Facebook's Asia and Africa connectivity initiatives unlock billions

28 July 2020 Consultancy.uk

With hundreds of partner firms around the world, Facebook is exploring new ways to bring fast, reliable internet to those without it. A new report asserts that these developments could bring economic benefits worth a combined $120 billion to economies across Asia and Africa.

The revolutionary influence of the internet has radically transformed communication, learning, work, trade and citizenship over the course of the last three decades. In the modern day, the internet allows people to access content and services which can be provided from anywhere in the world, allowing connections between friends, strangers, businesses and customers which would have been impossible a generation earlier. These connections are achieved through an interconnected web of networks which enable information to be exchanged between a shopkeeper in Bangkok, a supplier in Jakarta and a customer in Kuala Lumpur.

However, while access to the internet is increasingly important throughout the world as a means for people to forge social and economic relationships, a number of key barriers are holding back the progress of new technology in the developing world – and preventing the economic potential of the internet being realised in the process. According to a new study from global consulting and research firm Analysys-Mason, investments in connectivity could help boost the economy of Sub-Saharan Africa by $50 billion, and of the Association of Southeast Asian Nations (ASEAN) by $70 billion in the next five years.

BARRIERS TO CONNECTIVITY ARISING ALONG THE CONNECTIVITY VALUE CHAIN

In ASEAN, at present more than half of the region’s population remains unconnected, and there is a major connectivity gap between urban centres and rural areas. Meanwhile, in Sub-Saharan Africa, affordability is a major hurdle – with 1GB of monthly data accounting for 8% of the average income across the region (much higher than the UN’s target for this price of 2%). Even with the money, many people also lack the skills to use online services – many people are unfamiliar with digital technologies in ASEAN, while 38% of adults lack literacy skills across Sub-Saharan Africa, making the adoption of digital technologies even harder for them.

These are just a few of the barriers preventing more widespread adoption of internet technologies across ASEAN and Sub-Saharan Africa. Each also illustrates the challenge of making a return on investment in places where incomes are low, where people may be unaware of the benefits the Internet could bring them, or may lack the skills to use online services. This creates a vicious cycle, as the very place investment is needed most is the least appealing to investors. However, Analysys-Mason notes that social media giant Facebook is looking to change all that.

PROJECTED YEARLY GDP IMPACT OF FACEBOOK’S EDGE NETWORK AND SUBMARINE CABLE INVESTMENTS IN SUB-SAHARAN AFRICA

Facebook has launched a range of connectivity initiatives aimed at tackling these barriers, by providing financial and technical inputs that can make infrastructure easier and cheaper to deploy. These initiatives fall broadly into two categories. First, ploughing funds into network infrastructure, either directly or through long-term contracts. These include fibre investment edge network infrastructure including points of presence in Kenya, South Africa and Nigeria, and submarine cables such as the recently announced 2Africa cable and five current cables landing in ASEAN countries – along with a key data centre in Singapore.

Secondly, Facebook has developed programmes through which it works closely with telecoms operators and internet service providers to improve the economics of network deployment and operation. These initiatives are primarily focused on access network infrastructure and aim to support operators and service providers in bringing more people online by extending network coverage and improving service affordability. Meanwhile, Facebook has partnered with the Internet Society (ISOC) to support IXP infrastructure development through workshops, training and community engagement.

PROJECTED YEARLY GDP IMPACT OF FACEBOOK’S EDGE NETWORK AND SUBMARINE CABLE INVESTMENTS IN ASEAN

In terms of how this will benefit the economy of Sub-Saharan Africa, Analysys-Mason states that the direct boost will come from the economic activity involved in building infrastructure within the region, which like any building work will create local jobs and provide a shot in the arm to local economies. Beyond that, however, the researchers cited a study by Copenhagen Economics, which found that infrastructure investment by Google in Europe not only creates direct benefits in terms of jobs required for construction, maintenance and project management, but also had indirect and induced effects.

Analysys-Mason speculates that connectivity investments can have a GDP multiplier of 1.35, meaning that for every $1 of US currency in direct investment, a further $1.35 of GDP is generated. Most importantly, however, these investments support future growth in connectivity, the potential impact of which greatly exceeds the direct investment effects. Overall, over the coming five years, Analysys-Mason contends that such effects could boost the economy of Sub-Saharan Africa by $57.6 billion – reaching as much as an additional $19.5 billion per year by 2024.

In ASEAN, meanwhile, the possible benefits are even more pronounced. By Analysys-Mason’s reckoning, while in 2020 the investment represents an extra $3 billion in GDP, by 2024, the region could enjoy an economic boost of over $23 billion each year. Over the next five years, the investment campaign could add around $69.6 billion to ASEAN’s GDP in that case.


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