The Targeted Expansion of Digital Infrastructure

Whether it is cloud computing services, automated assembly lines that communicate with one another or streaming services for videos or music, many services nowadays require a high-speed internet connection. The same is likely to apply to entirely new developments in the near future, such as self-driving cars and electronic health services. In order to ensure that the potential of all these services and possible innovations is being exploited to the fullest, we need fast and, in some cases, ultra-fast data connections.

Though policymakers in Germany are aware of the fact that high-performance, fibre-optic broadband connections have a crucial role to play in keeping a modern economy competitive and have set some ambitious targets relating to broadband expansion, the roll-out of faster broadband in Germany, particularly in rural areas, is proceeding at a sluggish pace. According to the DIGITAL Economy Monitoring Report 2018, in which the Centre for European Economic Research (ZEW), Mannheim, is heavily involved, the most common demand from businesses directed towards policymakers is assurance that the broadband expansion will go ahead as planned.

That being said, some companies need to do their homework first. According to a ZEW policy brief “How the Digital Transformation of the Economy Can Succeed” by Professor Irene Bertschek, head of the ZEW Research Department “Digital Economy”, and Dr. Wolfgang Briglauer, senior researcher in the ZEW Research Department “Digital Economy”, German SMEs are well behind large companies when it comes to exploiting the full potential of digitalisation. The authors identified a number of areas of digitalisation in which Germany is trailing behind.

The consequences of insufficient broadband coverage in certain regions of Germany for local companies were the focus of a further ZEW study. This study found that a lack of access to a fast internet connection in a given region leads to a more limited online presence for companies located in the region, which can have a long-term negative effect on the companies affected.

To ensure that companies and society as a whole are able to fully exploit the promise of digitalisation, the government is willing to advance the expansion of gigabit networks using public funds. In a piece entitled “How to Transform Germany into a Gigabit Society”, ZEW President Professor Achim Wambach drew attention to the importance of avoiding costly duplications in infrastructure when public funds are involved. For example, it should be carefully considered where it makes sense to use fibre-optic cable or the latest mobile communications standard as the transmission route. To ensure that funding only goes to regions where it is most needed, Wambach calls for current funding procedures to be supplemented with demand-oriented schemes such as gigabit vouchers for SMEs and socio-economically significant institutions.