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Understanding the growing global connectivity divide

Given the massive expense of rolling out connectivity infrastructure, the extent of deployment and distribution of value will vary greatly among countries and markets.
Alexandre Ménard

Leads our Telecommunications Practice and media and technology work in France—with a focus on technology and operations—and specializes in technology related issues, primarily in the telecommunications, high tech, and automotive industries

When it comes to the expansion of connectivity around the world over the next decade, not all countries—or even markets within countries—are created equal, according to recent research by the McKinsey Global Institute and the McKinsey Center for Advanced Connectivity. Some 2.5 billion people remain offline altogether today, and the business case for building advanced networks and investing in frontier technologies like LEO satellites and high-band 5G varies widely across countries and between urban and rural areas. So while our research suggests that 80 percent of the world’s population could have advanced coverage or better in ten years, just one-quarter will enjoy access to networks delivering the highest speeds and lowest latency via frontier technologies.

To better assess the regional differences, we classified countries into four distinct groups, with China and India as separate, special cases.

  • Pioneers such as Japan, South Korea, and the United States lead in connectivity and are already deploying high-band 5G networks in certain parts of major cities.
  • Leaders such as Canada, France, Germany, and the United Kingdom closely follow the pioneers. Price competition, however, has put pressure on margins and average revenue per user and may constrain their investment in advanced connectivity technologies.
  • Followers such as Brazil, Poland, and Turkey are two to four years behind the pioneers, hampered by an inadequate fixed infrastructure for advanced connectivity (even in urban areas), limited investment capacity, and the same pricing pressure as the leaders.
  • Trailing markets in Africa, as well as in places such as Bolivia and Iran, have a limited basic connectivity infrastructure and aren’t in a position to deploy advanced mobile networks over the foreseeable future.
  • Then there is China, which is deploying enhanced technologies faster than any other country, with the goal of moving more than one-quarter of all mobile subscribers to 5G by 2025. While India is digitizing faster than any other trailing market, mobile network performance suffers except in a few major cities, while low subscription prices limit commercial viability and build-out of advanced fixed networks.

Among these country archetypes, the scale of advanced connectivity deployment will continue to vary greatly (Exhibit 1). Given the massive expense and complexity of rolling out true high-band 5G frontier connectivity—we estimate it would cost $700 billion to $900 billion to bring it to 25 percent of the global population—we expect around half of subscribers in pioneer countries and China could have such coverage by 2030, compared with only 5 to 15 percent in trailing markets as well as India. As for fixed networks, pioneers and China already have limited room for fiber growth, while the economics are not strong enough for trailing countries and India to make much progress.

Connectivity divides between country archetypes are likely to widen.
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Regardless of the country, there is an equally stark, and growing, divide in coverage between urban and rural areas. By 2030, around 80 to 85 percent of all urban dwellers—but virtually none of the world’s rural population—could have frontier connectivity coverage, a much wider gap than currently exists in advanced LTE coverage (Exhibit 2).

The challenging economics of deploying frontier cellular networks in remote areas will widen the urban-rural gap.
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These variations between and within countries will also be reflected in the distribution of value from advanced connectivity. Our research suggests that, by 2030, the pioneers and China will capture slightly more value than their contribution to global GDP (55–65 percent versus 45–55 percent, respectively), while India and trailing markets will capture less (4–10 percent versus 7–15 percent) and leader and followers will garner about the same (30–40 percent). By contrast, we estimate that as much as three-quarters of the value of frontier connectivity deployment will go to pioneer markets and China. Leaders and followers will spar over the bulk of what’s left, with just 2 to 5 percent left for India and trailing countries.

Despite these vast disparities, expanding access to any kind of connectivity should ultimately help narrow the economic gap between country groups. By the end of this decade, the share of the world’s population without connectivity should drop by half, to around 20 percent, which could help add $1.5 trillion to $2 trillion to global GDP (Exhibit 3).

The share of global population remaining unconnected or underconnected should be reduced by half
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And while China is expected to be the biggest gainer, followers and trailing countries, as well as India, indeed stand to gain the most, in relative terms (Exhibit 4).

Bringing unconnected or underconnected populations online could boost global GDP by up to some 2 trillion by 2030.
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This post was adapted from the recent MGI/MCAC discussion paper, Connected world: An evolution in connectivity beyond the 5G revolution. It is part of an ongoing series.

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