Policy Note 42: Digital infrastructure and resilience in times of crisis

The lockdown in many countries in spring 2020 put modern digital infrastructure to the test. The networks proved to be up to the increased demands and revealed their central role for modern economies.

"This significant macroeconomic resilience effect in the form of a substantial cushioning of the decline in overall economic performance and the expected faster recovery of the economy is accompanied by a still largely unexplored, but potentially particularly high positive impact of modern infrastructure and online services," says Wolfgang Briglauer, Head of Digitalization and Regulation Research at EcoAustria, "but the economic effects of modern broadband infrastructure are also significant in normal times."

An EcoAustria Policy Note published today examines the central role of broadband infrastructures in normal times and in the current crisis. Empirical research shows that modern, high-performance Internet ("high-broadband networks") and services based on them can be seen as a key technology that has great potential for innovation, productivity, employment, business creation and thus for economic growth in general in an economy. The positive effects of the availability and adoption of high broadband networks and services are reinforced by a higher level of education and a high level of ICT affinity on the user side. With regard to the distinction between urban and rural areas, it is clear that the latter benefit in particular from the positive effects of high broadband. In this sense, the full coverage targets for all households and companies formulated in the broadband targets at EU and national level are not only positive for distribution policy reasons (reduction of a "digital divide"), but can also be justified from an economic efficiency perspective.

The experience gained during the crisis points to the absence of lasting systemic impairments to the internet. Overall, the internet ecosystem has proven to be resilient and has so far survived the pandemic-related stress test without any major problems. The ability to resolve problems within the decentrally organized Internet ecosystem is therefore present to such an extent that no need for state market intervention can be derived from this.

While sector-specific deregulation and subsidies for the expansion of high broadband have become increasingly important in the past, the relevance of local capacity expansions and intelligent traffic management measures has also become particularly clear in view of the unpredictable increases and structural changes in internet traffic caused by the pandemic. Flexible and dynamically adaptive traffic management and engineering are key building blocks for ensuring the provision of economically relevant online services even in times of crisis with increased or changed internet usage.

Although there have been substantial public funding measures for the expansion of high broadband in the past in order to supply areas that are not profitable for private investors with high broadband, there is still a social digital divide in terms of the actual use of broadband services on the demand side - keyword "e-literacy": "Here, too, concrete measures must be taken to increase effective participation in broad sections of the population so that essential online services can also be used in the future," says Briglauer.