Rethinking urban network infrastructure with innovative financing

Connectivity – the wired and wireless foundations of our digital economies and digital societies – is increasingly as essential a utility for cities as electricity, gas and water.

A connected, data-driven urban environment not only enhances public services – it provides the underlying infrastructure needed to improve health, expand educational opportunities and boost economic prosperity. A 10-percentage-point increase in broadband penetration would increase GDP growth by 1.2-1.4%.

As cities accelerate investments to enable remote-working and learning, e-commerce, digital public service delivery, as well as providing standard and critical communications, fibre-optic broadband rollout is increasing in pace, with over 12% growth year-on-year.

As cities grow and digital services become more essential, the demand for reliable, high-speed internet and communication networks continues to increase. To address this growing need for network coverage and capacity, mobile network operators are rolling out 5G networks. However, cities are left with significant design, installation and maintenance costs, making it difficult to finance more advanced technologies.

In many instances, scaling connectivity in cities has become unsustainable. Connected devices such as cameras or air quality and light sensors have become increasingly critical for cities, however, traditional business models have proven unscalable. In some cases, cities that use commercial carriers for connectivity incur monthly costs between $10 and $30 per connected device. For cities to become hubs of economic activity and innovation, they must first have affordable, scalable models to do so.

As cellular networks advance and regulators facilitate the creation of private 5G networks, new opportunities for collaboration are rapidly emerging.

The cost of high-speed networks once limited deployment in cities. This is changing rapidly as governments and regulators recognize the importance of allocating dedicated spectrum to non-telecom enterprises. Dozens of regulators worldwide, including the United States, Germany Japan, Denmark and the United Kingdom, are releasing spectrum specifically for private networks.

Cities worldwide are now following suit to explore private 5G networks and by 2030, these private networks could account for as much as a fifth of all mobile network infrastructure spending.

Cities are increasingly turning to the private sector to address the growing need for affordable broadband and the services they enable. Shared investment models have significantly eased the financial burden on cities.

Meanwhile, the decreasing costs of 5G infrastructure, the availability of shared spectrum, and the collaborative distribution of capital and operational expenses are making private 5G networks a more accessible solution for urban connectivity.

By building and owning private cellular networks, cities can reduce operational expenses while providing bespoke coverage and speeds that public networks cannot support. Unlike public cellular networks that use pay-per-device models, private 5G networks allow cities to sustainably scale the number of endpoints without incurring expensive per-device access costs. A municipality’s ownership of the network allows it to take advantage of economies of scale, because the number of net new devices it utilizes is nominal as network capacity and technologies continue to improve.

The opportunity cost of not implementing these innovations would have been the continued strain on city resources and missed opportunities to improve public safety and digital equity.

In 2023, the City of Las Vegas and NTT DATA formed a partnership to deploy a private 5G network. The partnership addressed two key challenges: improving broadband access in underserved areas and enhancing the city's decision-making through real-time data analytics.

NTT DATA's Smart Solutions in Las Vegas was justified through measurable outcomes and cost savings. The partnership has led to several positive outcomes for the city, including:

Its success can be attributed to a few key factors: strong leadership and personal sponsorship from city officials, a clear vision for digital transformation, and the flexibility of solutions to scale with the city's changing needs.

The partnership in Las Vegas could serve as an example for other cities to follow.

The opening and sharing of spectrum that is currently only available for public network operators will only increase, unlocking new opportunities for mutually beneficial partnerships.

As cities explore collaborative models for deploying broadband, the following factors can be taken into consideration:

1. The importance of continuous stakeholder engagement and the need for adaptable solutions that can evolve with the city's changing needs;

2. The value of a phased approach, starting with pilot projects and gradually expanding the scope to maximize impact and minimize risks;

3. The appropriation of seed funding from national and local sources to jump-start various cities to activate connectivity initiatives; and

4. The investment into technological talent, including training and hiring workforce with expertise in private 5G networks and artificial intelligence to foster greater innovation in cities.

This article is part of Shaping Tomorrow: Responsible Innovation for a Brighter Future, a report by the Global Innovation and Impact Council that presents a framework of eight principles to guide the design, development, and scaling of responsible innovations.