Thor Johnsen, head of D9 Digital Infrastructure PLC looks at the opportunities for investing in the backbone of the internet
Digital infrastructure forms the basis upon which our society functions today. People around the world increasingly rely on the internet for work, shopping, socialising, and education. Over the last 18 months, we have seen an acceleration in the demands for improved speed, reliability, and resilience. The global need for connectivity is set to continue growing exponentially.
It’s clear that global digital infrastructure assets need to be modernised and upgraded over the next decade. This is a sector primed for investment as nations look to kickstart post-pandemic recovery, expand accessibility for all and reverse the impact of the digital divide. For investors this represents a significant opportunity.
Following the rollout of homeworking policies in March 2020, global data demands surged by 35% and almost all internet service providers saw double-digit increases in broadband usage, as ‘the busy period’ for streaming in households typically rose from four hours on weekday evenings to ten hours a day. One study of UK SMEs found that more than eight in ten companies said their productivity was impacted by an unreliable internet connection.
Overlooking the need to upgrade our digital infrastructure systems could lead to large scale disruption. Even before the impact of a global pandemic, the growth rate of Internet traffic was predicted to increase on average by 30% every year. And by 2025, the number of IoT connections is expected to double to 25 billion, demonstrating there is an ever-growing need for new resilient and sustainable digital infrastructure.
D9’s ‘Big Four’ of digital infrastructure development
Digital 9 Infrastructure (D9) has identified four key digital infrastructure assets that will be vital to improving global digital communications over the next decade.
The first is subsea fibre optic cables which are responsible for carrying 98% of international internet traffic. It is estimated that by 2026 there will be a 40% shortfall in transatlantic capacity, even after factoring in new cable developments and increases in capacity. New mesh networks that promise high network availability and low latency are urgently needed to meet the exploding demands for accessibility, affordability, speed and reliability of internet.
The second area is data centres, which operate at the heart of internet traffic. Businesses are increasingly looking to move operations to the cloud, to house their critical networks of computer and storage resources. In the last five years the amount of data stored in data centres worldwide increased by 5.8 times. There is a huge need for a new generation of green data centres that are directly connected to renewable energy. Reliable connectivity through subsea cables and terrestrial fibre are critical to this next phase.
Thirdly, wireless infrastructure and small cells will be key to supporting the rapid growth of online traffic that is being generated through mobile devices. Fifth generation technology (5G) will unleash a new era of connectivity between people, machines, objects and devices. Huge demands are required to scale this technology over the next decade.
Lastly, there is tremendous opportunity for terrestrial networks to be developed in the UK and further afield. Rural areas still lack the infrastructure for exceptional connectivity, and alternative fibre networks that target residential spaces will be vital to meeting government targets to address this.
An investment opportunity for global development
The emergence of digital infrastructure investment opportunities has been underway for more than half a century and is accelerating. In 2020 alone, almost $400 billion was spent on new digital infrastructure – across fibre, data centres and wireless networks. We will need to spend that amount – and more – every year to prepare our digital infrastructure for the future.
To respond to the long-term market opportunity, in March 2021, Digital 9 Infrastructure plc (D9 or The Company) launched on the London Stock Exchange, with an IPO of £300 million. The 9 in Digital 9 stands for Goal No. 9 in the UN Charter, which reflects the commitment on contributing to improving global digital communications in an environmentally sustainable manner, whilst achieving its investment goals of sustainable income and capital growth for investors. The company aims to significantly increase access to information and communication technology through its platforms: investing in a range of assets who can demonstrate the ability to improve digital access, for all sections of society.
D9 has already made a commitment to investing in its identified key areas through its acquisition of Aqua Comms, a platform which owns and operates approximately 20,000km of trans-Atlantic sub-sea fibre systems. D9 has followed up on this investment with a $50m investment into a network connecting Europe, the Middle East, Africa and India.
Covid-19 served as a test of the resilience of our digital infrastructure – and revealed that we need to invest a huge amount to prepare it for the future. To address the exponential demands for supporting the internet and improving digital connectivity, investments in digital infrastructure represent an opportunity to generate sustainable, long-term income, while addressing a huge societal challenge. To truly generate sustainable income, it is becoming increasingly clear that digital infrastructure, needs to be environmentally responsible. The most prominent environmental challenge and investment opportunity is to reduce the carbon footprint of data centres.