Don’t Let The COVID Era Widen The Digital Divide In Developing Countries
By Issa Faye
Digital infrastructure used to be secondary in importance in developing countries to traditional forms of infrastructure such as roads, bridges and ports. COVID-19 may have changed that forever*.
Around the world, broadband providers are reporting spikes in traffic as families self-isolate and employees work from home. The number of daily users of Zoom, the videoconference application, surged from 10 million at the end of December to more than 200 million in March. It’s too early to say what the impact of the coronavirus pandemic will be on digital infrastructure in developing countries. However, analyzing the forces at play can help policymakers and investors plan how to respond to the post-COVID landscape, which in all likelihood will be dramatically different than the picture that prevailed at the start of the decade.
If approached properly, this new era for digital infrastructure presents a host of opportunities for developing countries. However, this is not without risks. First, the divide could widen in digital connectivity between and within emerging markets. In the short run, users could see a decline in broadband quality due to increases in demand, a trend that could be more severe for nascent digital economies, as well as rural areas and women. The impact could be worsened by disruptions in digital-infrastructure supply chains, causing the cost of inputs such as IT equipment to rise. In the medium run, individuals and businesses may find it more difficult to afford digital services as the pandemic causes layoffs and loss of business.
Second, the sector could become less competitive. The supply shock could curb the growth of promising specialized companies, lead to the exit of small but fast-growing broadband operators, and result in the suspension of data-center projects. The result could be more concentrated markets, with limited open-access broadband infrastructure and less innovation. Meanwhile, lack of financing could delay investment in 4G and 5G networks, slowing the growth of the digital economy. This would be a bad outcome for development.
There’s a better path available to developing countries. We’re seeing evidence of a long-term shift toward consumers seeing digital connectivity as a necessity — even a right. Such a shift could support higher demand for cloud computing, and thus greater data-center capacity. Under such a scenario, the digital sector may see an increase in long-term financing and public funding to support more aggressive universal-access policies, with an emphasis on the underserved, including women, the poor and rural areas.
We may also see digital companies diversify their business models, which would be another encouraging step. Broadband operators could monetize the potential revenue from digital payments, content and data. Cloud-services providers could integrate with data centers and monetize digital data, by creating smart-grid applications using artificial intelligence, for example.
Within this context, governments may accelerate policies to encourage digital connectivity. A few changes could lead to increased investment opportunities, including fast tracking the availability of radio spectrum and supporting policies for infrastructure sharing. However, given the limited fiscal space in developing countries, they may not be able to go it alone. Development finance institutions have an important role to play in stepping up financing for an industry that has strong long-term potential, but also needs substantial upgrades and a boost in innovation. Development finance could strengthen the resilience and inclusiveness of digital infrastructure, helping to improve access for the poorest and most vulnerable.
The pandemic has underscored the vital role of digital connectivity in people’s lives. It would be a shame if, in addition to the human toll it is inflicting, the crisis deepens the digital divide.
Issa Faye is the Director of Sector Economics and Development Impact Department at the International Finance Corporation.
* A recent publication by Davide Strusani and Georges V. Houngbonon from IFC digs deeper into what the COVID-19 pandemic means for digital infrastructure in emerging markets.
