Telefónica participates in the SDGs Business Dialogue, held in the framework of the Regional Forum on Sustainable Development for the United Nations Economic Commission for Europe (UNECE). This event aims to discuss how partnerships, alliances and business innovation can accelerate sustainable development in the region to achieve the SDGs.
Christoph Steck, Director of Public Policy at Telefónica, analysed the critical nature of communication infrastructures to accelerate digitalisation, drive innovation and contribute to a more just, sustainable and inclusive recovery of our economies and societies post- pandemic.
Connectivity and innovation: a successful tandem
The health emergency caused by Covid-19 has highlighted the essential dimension of connectivity infrastructures. Communication networks have been the backbone of all our economic and social life, enabling us to continue working, studying and interacting at distance. The commitment to innovation has also been an upward trend in the last year to offer better solutions in difficult times. Connectivity and innovation have saved a lot of businesses from crisis, thanks to changes in the way they manage online bookings, digital menus, access to delivery platforms, etc. High capacity communication networks are therefore the basis for innovation.
While the crisis has shown us the social and economic benefit of having access to broadband infrastructure, it has also shown us the other side of the coin: the widening digital divides. Not being able to access the Internet is the most severe form of the digital divide. In today's digitised economy, it prevents people from progress, economic growth and even education.
"Without high-capacity networks, innovation will not flourish, or at least will stagnate", Christoph Steck
The crisis has revealed that government policies and regulatory frameworks in Europe and Latin America have failed to leverage sufficient private investment in high-capacity broadband networks with national coverage to achieve digital inclusion. Therefore, the first driver for economic recovery and digital sovereignty should be to improve next generation broadband networks, extending their reach and improving their quality. This can only be achieved by attracting more private investment.
High-performance, secure and resilient networks enable technology adoption and digitisation, and provide the basis for sustainable, green and digital growth, innovation and welfare in the long term. Closing the digital divide, connecting everyone and ensuring equal access to digital development and technologies is therefore more urgent than ever. To achieve this, we must understand that the foundation of any digital economy and innovation is modern broadband infrastructure.
It is time for policy makers and regulators to prioritise investment in modern, inclusive connectivity based on fibre and 5G to allow innovation to also take place in network deployment.
At Telefónica we have already implemented innovative approaches to expand networks in regions that are currently not considered a priority or are not cost-effective. These cases target both rural and urban areas with fixed (FTTH) or mobile (4G) networks.
In Germany, Telefónica and Allianz agreed to create an independent wholesale open access operator, focused on fibre deployment in rural and semi-rural areas across the country. The project foresees an overall investment of EUR 5 billion over the next six years to deploy an FTTH network reaching more than 2 million households in rural and semi-rural areas and covering more than 50,000 km. This is a highly innovative approach for several reasons.
On the one hand, the agreement defines a 50% stake for each company under a co-governance model. The resulting company brings together the investment capabilities of Allianz, one of the world's leading insurers and investors, and the expertise of Telefónica, one of the largest telecommunications service providers.
On the other hand, the operating and business model is also a new approach among the largest telecommunications providers. The company will operate as a neutral wholesale company, deploying local fibre-optic networks in rural and semi-rural areas deprived of internet throughout Germany. In addition, it will offer FTTH wholesale access to all telecommunications service providers so that they can in turn offer these services to their end customers. The alliance thus overcomes the obstacle of investment sustainability in rural areas, aiming at a more efficient investment approach.
Outside the most developed economies, broadband connectivity in urban areas of large capital cities is also an issue. As an example, in Brazil, we have launched a wholesale FTTH project similar to the one in Germany but focused on cities.
Telefónica and Caisse de dépôt et placement du Québec agreed to develop a fibre company, FiBrazil, which is also building a neutral and independent wholesale fibre optic FTTH network in selected medium-sized cities in Brazil outside the state of Sao Paulo. Fibrazil is starting with a portfolio of 1.6 million Passed Homes ("HPs") contributed by Telefónica Brasil and aims to expand its network to around 5.5 million HPs within 4 years. In turn, CDPQ is investing a total of up to 1.8 billion Brazilian reals (408 million Canadian dollars) in this joint venture, with Telefónica contributing the fibre assets.
Finally, the case of Internet para Todos Peru (IPT) is worth noting. IPT's approach is peculiarly unique, as it focuses on expanding and improving connectivity in rural and remote areas of Peru, through a wholesale mobile network. IPT was launched in May 2019 as a joint initiative between Telefónica, Facebook and regional development banks CAF and IDB Invest. An innovative partnership model by combining a telecoms operator, with an internet service provider and financial institutions.
IPT enables all Peruvian mobile operators, under an open wholesale business model, to extend their mobile services to rural areas, providing 4G mobile broadband services through more than 1600 base stations. As in the German and Brazilian fibre cases, IPT does not serve end customers, but other telecommunications service providers. In addition, it uses open, state-of-the-art technology such as RAN Sharing infrastructure, network virtualisation and automation of operational processes to reduce costs and make networks viable in rural areas.
In just over a year, IPT has connected nearly 1.5 million people to the internet, approximately 25% of the people who were not connected in Peru. Targets remain ambitious for 2021, when it expects to reach more than 3,100 4G base stations and more than 31,000 locations (6,000 locations in 2020).
The main learning from the above-mentioned innovative projects is that the right policy and regulatory frameworks are needed to implement them. An investment-friendly regulatory environment that fosters innovative approaches to connect the unconnected and bring digitalisation to all is essential to leave no one behind.