Keywords

6.1 Introduction

Our economic and social interactions have become increasingly organised around digital information networks that connect people, processes, things, data and networks. Digital connectivity is, of course, a prerequisite for participating in a networked “knowledge economy”. In economic terms, digital connectivity brings together businesses and consumers via a web of sophisticated information and communication technology (ICT) applications, such as cloud computing, supply-chain and business-to-business networks (Canzian et al., 2019). However, the impact of digital connectivity extends far beyond the economic sphere. The potential societal benefits of digital connectivity are well illustrated in an EU context, where the European Commission has emphasised digital connectivity as a component of the European Pillar of Social Rights, a set of principles outlined by the European Commission in November 2017 which aims to ensure that EU citizens enjoy equal opportunities and access to the labour market, fair working conditions, and social protection and inclusion.Footnote 1 Furthermore, the availability of a secure and performant sustainable digital infrastructure is one of four pillars of the EU’s plans for Europe’s digital transformation by 2030. Indeed, the European Commission (2021a, p. 5) states.

It is our proposed level of ambition that by 2030, all European households will be covered by a Gigabit network, with all populated areas covered by 5G.

Of course, digital infrastructure aspirations are not confined to the EU. Policymakers across the globe have sought to harness the potential of digital connectivity to drive economic development and improve standards of living. However, while a growing body of evidence now documents the positive impact of digital connectivity across a number of different economic indicators, significant challenges continue to impede the delivery of comprehensive digital connectivity across all social groups and geographical contexts.

6.2 What Is Infrastructure for Digital Connectivity?

The definition of digital connectivity is widely debated. These definitions range across a socio-technological spectrum. For example, it can be defined as the relations enabled via digital media technologies (Ponzanesi, 2019) or as the deployment of broadband infrastructure and its quality (Digital Economy and Skills Unit, 2018). In many respects, both definitions are too narrow. The former does not allow for technologies other than digital media while the latter emphasises only one type of connectivity, broadband. Digital connectivity, as the term suggests, cannot be characterised in isolation but rather needs to be viewed as part of a wider digital ecosystem. It needs to accommodate a constantly evolving technology base and a wide range of use cases and contexts. As such, we use the term ‘Infrastructure for Digital Connectivity’ (IDC) in this chapter to mean the availability and access to infrastructure for using digital technologies.

While policy overwhelmingly focuses on the deployment and quality of telecommunications infrastructure, and specifically broadband, when referring to digital connectivity, this reflects a first world and macro bias. Firstly, it assumes uninterrupted power supply. Over 770 million people worldwide do not have access to electricity, and the overwhelming majority are located in rural areas, primarily in Asia and sub-Saharan Africa (IEA, 2020). As one observer noted: “without energy, the Internet is a black hole” (Rubin, 2017). Secondly, it assumes once telecommunications infrastructure is deployed, citizens and other social institutions will have access to the computing equipment and the skills to use this telecommunications infrastructure. As discussed in Chap. 2, this cannot be assumed. Finally, it assumes freedom to connect to the Internet. As well as inequalities resulting from the digital divide, access to the Internet may be subject to state control generally or in specific in specific contexts (Freedom House, 2020).

Against this background, and in the context of this book, towns play an important role in rural communities as (i) they are not only likely to have the prerequisite electricity supply but are more likely to have higher quality telecommunications infrastructure than sparsely populated areas, and (ii) public access to computer equipment and the Internet through civic buildings, libraries, Internet cafes etc. Table 6.1 below briefly summarises key terms and concepts with respect to IDC. For the most part, IDC comprises increasingly mainstream technologies e.g., fixed broadband, 2G–4G wireless networks, and Wi-Fi. However, frontier technologies such as solar photovoltaic energy are providing greater access to power in remote areas (UNCTAD, 2021), while next generation access (NGA) technologies such as 5G and artificial intelligence are dramatically increasing the availability and quality of broadband access. Furthermore, blockchain technologies are being deployed to enable distributed and shared broadband (Messié et al., 2019; Haleem et al., 2018).

Table 6.1 Key terms and concepts in Infrastructure for Digital Connectivity
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6.3 Economic Impact of Infrastructure for Digital Connectivity

In recent years, a growing body of research has sought to estimate the impact of enhanced IDC on economic activity. While headline Gross Domestic Product (GDP) data yields an aggregate estimate of IDC’s contribution to economic activity, research has increasingly sought to ascertain the channels through which this contribution emerges—be it at a household level or a firm level; also, at a variety of spatial scales, from local and regional upwards, as well as in distinct geographical and economic contexts. The picture that emerges when one goes beyond the aggregate economic level is one of marked social, spatial, and occupational unevenness in the impact of IDC on economic activity.

6.3.1 Macro-Level Economic Impact

A substantial body of evidence now indicates that increased broadband penetration is positively associated with growth in GDP (ITU, 2012; Minges, 2016; Bertschek et al., 2016). A number of cross-country studies focusing on the early 2000s pointed to a 10 percentage point increase in fixed broadband penetration yielding an increase in per capita gross domestic product (GDP) growth of 0.25 to 1.5 percentage points (Czernich et al., 2011; Qiang et al., 2009). However, studies that avail of more up-to-date datasets and longer time spans have produced a wider range of estimates. These studies have also coincided with rapid advances in broadband speeds and greater public investment in digital infrastructure. Koutroumpis (2019), for example, in a study of 35 OECD countries over a 15-year period (2002–2016), found that increased broadband adoption over that period led to an average increase in GDP of 0.3% per annum. Enhanced broadband speed has also been found by Koutroumpis (2019) to exert a positive economic impact, albeit at a diminishing rate until a market saturation point is reached.

This incremental contribution of high-speed broadband to economic growth has been the focus of a number of recent empirical studies. Briglauer and Gugler (2018), for example, in a study of the EU27 member states over the period 2003 to 2015 find a small but significant effect of ultra-fast fibre-based broadband adoption (0.002–0.005% of GDP) over and above the effects of basic broadband on GDP. The positive impact of increased broadband speed is also found by Kongaut and Bohlin (2017) in their study of OECD countries, with the authors concluding that a 10% increase in average broadband download speed positively impacts GDP per capita by 0.8%.

Empirical studies have also sought to distinguish between fixed broadband and mobile broadband penetration. Katz and Callorda (2018a), have estimated, based on a set of 139 countries over the period 2010–2017, a 1 % increase in mobile broadband penetration yields almost twice as large an increase in GDP than a 1 % increase in fixed broadband penetration. According to the authors, the impact of mobile broadband penetration is likely to be higher in lower income countries where market saturation has not been reached and the impact of incremental increases in mobile broadband penetration on economic growth has yet to encounter diminishing returns.

The positive economic impact associated with broadband availability and increased broadband speed has also been evident at a regional level. Briglauer et al. (2021), in a study of 401 German counties over the period 2010 to 2015, find that an increase in average broadband speed had a significantly positive effect on county-level GDP, with an increase in average bandwidth speed by one unit (1 Mpbs) bringing about a rise in county-level GDP of 0.18%. What is more, when positive regional externalities across counties are taken into account, the effect is almost doubled (0.31%).

6.3.2 Households and Digital Connectivity

At a micro-level, research suggests that high-speed broadband contributes positively to household income levels. Rohman and Bohlin (2013), in a study of eight OECD countries and three BRIC countries (Brazil, India and China), found that those households who did not have high-speed broadband (2–4 Mbps at that time) resulted in a difference of c. US$2100 per household per year (c. US$182 per month). For Brazil, India and China, additional annual household income of US$800 is expected to be gained by introducing 0.5 Mbps broadband connection (US$70 per month per household).

As noted by Dutz et al. (2009, 2012), high-speed home broadband connectivity has transformed the daily routines, consumption patterns, and information exchange of households across the globe. Economic efficiencies—such as remote working, at-home entrepreneurship, and online job searching—are merely the tip of the iceberg. A vast range of knowledge-based activities and commercial interactions—relating to e-commerce, education, entertainment, health care, news and information, personal finances, social networking, and interactions with government—can now be undertaken online. Given recent COVID-related restrictions on public gatherings, households have become even more reliant on digital connectivity. In particular, broadband has facilitated more flexible patterns of work in the form of teleworking, as well as a rapid shift of education provision to virtual and blended formats.

A 2015 report from the UK-based Centre for Economics and Business Research (CEBR) has sought to categorise and quantify the array of economic impacts accruing from enhanced digital connectivity and digital skills. These include employability benefits and an estimated earnings premium of 3%–10% for people who acquire digital skills; retail transaction benefits, with evidence showing that shopping online saves individuals on average 13% compared to if they were to shop in-store; time-saving benefits via rapid access to government services and swift completion of online banking transactions; and communications benefits, as individuals connect and communicate with their community, friends and families more frequently.

6.3.3 Firm-Level Productivity and Entrepreneurship

Existing research also explores the impact of enhanced IDC on the labour market, employee and firm-level productivity, and new firm formation. The impact of connectivity appears to manifest itself in an uneven manner: enhanced IDC appears to complement high skilled workers and highly productive firms—both of which tend to be geographically concentrated in particular regions.

Microeconomic studies have not yielded unanimous evidence of positive productivity effects of IDC on the firm level. Colombo et al. (2013), based on a sample of 799 Italian SMEs from 1998–2004, found that adoption of basic broadband applications did not increase firm-level productivity. However, SMEs that adopted advanced broadband applications did experience productivity gains, though this was contigent on these applications being industry-specific (e.g., supply chain and client management applications in manufacturing) and the SMEs augmenting them with firm-level strategic or organisational changes. Advanced broadband is also found to positively contribute to firm-level productivity in Canzian et al. (2019). This study of the impact of upgraded broadband (up to 20 Mbps download; up to 1 Mbps upload) in Trento (Italy) from 2011–2014 found that upgraded broadband was associated with increases in both firm revenue and total factor productivity.

However, the productivity impact of ultra-fast broadband networks has been shown to exhibit marked spatial, sectoral, and occupational disparities. Hasbi (2020), in a study of almost 5000 municipalities in metropolitan France from 2010 to 2015, finds that municipalities with ultra-fast broadband networks enjoy higher firm formation in services activities, rather than across industry more generally. Similarly, Mack and Faggian (2013) and McCoy et al. (2016) find that broadband brings greater productivity benefits to regions that possess high skilled firms and high levels of human capital. These spatial disparities are indicative of what has been referred to in previous chapters as the “digital divide”. Indeed, as noted by Philip et al. (2017) and Ali et al. (2020), this digital divide is most usefully understood as referring not only to inequalities in the provision of technological infrastructure required to support digital connectivity, but also as a wider socio-economic digital divide in which factors such as geographic remoteness and social exclusion create barriers to digital adoption and use in rural areas.

Specific to sectoral disparities, Haller and Lyons (2019), in a study of Irish services firms from 2002 to 2009, assess whether or not the introduction of digital subscriber line (DSL) broadband services increased firms’ productivity in the services sector in Ireland from 2006 to 2012. While they did not find significant productivity effects across the services sector as a whole, they did find positive significant effects on firm’s total factor productivity in Information and Communication and Administrative and Support Services. In contrast, a previous study by the same authors (Haller & Lyons, 2015), found no evidence that broadband adoption led to higher firm productivity across a sample of 2290 Irish manufacturing firms over the same time period. The extent to which broadband adoption manifests itself as a skill-biased technological change that favours high skilled occupational groups is considered by Akerman et al. (2015) in a study of Norwegian firms over the period 2001–2007. Akerman and co-authors find that broadband adoption complements the skillsets of skilled workers and thereby increases their productivity, whereas it substitutes for routine tasks formerly undertaken by unskilled workers and ultimately lowers their productivity.

6.3.4 Employment Impact of Digital Connectivity

While the empirical evidence outlined above provides indications of digital connectivity enhancing productivity of existing skilled workers and skill-intensive regions or municipalities, evidence of new employment being created as a direct result of broadband adoption has been less clear cut. For example, Fabling and Grimes (2021)—utilising Statistics New Zealand’s Longitudinal Business Database, which surveys approximately 7500 firms annually—find that over the period 2008 to 2018 ultrafast broadband adoption had a positive impact on firm-level productivity within a four-year time horizon, but a negative impact on employment. While positive productivity effects were evident among firms that had also made complementary investments, negative employment effects were observed among firms with initial low computer intensity. Briglauer et al. (2019), evaluating the impact of a European state aid programme for speed upgrades in broadband internet availability to rural areas in the German state of Bavaria throughout 2010 and 2011, find that those municipalities with greater broadband coverage at relatively higher speed did not, on average, experience an increase in local jobs per resident.

A number of early US studies found that greater broadband availability positively impacts upon employment growth across zip-code areas (Lehr et al., 2006; Kolko, 2012). However, recent US studies focusing on the employment impact of increased broadband speeds provide conflicting results. Ford (2018), in a study of broadband speed differentials (10 Mbps versus 25 Mbps) across US counties for the years 2013 to 2015, finds no evidence of counties that predominantly use 25 Mbps broadband connections enjoying higher employment growth than those with 10 Mbps connections. In contrast, Lobo et al. (2020)—exploring the effects of broadband speed on county unemployment rates within the U.S. state of Tennessee over the period 2011 to 2016—find that unemployment rates were 0.26 percentage points lower in counties with high speeds compared to counties with low speeds, with better quality broadband appearing to have a disproportionately greater effect in rural areas.

However, recent studies from beyond EU and US contexts have identified both productivity and employment gains associated with digital connectivity. Chen et al. (2020) in a study of Chinese firms over the period 1998–2007 find that high-speed internet significantly increases firm’s productivity and worker’s wage, albeit with the impact being larger for firms in industries with high skill intensity and for more educated workers. Hjort and Poulsen (2019), using firm-level data for 12 African countries over the period 2006 to 2014, find that fast internet availability in the observed African countries leads to employment increases in higher-skill occupations, but also employment gains (albeit of a relatively smaller magnitude) for less educated worker. The employment benefits manifest themselves through a variety of channels, such as greater firm entry in South Africa; higher firm level productivity among existing Ethiopian manufacturing firms; and by an increase in exports, on-the-job training, and use of online communication among firms in a further six African countries.

6.4 Free and Municipal Wi-Fi

Public Wi-Fi network access is the provision of broadband Internet services to the public in spaces other than the home or office, under non-discriminatory terms and conditions (Fuentes-Bautista & Inagaki, 2005). In this context, “public” refers to availability of the networks that provide public benefits, and therefore serve the public interest, in the form of wireless connectivity as a service to passing users (Clement & Potter, 2008; Bar & Galperin, 2004). The network may be owned or provided by government, communities or local businesses who typically provide use of the network at low cost or free of charge (Lehr & McKnight, 2003) in small localised spaces (e.g., libraries, shopping centres, coffee shops or hotels), or on a larger scale (e.g., municipal, city-wide or town-wide networks). Picco-Schwendener et al. (2018) identifies three main types of public Wi-Fi networks:

  1. 1.

    Municipal Wireless Networks (MWNs)—the local public administration provides Wi-Fi Internet access across a whole city or town, or a section of it, in order to serve the public interest.

  2. 2.

    Community Wireless Networks (CWNs)—residents in a community share part of their wired home Internet connectivity with other people of the community using Wi-Fi technology. The providers of CWNs typically have a social motivation.

  3. 3.

    Commercial providers—businesses provide public wireless internet access to further a business purpose.

The primary economic benefit of free public Wi-Fi is derived from the savings that consumers benefit from by accessing the Internet through sites offering free public Wi-Fi rather than relying on their mobile data plan. A study on future access to public Wi-Fi suggested that 60% of UK total mobile traffic will be offloaded to Wi-Fi in 2019 and of that approx. 4.32% will be free (Katz & Callorda, 2018b). This projection signals further potential savings to the consumer generated by greater access to public Wi-Fi. While the total value of this consumer surplus is significant (see Table 6.2), it is not without controversy, not least because it may represent unfair competition to existing telecommunications providers (Potts, 2014).

Table 6.2 Six developed countries: value of free Wi-Fi 2018 and 2023 (Katz & Callorda, 2018b)
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As well as the direct consumer surplus described above, the benefits of free municipal public Wi-Fi access include economic development, community branding, collaboration between other public service providers in a municipality, provision of internet connectivity (and associated services) to low-income and underserved citizens, and revenue generating activities (see Table 6.3).

Table 6.3 Motivations and anticipated benefits for MWNs (adapted and extended from Picco-Schwendener et al., 2018)
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It is noteworthy that free public Wi-Fi forms part of the European Tourism Manifesto for Growth and Jobs (European Tourism Manifesto Alliance, 2017). Item 7 of the manifesto emphasises, amongst other things, that the EU should encourage free Wi-Fi for visitors in tourist attractions, events and destinations (European Tourism Manifesto Alliance, 2017).

6.5 Rural Digital Hubs

Rural digital hubs have been proposed as a potential solution to improve broadband connectivity, improve digital literacy for individuals, workers and businesses, attract new residents and visitors, and stimulate economic activity (European Network for Rural Development, 2017). Refining the European Network for Rural Development (ENRD) working definition of rural digital hubs (ENRD, 2017), Rundel et al. (2018, p. 1) define a rural digital hub as “a physical space, which can be fixed or mobile, focused on digital connectivity, digital skill development and/or emergent technologies.” They are not a new idea. Indeed, they merely represent the latest wave of optimism for what was referred to as telecottages in the 1990s and telecentres in the 2000s (Moriset, 2011). They have become an increasing part of policy responses during the COVID-19 pandemic to support remote working and indeed rural digital hubs and co-working spaces report renewed optimism for the sector backed by state and corporate support for remote working (Tomaz et al., 2021). For example, the Irish government launched a National Hub Network and support funding for up to 380 remote working hubs (Department of Rural and Community Development, 2021).

Consistent with the telecentre literature (Moriset, 2011), in their recent analysis of rural digital hubs, Rundel et al. (2020) note that such hubs can be organised into hubs for businesses, hubs for communities, and hubs for both sets of stakeholders. Similarly, they may be standalone or co-located in libraries or community centres (Rundel et al., 2020). They also note that while the ENRD (2017) aspired for rural digital hubs to play an active role in improving digital literacy, in reality few offered such services or indeed recognise themselves as a digital hub, and where offered these services required payment (Rundel et al., 2020). As a result, accessibility issues may not be addressed satisfactorily. The ENRD (2017) notes that committed leaders and community engagement are critical success factors for rural digital hubs initiative, and that rural digital hubs should form part of a wider strategic vision for a town. It is also important to note that the establishment and sustainability of such hubs requires a mix of funding from local and national authorities but also the private sector through sponsorship (ENRD, 2017). This suggests high levels of both vertical and horizontal integration are needed, a subject that will be discussed later in Chap. 8.

6.6 Measuring Infrastructure for Digital Connectivity

The manner in which digital connectivity impacts upon economic outcomes also gives rise to numerous measurement problems. As Canzian et al. (2019) note, digital connectivity is best characterised as a “general purpose technology” and, as such, its positive impact on economic outcomes most likely takes the form of growth-enhancing externalities that enhance all economic activities and social interactions. But as Abrardi and Cambini (2019) point out, empirical measurement of such externalities has proven to be problematic, as it seeks to quantify the effects of high-speed broadband diffusion in terms of economic metrics rather than as network effects. What is more, available data points to a low take up of ultra-fast broadband—something which may underestimate the full extent of potential network effects which can accrue from digital connectivity. Briglauer and Gugler (2018) note that, across the EU member states in 2015, basic broadband take-up rates (72.50%) were much larger than for hybrid (20.59%) and end-to-end fibre-based (25.91%) broadband. While recent data suggests that high-speed fibre Internet connections surpassed copper-wire DSL connections in the OECD for the first time in 2020 (OECD, 2021), there would seem to be persistent gaps between urban and rural areas in terms of ultrafast broadband availability (OECD, 2020). This low take-up may be due to consumers opting for satisfactory basic broadband rather than switching to more expensive high-speed alternatives. Should measurement difficulties—compounded by low take-up of high-speed broadband—lead to the positive overall welfare contribution of digital connectivity being underestimated, cost-benefit analyses might not be supportive of additional public investment in digital infrastructure provision.

As per Table 6.4, IDC features in most major international measurement frameworks and composite indices to varying degrees. Reflecting the literature, the availability and adoption of broadband is a significant focus. Some frameworks include additional relevant indicators including:

  • 5G readiness—Digital Economy and Skills Unit (2018, 2020, 2021);

  • Access settings, time spent online and support and training—Digital Capital Index (Ragnedda et al., 2020);

  • Secure Internet Infrastructure—Digital Capital Index (Ragnedda et al., 2020); G20 Toolkit for Measuring the Digital Economy (G20 Digital Economy Task Force, 2018);

  • Institutional and regulatory—G20 Toolkit for Measuring the Digital Economy (G20 Digital Economy Task Force, 2018);

  • Infrastructure for the Internet of Things—G20 Toolkit for Measuring the Digital Economy (G20 Digital Economy Task Force, 2018).

Table 6.4 Selected Infrastructure for Digital Connectivity indicators by international digital society and digital economy measurement frameworks and composite indices
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Interestingly only two frameworks include access to electricity (the Digital Evolution Index and the Partnership on Measuring ICT for Development), and only one includes public access to Wi-Fi (CityKeys).

Unlike data for other topics discussed in this book, it is worth noting that data on IDC is typically collected and reported regularly by national sources, often at high levels of granularity including towns and their environs. International benchmark data is also widely available. Commonly cited international sources include:

  • EU Broadband Coverage in Europe Studies

  • EU Broadband Internet Access (BIAC) survey

  • European Broadband Mapping Portal

  • EU Communications Committee survey

  • Eurostat

  • ITU World Telecommunication/ICT Indicators database

  • OECD Broadband portal

  • UNESCO Institute for Statistics

IDC cannot be examined in isolation. As noted above and in previous chapters, the skills-bias inherent in digitalisation, as a whole, brings with it the risk of creating economic winners and losers. Abrardi and Cambini (2019, p. 184) neatly summarise the risks posed to employees and firms who find themselves on the losing side:

While higher productivity could translate into higher wages, firms might as well shed staff in response to the increased automation. Differences in income between skilled and non-skilled workers could increase, as broadband is complementary to human capital. Moreover, if broadband increases competition, some firms will lose staff or go out of business altogether.

The spatial manifestation of disparities associated with digital connectivity is, of course, one aspect of the “digital divide” referred to in previous chapters. As Ford (2018, p. 775) points out, “broadband is not randomly distributed across geography, but rather is deployed in areas where the ratio of demand to costs is favorable, complicating the task of discovering broadband’s influence on economic outcomes.” Lower population densities and greater distances in rural areas discourage private sector actors from investing in new technologies, re-enforcing this digital divide between urban and rural communities. Salemink et al. (2017), in a review of 157 papers on digital developments and regional growth, find a persistent and widening gap in data infrastructure quality between urban and rural areas, with public policies aimed at promoting the availability or improvement of data infrastructure becoming rapidly outdated by market developments. As such, more granular analysis at the level of towns and sparsely populated areas is required.

6.7 Conclusion

In studies of the economic benefits accruing from technological advances, references to eminent economist Robert Solow’s quip that “you can see the computer age everywhere but in the productivity statistics” have become ubiquitous.Footnote 2 While it may be tempting to declare that Solow’s productivity paradox has now been resolved, such a conclusion appears to be premature.Footnote 3 As discussed above, it would appear that instead the paradox noted by Solow is more akin to—to borrow another oft-cited phrase, albeit from an entirely different context—“a riddle, wrapped in a mystery, inside an enigma”.Footnote 4 While the majority of empirical studies examined in this chapter document positive impacts of digital connectivity on GDP, firm-level productivity, and—to a lesser extent—employment, the effects of digital connectivity are characterised by a marked social, spatial, and occupational disparities. So, rather than resolving Solow’s productivity paradox, a host of further puzzles have emerged. These issues relate primarily to the digital divide. For example, should the digital divide be understood merely in terms of uneven roll-out of digital infrastructure or as a wider societal inequality? Will greater digital connectivity benefit both rural and urban regions, or indeed low-income and high-income countries, or will existing regional and national disparities persist? Do the benefits of digital connectivity only accrue to high-skilled workers and those firms which possess the requisite organisational structures? While empirical studies have in recent years begun to engage with these questions, conclusive answers have yet to materialise.

There is an onus on policymakers to respond to the inequalities that arise due to the emergence of new digital technologies and, indeed, to use new technologies to bridge existing economic and societal “digital divides”. The crafting of such digitally-informed economic, social, and regional policies has become all the more pertinent in the post-pandemic context. 5G mobile access networks are expected to have a greater impact than previous network shifts, enabling new classes of advanced applications, fostering business innovation and spurring economic growth (IHS, 2019). However, as this chapter illustrates, such far-reaching digital advances can bring great economic and societal benefits but can also see certain social groups and regions left behind. The challenge facing policy makers in the coming years will be to ensure that no-one is left disconnected.