Even before covid-19 forced the world into trouble, digital infrastructure was still developing rapidly. Now, its importance is obvious.
There was a time, and it seemed to be a long time ago, that digital infrastructure was a peripheral sector, and perhaps fortunate enough to be exposed to something, but it was not important. For most investors, a penny fell before covid-19 forced the world into trouble. For those who have no notes, the current trend is inevitable.
The pandemic has brought both challenges and opportunities. This is currently the most important theme for dealing with this problem, but it is not the only theme. From the need to update the infrastructure to whether technologies such as 5G are the right way to implement it, there are problems that pre-covid-19, and once the new coronavirus becomes a memory, the industry is still expected to solve it.
Optical fiber is “mission-critical”
For all other issues, covid-19 emphasizes the importance of digital infrastructure in the modern world. The quarantine conditions triggered by the virus on a global scale have made people more dependent on mobile phones and streaming media services than before.
Entertainment options have been expanded through digital infrastructure. However, until recently, remote work was not an option for many people. However, thanks to conference calls, cloud storage for documents, digital publishing, and countless other services, employees around the world can continue to work.
“Today, it is clear that our country/region regards fiber optic connectivity as essential and critical infrastructure, which should be compared with utilities such as water and electricity,” said Stéphane Ifker, senior partner at Antin Infrastructure Partners. “The situation does exist, but it is even more so today.”
Frankly speaking, digital infrastructure is “critical to the survival of the planet and our economy,” said Marc Ganzi, CEO of Digital Colony. Many jurisdictions have designated digital infrastructure as critical infrastructure, so even if other areas are restricted, work in this area can continue. No one will underestimate the importance of digital infrastructure.
“Covid-19 can be seen as a paradigm shift to digital infrastructure,” James Harraway, managing director of transactions, said of Infracapital. “Recognizing that they can operate effectively with employees working remotely, this will permanently change the way organizations work in many departments.”
According to the 2019 National Compensation Survey by the US Federal Bureau of Labor Statistics, before the outbreak, only 7% of civilian workers in the United States had access to flexible workplace benefits or telecommuting. Global Workplace Analytics predicts that in the next two years, the number of people working at home a few days a week will grow to 25-30%.
Long-term and lasting changes to work and social practices will accelerate changes within the digital infrastructure, and reliable high-capacity connections will be critical to this. The demand for all-fiber digital infrastructure and the subsequent investment will follow.
“I believe that policymakers (if they have not done so) will define fixed broadband as a basic necessity, just like other utilities and basic telephones were handled in the last century,” said Izzet Guney, managing director of Cube. Infrastructure management. “Hopefully this means that state aid will promote the search for reliable solutions, in other words, from fiber to local, rather than being technologically neutral as it is today.”
Even if there is no coronavirus, this is likely to happen, but the resulting isolation conditions make this problem even more prominent. “Although it had become a popular industry for infrastructure managers and investors before covid-19, people now have the importance of digital infrastructure (especially a fast and reliable Internet) and the need to provide better services The realization is obvious,” Tom Maher said. Head of Business Development at Whiteheim Capital. “In the long run, this will mean more transaction competition and will also bring more progress.”
Need a lot of investment
Even before covid-19, the need for investment in digital infrastructure was clear. OECD data show that since last year, the number of countries where high-speed fiber accounts for at least half of fixed Internet connections has increased by 50%, but this has increased from six countries to nine. In the 37 countries surveyed by the OECD, the share of optical fiber in total broadband increased from 24% in mid-2018 to 27% in mid-2019.
“We are now facing a once-in-a-lifetime window. A large amount of digital infrastructure on which we live and a large amount of digital infrastructure on which the telecommunications industry relies need to be upgraded,” said Antin partner Simon Soder (Simon Soder). Infrastructure partners. “A large amount of capital required to achieve this goal creates opportunities for experienced investors to support this transformation, and this is ultimately driven by end-users’ demand for better connectivity.”
Investors have been paying attention. Digital Colony Management was finally closed last year with initial fundraising of US$4.05 billion. The initial target was US$3 billion for network infrastructure investment in towers, small cells, fiber optics, and data centers. In the first quarter of this year, Brookfield’s $20 billion Brookfield Infrastructure Fund IV exceeded its 15% target allocation for digital infrastructure, and $3.6 billion of vehicle capital has been invested in this sub-sector.
Current events will provide more opportunities. Although the world has realized the importance of digital infrastructure, it can also see where it is missing.
Guney said: “This crisis has made today’s systems inefficient and has shown the need for a large amount of additional investment in fiber-optic networks.” “The importance of the quality of the network has been highlighted.
“Unfortunately, I think [the existing infrastructure in Europe] is not in good condition. With the continuous increase in voice traffic and streaming media traffic, we have experienced unprecedented upload pressure.”
Guney argues that cloud-based events and the need for video conferencing services have made the old model (allowing the network to focus on download capacity) infeasible and that only fiber to the home can provide the symmetry of the required traffic. Technologies such as coaxial cable and XDSL cannot adapt to changes in traffic patterns.
Together with next-generation optical fiber, the market is considering next-generation data centers. There are more than 500 ultra-large-scale data centers in the world, but this is not just a case of continuous expansion. The importance of edge data centers is also increasing and provides opportunities for continuous development.
“It is worth mentioning that the edge data center,” Soder said. “This segment is still in the early stages of development, but we hope it will grow over time.” These smaller facilities are usually connected to one or larger central centers, but their location should be as close as possible Close to the people it serves.
InfraVia Capital Partners is a partner BrunoCandès that these edge data center for the “edge of the network and requires low latency computing capabilities, such as online gaming, and these services will require specific data center.” Investors are just beginning to understand how to best take advantage of the opportunities presented by edge data centers. However, Candès believes that “observing how to bring data centers and computing power closer to their utilization rate is undoubtedly a trend.”
Ganzi strongly supports edge computing. Digital Colony companies saw increasing demand and therefore provided more infrastructure. He said: “Of course, with the increase in people working at home, as well as more business and education at home, the workload is further away from the urban core area.” “This is a major paradigm shift, it is leading to changes in the network. It must be crowded.”
ESG is important
In addition to alleviating network congestion, technological advances are even expected to help the environment. More efficient data usage means less energy is needed, but our roads can also become less crowded.
Guney said: “The covid-19 crisis has shown us the importance of digital infrastructure in facilitating remote work and thus greatly reducing travel.” “This is undoubtedly a positive impact on the environment. Improved connectivity also helps to make more People participate in society.”
Of course, the world of work in the future is expected to be completely different from the world we knew before. If employees can get off work remotely without having to commute in the city, then they can get environmental returns.
Energy use is another important factor. “Data centers consume a lot of energy, and shareholders have the ability to influence the source of energy,” Soder said. “For example, in the case of Eurofiber’s data center business, energy comes entirely from renewable energy and green energy.”
5G can also play a role by greatly reducing the electromagnetic radiation of the antenna itself. Connecting more antennas and more fibers will result in a shorter distance between the device and the network, so less power is required to communicate the signal.
“5G can not only reduce the total amount of electromagnetic radiation, but it will also be better for the environment-because each antenna site will use less power-and will create a better user experience and a more reliable network in the future,” he said.
Don’t you believe in the hype?
These environmental benefits are the basis for the increased communication speed and reliability of equipment promised by 5G. However, not everyone believes that 5G will be as transformative as promised.
Guney said: “I have never been a 5G supporter-maybe because I have experienced all the 3G hype.” “Of course, the current situation highlights the need to keep people and things connected. The problem is that 5G is extremely expensive.
“5G may have a place in the densest areas (Paris or central London), but it will not work in rural or even semi-dense areas.
“More towers will need to be built. Then, fiber optics will need to connect those towers to the backbone network and units. This is too expensive.”
However, the Ganzi people are much bullish. He believes that 5G can become a catalyst for the “Internet of Everything”.
He said: “Today, there are approximately 2 trillion devices on the global network.” “In the next five years, we see that the market will grow to 7 trillion devices. In terms of usage and demand for mobile infrastructure, In other words, this is an important step.
“For operators and customers in the 5G world, what is crucial is the concept of delay-the speed at which the signal travels from the device to the antenna and then to the switch or data center where the application resides. Improved speed and reliability Vital.”
Original Article Source from www.infrastructureinvestor.com