digital services, it’s also imperative to modernize policies and regulations to encourage investment and innovation throughout the digital environment.

The face of the communications industry has changed dramatically over the years, riding high on the twin pillars of innovation and collaboration. The private sector has played a big role in both. Innovation has been a direct offshoot of market competition, while collaboration among industry participants is well and truly a result of strategic foresight and progressive thinking that keeps wider industry issues in perspective. Strategic collaboration, such as passive infrastructure sharing, has rapidly reduced the cost of rollout.

It’s now time to move to the next level and share active infrastructure through the formation of network companies. This will help to release more investment for market expansion and ensure a better customer experience. The private sector will also have to experiment with innovative funding and market access mechanisms to promote market-based infrastructure investment.

Driving the penetration of digital services in emerging markets is a two-headed challenge: firstly, there is the low purchasing power that leads to low ARPUs; secondly, there is the absence of vernacular language applications which inhibits adoption. A vibrant, local application system focused on solving local needs is imperative. Over and above helping to create vibrant infrastructure, government and regulators will have to focus on activities across the digital value chain, taking a comprehensive view of the sector.

The US-China confrontation over trade and for technology supremacy has left everyone wondering about its impact on the evolution of the digital environment. Given the early stage of their digital evolution – both in terms of infrastructure and adoption – emerging economies will be better served by staying clear of this contest for supremacy and should take decisions that are in their own long-term interest.

India with its large market size – for both network equipment and handsets – has historically played an important role in shaping the global digital market by providing scale. As the global market shifts gear from 4G to 5G, significant, emerging markets like India will play a critical role in setting the pace and direction of the market’s evolution.