Estimating Digital Infrastructure Investment Needs to Achieve Universal Broadband

EstimatingDigitalInfrastructureInvestmentNeedstoAchieveUniversalBroadband EdwardOughton,DavidAmaglobeli,andMarianoMoszoro WP/23/27 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2023 FEB ©2023InternationalMonetaryFundWP/23/27 IMFWorkingPaper FiscalAffairsDepartment EstimatingDigitalInfrastructureInvestmentNeedstoAchieveUniversalBroadbandPreparedbyEdwardOughton,DavidAmaglobeli,andMarianoMoszoro* AuthorizedfordistributionbyRodrigoCerdaFebruary2023 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:Wedevelopadetailedmodeltoevaluatethenecessaryinvestmentrequirementstoachieveaffordableuniversalbroadband.Theresultsindicatethatapproximately$418billionneedstobemobilizedtoconnectallunconnectedcitizensglobally(targeting40-50GB/Monthperuserwith95percentreliability).Thebulkofadditionalinvestmentisforemergingmarketeconomies(73percent)andlow-incomedevelopingcountries(24percent).Wealsofindthatifthedataconsumptionlevelisloweredto10-20GB/Monthperuser,thetotalcostdecreasesbyuptoabouthalf,whereasraisingdataconsumptionto80-100GB/Monthperuserleadstoacostincreaseofroughly90percentrelativetothebaseline.Moreover,a40percentcostdecreaseoccurswhenvaryingthepeakhourqualityofservicelevelfromthebaseline95percentreliability,toonly50percentreliability.Toconclude,broadbandpolicyassessmentsshouldbeexplicitaboutthequantityofdataandthereliabilityofserviceprovidedtousers.Failuretodosowillleadtoinaccurateestimatesand,ultimately,topoorbroadbandpolicydecisions. RECOMMENDEDCITATION:Oughton,E.J.,D.Amaglobeli,andM.Moszoro,2023,“EstimatingDigitalInfrastructureInvestmentNeedstoAchieveUniversalBroadband”,IMFWorkingPaper23/27. JELClassificationNumbers: H54,Q01 Keywords: Broadband,DigitalInfrastructure;PublicInvestment;SustainableDevelopmentGoals Author’sE-MailAddress: eoughton@gmu.edu,damaglobeli@imf.org,andmmoszoro@imf.org *TheauthorswouldliketothankRodrigoCerda,ChloeHyungsunCho,DmitryGershenson,FlorenceJaumotte,SalmaKhalid,ManabuNose,SoheibNunhuck,CarloPizzinelli,AbdelhakSenhadji,andHerveTourpeandparticipantsoftheIMF’sFiscal AffairsDepartmentSeminarfortheirvaluablecommentsandMengfeiGuforoutstandingresearchassistance.Thisprojectwas partiallyfinancedbytheEuropeanUnionundertheEU-IMFPublicFinancialManagementPartnershipProgram(PFM-PP). WORKINGPAPERS EstimatingDigitalInfrastructureInvestmentNeedstoAchieveUniversalBroadband PreparedbyEdwardOughton,DavidAmaglobeli,andMarianoMoszoro1 1TheauthorswouldliketothankRodrigoCerda,ChloeHyungsunCho,DmitryGershenson,FlorenceJaumotte,SalmaKhalid,ManabuNose,SoheibNunhuck,CarloPizzinelli,AbdelhakSenhadji,andHerveTourpeandparticipantsoftheIMF’sFiscal AffairsDepartmentSeminarfortheirvaluablecommentsandMengfeiGuforoutstandingresearchassistance.ThisprojectwaspartiallyfinancedbytheEuropeanUnionundertheEU-IMFPublicFinancialManagementPartnershipProgram(PFM-PP). Contents I.Introduction3 II.EvolutionofDigitalConnectivity4 III.MethodforCostingDigitalInfrastructureInvestments8 A.EstimationofDataDemandDensity9 B.EstimationofNecessaryInfrastructureUpgrades11 C.EstimationofCosts12 D.ModelData14 IV.CostDriversforDigitalInfrastructureInvestment15 V.DigitalInfrastructureInvestmentNeeds18 VI.SensitivityAnalysis22 VII.Conclusions24 References27 FIGURES 1.PopulationCoveragebyTypeofMobileNetwork,LatestYearAvailable(percent)6 2.ExamplesofShiftingConsumerPatternsResultingfromtheCOVID-19Pandemic7 3.SequentialMethodIllustratedasaBoxDiagram9 4.VisualizingPopulationDensityDecilesforeachIMFCountryastheSub-nationalLevelAcross16 5.VisualizingKeyCountryMetricsforPopulationDensityDecilesbyIMFIncomeGroupsand17 6.EstimateofRequiredAnnualInvestmentbyIncomeGroupandRegion18 7.Country-levelEstimatesofRequiredInvestment19 8.ProportionofNecessaryInvestmentRelativetoGDP20 9.VisualizingInvestmentCostsforPopulationDensityDecilesforeachIMFCountryattheSub21 10.EvaluationoftheDICEModelAgainsttheITUConnectingHumanityModelingMethod22 11.ExploringtheImpactofDataConsumptiononCostSensitivity23 12.ExploringQoSReliabilityonCostSensitivity24 Tables 1.DataSources14 I.Introduction Digitalinfrastructureconsistsofallelectronicandnon-electronicassetsoperatedtoprovidebroadbandservicestousers.Indeed,investinginuniversaldigitalinfrastructureisessentialforInternetadoptionandisakeypartoftheUnitedNationsSustainableDevelopmentGoalsviaTarget9.1(UnitedNations2019).TheavailabilityofInternetconnectivitycanprovideneweconomicopportunitiesforunconnectedcommunitiesandhelpinfosteringgreaterstructuralshiftsinlabormarketstowardsmoreproductive,digitally-enabledactivities(JungandLópez-Bazo2020).Moreover,Internet-enabledonlineservicesareincreasinglyessentialforeconomicdevelopment,withtheliteraturedocum